What's behind AHDB's mild Cheddar prices?

We know there are questions in the cheese sector about our published mild cheddar price for August, which was reported to have weakened slightly on very thin trade. The question centres around the difference between our price and the price reported by the Provisional Trade Federation (PTF), which has been around £200/tonne higher over the past couple of months. These two reported prices normally differ, but this larger than average gap has justifiably raised questions over which price is reflective of the market.

Both organisations use roughly the same method for collecting price information, but publish at different intervals, which can make direct comparisons difficult.

The AHDB published price is an unweighted average of quotes for spot market deals completed over a 4-week period, while the PTF prices reflect trading during the seven days leading up to its published report. This difference can, at times, create discrepancies as any sharp price movements which occur in one week will show up in full in the PTF series but be averaged across the 4-week reporting period in the AHDB published price.

It appears this may in part explain how the price discrepancy developed between the two series, which started in the final week of June but has persisted through the summer as markets have seen very little trade occur.

The big swing in mild cheddar prices, which appears to have created the gap between the AHDB and PTF price quotes, occurred in the final week of June (7 days to 24 June), when PTF reported that “…supplies of mild and mature on the spot market have pretty much dried up…”. The tightness in the market was reported to have increased prices by £150/tonne in that 7-day period to £4,900/tonne. However, although it was also pointed out that there was a lack of any trade at these prices.

In the AHDB series, the jump in that week would have been accounted for in the reporting period for June, which covered the 4-weeks 23 May to 24 June, pulling up the overall average, but also taking into account prices achieved on the spot markets in the previous 3 weeks. In June, the average price for mild Cheddar was published as £4,740/tonne, up £90/tonne from the May average.

During this period, PTF also reporting that prices had increased £50/tonne in the 7 days to 27 May, but then holding steady in the 7 days to 10 June, before jumping by £150 in the final week of trading.

In very thin markets, price quotes can often vary significantly as this lack of volume can distort price signalling. Through July and August, trade was described as very quiet by both organisations, and prices moved very little, if at all, from the June quotes. So, while a gap appeared in the reported price, this then persisted through the summer months as markets remained quiet. To compare the two prices is not valid however as one is reflective of a 4-week average while the other reflects the situation in one week.

AHDB relys on a panel of buyers, sellers and manufacturers to form its monthly ‘indicative’ price for mild Cheddar (as well as butter and skim milk powder), and only publishes a price if sufficient quotes are obtained. The quality of information is therefore improved by having more contributors.

If you feel our prices are not reflective of the markets you operate in, please get in touch to join our panel by sending an email to patty.clayton@ahdb.org.uk

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