The Task Supply and demand analysis allows us to investigate and understand the operation of markets.
Using supply and demand analysis identify which you believe to be the main factors in determining the price of British Cheddar cheese in the UK.
Factors Affecting the Production of Cheddar Cheese
The cheddar cheese of the United Kingdom is one of the world’s well known and loved cheese whose roots are in the English West Country. The cheese can only be called Cheddar if it is being made using milk from herd in the countries of Dorset, Devon, Somerset and Cornwall and should also not contain any kind of colouring or flavouring and preservatives. Cheddaring of cheese is a process of stacking the cut curd to form blocks. The mature cheddar variety of cheese is one of the best selling in United Kingdom. The only produce of cheddar cheese in UK in the recent years is the Cheddar Gorge Cheese Co. As the milk is the one of the most important raw material for producing cheese, therefore the demand and supply markets of milk will highly affect the price of cheddar cheese (Turfkruyer and Verhasselt 2015). Cheddar is one of the favourites and the best selling cheese in the United Kingdom and in the whole world. Cheddar has always been in the top ten favourite list of cheese. People of Britain loves to consume cheese with toast, pizzas, sandwiches bagels and burgers.
As one of the most important raw material for making cheddar cheese in milk, therefore the price of cheese will highly depend upon the demand and supply of milk I the United Kingdom.
Weather, climate and geography (SUPPLY): Places with temperate climate tends to put less stress on cows when compared to more extreme climate. As UK has a temperate oceanic climate, it experiences a cold weather all throughout the weather which help cows to produce more milk. Weather and climate can be said as one of the significant factors that affects the production of milk. Heat and humidity both make the cows sweat and therefore they also produce less milk. It is very important to keep the cows in the cool place (Pegolo et al. 2017). Because of high metabolic heat production which is also associated with the lactation of the dairy cattle, they are particularly very sensitive to the heat stress. In high temperatures, the dairy cows lower their output and also heat reduces the fertility of the cattle reducing the rate of reproduction. However, as there are very less chance of being suffering from heat stress in the United Kingdom, dairy cattle usually supply enough quantity of good quality milk. Therefore, the supply of milk in the cold climate will always be good which will also help in lot of production of cheese.
Factors Affecting the Demand of Cheddar Cheese
Age: age is also considered as one of the vital factors for production of dairy milk. it is known that younger cows in general produce much more milk than the older ones. Therefore, more the presence of younger cows in the UK, better the production of cheese will be as enough amount of milk will be produced from the younger cows. Also taken in to account that sick and unhealthy cows also produce poor quality milk which will again hamper the production of cheddar cheese in UK (Hoddinott, Headey and Dereje 2015). Therefore, it can be said that more the number of young and healthy dairy cattle present in United Kingdom, better will be the quality of milk production. Therefore, as price increases when supply increase, price of the cheese also depends upon presence of number of younger and healthy cattle in UK.
Accommodations : when the dairy cattle will have comfortable places to rest, enough space to graze, they will be more productive. As it is known that seventy percent of the area of land In UK is the agricultural land, dairy cattle have enough place for accommodations and enough space to graze. There are also present of 17,000 dairy farms in UK which suggests that the production of milk is quite high. An average cow yields 6300 litres of milk per year which also helps in making of cheddar cheese. It is known that the dairy cows need about 0.5 hectares per cow to stay and the law of UK also requires an animal to kept in sunlight in daytime in groups with bedding and access to hay. As enough space for accommodation and for grazing are available in UK, cows generally produce good quality milk which helps in production of cheese.
Land for pasture: the amount of milk a cow produces I directly related to the quality and quantity of food she eats. When both quality and quantity is lacking, dairy cattle will be responding buy producing less milk. Less production means less milk available for the production of cheese. For this reason, the farmers should ensure that the cows are well fed and are cared for. As the agricultural area is known t be 17.2 million hectares which is about the seventy percent of the land in UK, cows have enough space to graze (Blayney and Gehlhar 2018). Also, as most the area is the grassland, it is used as pastures. Milk production the United Kingdom is also among the top twenty agricultural products produced in UK, because for this reason. As cows have enough grazing space in the United Kingdom, good quality of milk is available for cheese production. Therefore, farmer o the UK must ensure that the cattle are fed properly so that they produce better quality milk. Therefore, availability of enough land for grazing also affects the supply of cheese production.
Dry period: how long a cow can be allowed to stay ‘dry’ which is generally in between calving impacts the amount of milk it will be producing during lactation. The dry period includes the time between halting of milk removal and the subsequent calving. It is known that the mammary glands of the dairy cows require non lactating period prior to an impending parturition to optimize the milk production. When during the dry period water supply is reduced along with grains, there will be a drastic reduction in the production of milk and the milking is halted generally for 45 to 50 days (Hoddinott, Headey and Dereje 2015). Both short and long dry periods affect the production of milk. When dry period takes less than 40 days, the yield of milk in the next lactation period will also decrease.
Imports: when there is increase in imports or milk and cheese, the supply of cheese in a particular place increase. Therefore, when UK imports more cheese or milk, supply of cheese will definitely go up. When there is increase in imports in the economy with exports being stable, it suggests that there will be rise in th4e aggregate supply. In the year 2017, the import of cheese in UK went up to 497 thousand tons. majority of the imports comes from Switzerland followed by Norway and New Zealand. However, it was seen that the imports of cheese went down by 6% from the year 2017 to 2018. On the other hand, the cheese exports of UK went up by nearly eight per cent from 14819 in 2017 to 15970 in 2018 which suggests that imports of cheese have fallen bit and the exports have risen suggesting increase in supply of cheese.
However, it has been found out that th4e supply of dairy products can go down after UK leaves Europe.
(Kapaj and Deci 2017)
The factors which affect the demand for cheese are:
Brexit: dairy products is known to become more expensive after United Kingdom is known to have exited Europe. Dairy products like cheese and milk products can become the item of luxury after Brexit. As Britain relies mostly on imports, the Brexit will severely affect them. They even do not produce enough milk in order to keep up with the demand and therefore creates a dependency on the Europe. Britain mostly depends on Ireland, Germany, France, Denmark and Belgium for every day items including cheddar cheese and butter. If Britain crashes out of the Europe with no deals, prices will be known to be certainly rising as dairy products will be attracting high tariffs. In addition to it, the riles of origin certificate could add up to £ 45 along with veterinary controls of worth £50 for each consignment (Metro.co.uk. 2018). Above all these there remains fuel costs, vehicle maintenance, rise in wages along with loss of shelf life of the goods. According to the research it was also found out that small cheese suppliers of Italy and France will find their products uncompetitive in British shops, which will generate scarcity and also rise in prices. Though Brexit will bring opportunity for the dairy industry of U to expand in the long term, however, in the short term it will be quite difficult to switch to milk production. As Britain heavily depends on imports of dairy products, the Brexit will make the price of dairy products more expensive.
Advertising: advertising generally have huge impact on demand and therefor it has been seen that the governments are increasingly tempted to regulate the industry on advertising. Increase in advertising can raise the sale of cheese by about 16 million pounds. Advertisements of cheese will not influence much on those households who normally purchase cheese but will help in increase the purchase of cheese of those people who do not normally purchase cheese. Innovative ideas of advertising will also lead to rise in the demand for cheese (Howden, McCarthy and Hyde 2016). Advertising will affect the demand for both processed as well as for natural cheese. The effects of generic advertisement impacts both the sales of natural as well as processed cheese. The generic advertising under the dairy acts also increased the consumption of cheese by 562 million pounds. When successful generic advertising takes placed it can consumers who never had cheese before. The advertisement of cheddar cheese had been quite successful impact on the suppliers of cheese. With the rise in price of milk along with increase in the cost of production resulted to five times increase in the cost of advertisements.
Fast food: with the growth of the fast food industry in the United Kingdom, the demand for cheddar cheese also increases. Consumption of cheese will increase with the increase of the fast food industry. Fast food industries including pizzas leads to one of the highest demands for cheese followed by sandwiches, burgers and others. With the rising of pizza outlets in UK, the demand for cheese increases (Metro.co.uk. 2018).. The reason behind increase in vast consumption of cheese is that people is recent years have increased the habit of eating meals away from home and there had been therefore increased in pizza consumption which also lead to increase in demand for cheese. Another reason is versatility, as people have found out a large number of ways of consuming cheese which includes cheese used in cooking, used in salads, burgers, sandwiches and more. Therefore, the demand for cheese industry will keep on increasing with the rise in consumption of pizzas or any kind of fast foods.
(Gulseven and Wohlgenant 2017)
Temperature and weather: according to the research it has been observed that countries with cold climates generally consume more cheese. It is been found out that the top consumers of cheese are generally people from the cold region of the world mainly because cheese can be preserved for future by keeping in chilled areas. People staying in cold region also needs high protein levels which the cheese generally provides. Therefore, as UK is situated in the colder region, it is very obvious that there will be always a high demand for cheese (Blayney and Gehlhar 2018). Therefore, it can be said that though people from hot and humid countries consume cheese, but it is mostly consumed by people from colder regions. Cheese is also known to be the comfort food for the people in winter. Therefore, it can be said that the consumption of cheese is dependent on the increase in the availability of different varieties of cheese, expanded cheese used by both pizza and fast food industry, increased use of cheese by cooks and food manufacturers along with increased consumption of cheese rich ethnic food used by Mexican and Italian dishes. Therefore, it can be said that countries in colder region tends to consume more amount of cheese compared to the people form hot and humid climate.
Price of milk: cheese consumers are also highly sensitive to the price of milk. When the price of milk will increase, consumers will also start consuming less cheese as cheese is a highly elastic good (Turfkruyer and Verhasselt 2015). As very high prices of milk will lead to high price of cheese, the demand for cheddar cheese will fall and also as the consumes of cheese are quite sensitive to the prices of cheese it will reduce the consumption of the cheese with rise in price and increase the consumption with fall in price.
Exports: with the increase in exports the demand for cheddar cheese will also go up. As it has been found out that the exports of cheese went up from 14819 in 2017 to 15970 in 2018 (Howden, McCarthy and Hyde 2016), it can be said that there had been rise in demand was the export have increased in the last few years. also, when there is increase in the exports of cheese to the rest of the world, there leads to an increase in the economy which in turn increases employment and investment to meet the rise in demand. with the income and investment, the aggregate demand of cheese rises.
Therefore, in order to conclude it can be said that both supply and demand will affect the price of cheddar cheese in the United Kingdom. Supply of cheese though is expected to be high all round the year, however the Brexit can affect the supply of cheese negatively. As the producers of the UK highly depends on Europe for the supply of cheese, Brexit can have a serious effect on the price o cheddar cheese. Cool temperature, mild weather, enough land for grazing, enough place for accommodation of dairy cattle will help in increase the supply of cheddar cheese as milk is the sole raw material used for producing cheese. Price of cheese tend to be low also when the nation will have enough healthy and young cattle to produce the ample amount of milk required for production of cheese. Therefore, it can be said as UK have favourable climate and temperature for milk production, supply of milk will increase and thus the price of cheese will not rise too much. Availability of enough pasture lands will also produce healthy cows. Coming to the factors that affect thee demand for cheddar cheese in UK, it can be said that increase in the innovative generic advertisement will help in increase the demand for cheese as consumers will be aware of the aviability of wide variety of cheese. Increase in the consumption of fast food like pizzas and burgers also leads to increase in the consumption in cheese which will increase demand and therefore the price of cheese will definitely increase. Therefore, looking at all the factors on both supply and demand it can be said that as demand for cheese increases more than the supply price of cheddar cheese in The United Kingdom will definitely rise in the near future.
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