U.S., World Cheese Growth Slowing

January 17, 2012 02:20 AM

U.S. cheese sales growth, the real driver of milk prices over the last 40 years, is slowing to almost a snail’s pace. But in a delicious ironic way, the demand for whey, the waste product of cheese manufacturing, is now growing by leaps and bounds.

What that means, of course, is that cheese prices could start to sag while prices for whey could rise.
Tim Hunt, a global dairy strategist for Rabobank, presented the finding at Dairy Forum 2012 here in La Quinta, Calif., Monday. He says that in the 1970s, demand for cheese rose 5% annually, driven by a 4% increase in per capita sales. Each of those percentages declined until this decade, where per capita growth is only 0.5 and volume increases are about 1.5%.
Global cheese sales mirror that, with expected cheese demand to grow at about 1.5% over the next four years. In contrast, other dairy products are expected to grow 2.7%. And whey products are leading that increase.
The rising demand is coming from “eat healthy” food trends that perceive whey proteins positively, and rising incomes internationally that make these foods affordable. There has also been significant product development that incorporates whey as an ingredient. These include protein bars, infant formulas and even “muscle milks” for after workout replenishment.
This increased demand for whey will change the pricing matrix for cheese and whey products. For example, since January 2009, whey prices have doubled. But cheese prices, due to the recession and a maturing market for cheese, have not.
The situation also could create a “have” and “have not” scenario, where cheese makers who have invested in whey technology will be able to exploit the rising demand. “These higher returns for whey will decrease the returns required for the cheese they make,” he says. That, in turn, will put competitive price pressure on cheesemakers who have not invested in whey technology.
In tight whey markets, large, sophisticated U.S. cheese makers hold the best supply prospects, Hunt says. That’s because these plants have access to lower priced raw milk than many of their global competitors, and their size, scale and technology gives them further manufacturing advantages and cost savings. 

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