Following sharp declines in EU yellow cheese prices last week, the downward price trend continued this week. Market participants report that prices appear to fall on a daily basis. For reference, the Mintec Benchmark Prices (MBP) for Gouda EXW Europe [Mintec Code: J114] was last assessed on 19th January at €3,050/mt, down €50/mt during the week. Meanwhile, the MBP for Edam EXW Europe [Mintec Code: J113] stood at €2,995, down 3% week-on-week (w-o-w).
One contact stated last week, “it’s expected that gouda and edam prices will reach bottom floor prices of €2,800/mt in February.” And this week February contracts were reportedly ranging between €2,850/mt and €2,880/mt.
Theoretically, when prices are in backwardation this is a bullish sign, because it means traders and manufacturers no longer have an incentive to produce and store cheese, and sell it at a later date. However, cheese stocks are high in this case. One source indicated, “there is too much old cheese available in the market. We can see gouda with eight weeks, which has to move quickly if it is to be sold for slicing.” Furthermore, according to market participants and the earliest milk output estimates across the EU, December milk production was higher than expected. This will likely translate into higher stocks in the next four to eight weeks. Also, the most likely scenario is that cheese producers will try to slow down production to balance out supply and demand.
In terms of demand, January is seasonally low as volumes purchased for Christmas linger during the month. Additionally, international demand is muted, and most likely foreign demand for EU cheese will return when prices stabilise. Although China has lifted COVID-19 restrictions, Chinese buyers are not active in the market.