Cheese Prices Slightly Decrease, But at What Expense?

Cheese Prices Slightly Decrease, But at What Expense?

Cheese Prices Slightly Decrease, But at What Expense?

The FINANCIAL -- The average cost of cooking one standard Imeretian khachapuri in October 2018 was 3.59 GEL, which is 1.1% higher month-on-month (compared to the previous month), and 1.2% lower year-on-year (compared to the same month of last year).

Trade statistics show that there is growing demand on bovine animals. In the last three years, exports of live cattle (beef and dairy) from Georgia increased by 26% on average. This means that there are fewer dairy cows left in the country, which is of course reflected in production volumes of milk. In 2017, milk production was 528,400 tones, which was 11,700 tones less than in 2016 and 37,900 tones less than in 2015.

Looking at these figures, one might expect increased milk prices compared to last year. However, according to the Khachapuri Index, the prices of milk and cheese have actually fallen by 0.8% and 1.9% respectively, compared to the same period last year (October 2017). An explanation for this might be the fact that in out-of-season periods cheese producers usually substitute milk with milk powder (even if dairy regulations do not allow the labelling of products made from milk powder as cheese, the majority of market players are unregistered cheese producers and use of powder is common practice). The trend of substituting raw milk with milk powder has become more pronounced in recent years. Average imports of milk powder have risen by 24% in the last three years.

As the FAO’s food price index is reporting some small decrease in international dairy prices, we might expect no significant increase in the prices of milk products in the coming months. However, this will of course depend on exchange rate dynamics.