Could the Cheddar Surplus Crisis Be Crumbling Away?

cheddar Brent Hofacker/Adobe Stock

Spend Matters welcomes a guest post from Verity Michie of Mintec.

Whether you melt it over a pizza or slice it into a sandwich, you can’t go wrong with a bit of cheese. This is particularly true in the U.S., the second largest consumer of cheese per person, falling just behind the EU.

Cheddar originated in an English village called… that’s right, Cheddar. Since then, cheddar production has spread throughout the U.K. and other countries to become the second most popular cheese in the U.S., with mozzarella taking the top spot.

Over the past few years, U.S. cheddar prices have been on a rollercoaster ride. Record high cheese prices in 2014 encouraged farmers to increase production, which had been facilitated by low feed costs. Between September 2014 and October 2016, prices were down 32%, reaching a six-year low in May this year.

In addition, the appreciation of the U.S. dollar throughout 2014 and into 2015 made exports from the U.S. more expensive for foreign buyers, so demand tumbled 13% year-on-year in 2016. This demand was picked up by Europe, who saw exports rise by 10% year-on-year, especially to Asia and the Middle East.

This resulted in such a large cheese surplus that every American would have had to eat an extra three pounds of cheese throughout the year just to keep the market stable!

Farmers saw a brief relief period between May and August, when seasonal demand from barbecues picked up and speculation over possible governmental intervention grew. However, by the end of September, high domestic cheddar production pushed U.S. cheese stocks up 7% year-on-year to 562,000 tons, weighing down on prices.

So, what has changed that has now caused cheddar prices to reach a two-year high? At the beginning of October 2016, the U.S. Department of Agriculture (USDA) stepped in, in an attempt to protect domestic farmers from the low prices. They decided to buy up $20 million worth of cheddar stocks in the U.S. That is around 5,760 tons of cheese at the current market price.

To put that into perspective, it is enough cheese to make 68 million grilled cheese sandwiches at the average 2016 cheddar price. But if you are wondering, the government’s plan is to donate the cheese to food banks and nutrition programs across the country.

This investment from the USDA has taken a chunk out of the cheese surplus and caused U.S. cheddar prices to rise by 18% month-on-month in mid-November. This may be a small step on the road to recovery for cheese prices, but it has been well received by dairy producers so far.

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