Feast or famine?


George Ward engages in a little currency exchange speculation.  Because, after all, who needs experts?

Cheesemakers in the UK are reaching for the backs of envelopes to see if recent moves in the market are good or bad news for them.

The bad news for them (but good news for dairy farmers) is that the price of milk is going steadily up.

As it takes around 10 litres of milk to make one kilo of hard cheese a rise of somewhere around 9p a litre is obviously going to make a big difference to their costs.

That’s the kind of bad news no one likes chewing over in the slack post-Christmas weeks.

But the wild fluctuations in milk prices in Europe may simultaneously be sending a little windfall their way.

Milk prices yo-yo across the EU, and farmers everywhere have been getting out of milk – hence the sharp spike in prices as supply dwindles.

We have been approached by a French buyer looking to import milk from the UK. We can’t help, we do not have our own herd.

But the reason they are looking here does hold out hope. A sudden drop of around 16% in the price of sterling against the euro makes our milk very much cheaper than euro-zone milk.

This is looking like very good news indeed for cheddar makers. At the moment most of Europe goes to the big dairy boys in Ireland for their cheddar.

But if ours is suddenly far cheaper, then they are going to be coming to the UK.

Cheddar, and quality cheddar in particular, is increasingly popular on the Continent. They love its punch. And as milk prices rise the UK offerings, priced in a devalued sterling, becomes increasingly attractive.

Now, if I can write off my Continental holidays against tax as sales drives, I might just come out even on these currency switchbacks. Do I have a future at Goldman Sachs?