Cheese to put squeeze on processors

By Neil Merrett

- Last updated on GMT

Related tags: Milk

European processors should prepare themselves for a significant
rise in the price they pay for cheese, the head of the European
Dairy Association (EDA) warned today.

Joop Kleibeuker told DairyReporter.com that processors may have to reconsider how they use the product to formulate their goods as a result of these potential changes in the market. The comments will throw further weight to concerns that Europe may be facing a possible cheese shortage, as woes over the dwindling global milk supply continue to take their toll on the industry's margins. Kleibeuker added that concerns over cheese supply had been compounded by the current high prices for products like butter and skin milk powder. "What we have seen in various countries, is a shift in raw milk use for skin milk powder (smp) and butter, which are being sold at very good prices,"​ he said. This has resulted in less milk being made available for cheese production, Kleibeuker added. Until recently, cheese prices in Europe have remained generally stable. However, with the industry unable to boost supply of the product, they are beginning to rise accordingly. The delay in these rises, compared to the rates for butter and skin milk powder, can be related to the three to six months pricing contracts often agreed between cheese producers and their clients. Kleibeuker suggests that changes to pricing could also affect current consumption of the product, a trend that has already occurred in the US, as processors have moved higher costs onto consumers. Europe as yet, appears to have resisted this practice, which according to Kleibeuker could be attributable to competition between retailers to ensure prices remain low. Looking ahead though, he suggested that it was impossible to predict whether these price increases will become a long-term or short-term issue for the industry. Currently, demand is being stretched by a reduction in milk output from major exporters like Australia and South America, along with increasing demand from emerging markets like China and Russia. Quota reforms within enacted in Europe have also restricted supply, Kleibeuker suggested. He added that authorities were attempting to create greater flexibility for producers, with countries like France beginning to lift dairy production, though this remains below quota. While unsure as to what effect this could have on global supply, Kleibeuker said that the milk commodities market remains volatile. "Even a relatively small change in either supply or demand for dairy products is currently resulting in big impacts on the market,"​ he said.

Related topics: Manufacturers, Cheese

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