Market Report: Positive signs for cheese contracts

British cheddar prices are set to rise as supplies tighten and imports tumble, according to DairyCo‘s latest Datum report.

“The UK cheddar market has remained stagnant over the past 12 months, relative to other dairy commodity prices,” it says. But production fell by 4.7% in the year to February, and imports dropped by 15% in January, primarily due to a 53% cut in supplies from Australia and New Zealand.

Demand has also improved, with cheddar sales rising by 4.4% in 2009 against 2008. “Prices on cheese contracts may come under upward pressure, with a basket price of cheese contracts at 23.5p/litre in March, 4.1p/litre below the market indicator MCVE (Milk for Cheese Value Equivalent), which stood at 27.6p.litre. With supply holding and demand growing, the market should react, with the likely result being an increase in price.”

Meanwhile, yoghurt production increased by 41.5% in January and February compared with 2009, accounting for 49m litres of milk. Retail demand grew by 3.7% in the year to 21 March. “Continued growth in the demand for milk used for manufacturing higher value products should help to see improved returns for dairy producers.”

* For a view on the dairy markets see Phil Clarke’s Business Blog