European Cheese Prices Soar on the Back of Tight Fundamentals

European cheese prices have rallied in recent months, driven by the limited availability and tight milk supplies. On the EEX, price activity of Cheddar Curd, Mild Cheddar, Young Gouda, and Mozzarella have all been on the upside over the month. Cheddar Curd rose 8% MoM to finish the month at €5310/mt with Mild Cheddar also edging up 6% to end at €5182/mt. Mozzarella and Young Gouda were not left out in the bullish price activity: mozzarella opened in March €54 stronger, ending the month at €5058/mt, up 17% MoM. Young Gouda is currently trading at €5038/mt which is €728 up from its price in December last year. The price trend is expected to carry through towards the second half of 2022 owing to tight fundamentals.

According to CLAL, EU 27 Cheese production in January ended up at 757 thousand mt, down 6 thousand mt from the previous month. Production in January 2021 was 771 thousand mt, which is 14 thousand tonnes more than the production volume in 2022. This deficit in available stocks has tightened the cheese supply in the EU, adding to the already negative effects of lower milk supplies in Europe. Cheese manufacturers have very limited supplies, to the extent of them currently serving regular customers only although buyers in Europe remain looking for offers. That said, demand from bulk cheese buyers continues to be brisk amid high interest from the retail sector. From market sources, the demand for retail products are not only coming from European buyers but also from external, for example China. Most of the European buyers didn’t make forward purchases but reserved their buying with the expectation that prices will fall. With prices remaining elevated, they’ve had no alternative but to come back into the market.

Tight milk supplies have also added to the already complex cheese situation. Production volumes across Europe have declined. In the UK, Germany, France, the Netherlands and Poland, major milk production countries, collections remained behind last year. Total EU milk supply for January came in at 11.67 million mt, 1% down YoY. With lower milk supplies, full cheese-making capacity across manufacturers is not being utilized.

Another interesting development is the shortage of trucks and truck drivers in Europe. A loss of about 400,000 truck drivers in Europe has meant thousands of gallons of milk have had to be thrown away and even when the milk is churned into cheese it’s been challenging getting transport to move scheduled sales to customers. Tridge's expectation is that prices will remain high for quite some time and volatile before finding some resistance given the current supply situation.