After more than two years of largely steady prices, at least for the popular mild cheese, UK Cheddar is showing a sharp tendency towards lower prices. Since May, first-hand prices for cheese of UK and Irish origin have moved down 10% to levels of between £1,900 to £2,000/tonne. In a recent tender it is reported that Tesco has even bought supplies over the next four months at prices that range down to the mid-£1,800s per tonne.

This weaker market has partly been brought about by the belief that UK cheesemaking has been growing at an unusually high rate. In 2005, for example, it was originally reported by Defra that output had gone up by over 11%, a rate far higher than any possible growth in consumption. This growth was significantly overstated.

The Defra estimate of total UK cheese output in 2005 has now been revised downwards by 25,000 tonnes with estimates of output in 2003 and 2004 cut by 12,000 and 14,000 tonnes respectively.

This suggests UK output still grew 8% last year and this growth continued early this year.

However, allowing for rising exports, this lower growth is more sustainable and may not lead to a large stock build up. Ever-growing demand for mature Cheddar is not weakening prices, so the dip for mild Cheddar may be purely a readjustment of market values, which will now stabilise.

The growth in cheese consumption in the UK, up 3% a year over the past four years, could even get a boost if the retail market responds to Asda cutting retail prices for Cheddar by over 20%, at least for a promotional period. This price cut, which takes both mild and mature prices down to £4 per kg, is enough to provide a boost.

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