Continued high milk prices are increasingly putting pressure on area cheese manufacturers, forcing a renowned Mohawk Valley cheddar cheese company to cut production and others to pass along higher costs.
Palatine Valley Dairy this month will scale back production of its award-winning Palatine Cheese products, according to one of its owners.
Increasingly burdened by the 17,000 pounds of milk needed to make 1,700 pounds of cheese each week, Palatine Valley will shift to a biweekly production schedule. Traditionally, the company makes a batch of cheese each Monday.
The Palatine manufacturer will dig deeper into its 20,000-pound cheese inventory to fulfill orders and keep its shelves stocked while production is slowed. Apple orchards with food markets, including Indian Ladder Farms near Voorheesville, are big customers of Palatine Valley.
The slowdown marks the first time Palatine Valley has reverted to an every-other-week production schedule in years. But whereas the previous slowdown was prompted by a management transition, this latest reduction is being blamed on a seasonal lull, plus higher milk and energy costs.
“We’ve been trying to hold the line as much as possible. We haven’t raised the price of our cut-and-wraps in two years,” said Earl Spencer, who operates Palatine Valley’s retail store and plant with his wife, Carol. They took over the business in 2001.
Palatine Valley has held to that line better than other U.S. cheese manufacturers. The national average for a pound of natural cheddar cheese in November was $4.47, up 12.3 percent from $3.99 a year earlier, according to the U.S. Bureau of Labor Statistics.
However, Palatine Valley in September implemented a 10 percent increase on its 40-pound blocks of cheddar and 15-pound bags of fresh curd — those products’ first hike in four years. At its Palatine retail shop, a pound of individually packaged mild cheddar is selling for $4.50 and 2-year-old super sharp cheddar carries a $7.25 price tag.
Palatine Valley last summer walked away from the New York State Fair in Syracuse with two awards. In the expo’s “Natural Cheese with Condiments or Flavor Added” category, the company received a red ribbon and silver medal for its black olive and roasted red pepper cheese. A year earlier, its smoked cheddar won a gold medal at the fair.
By mid-December, New York farmers were getting paid an average $22.20 per hundred weight of milk, up 65.8 percent from a year earlier. But December’s price dipped 30 cents over the month, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service New York Office.
In August, the federally mandated basement price for locally produced milk reached a record high of $25.01 per hundred weight. Last January that price was $15.09.
A hundredweight of milk, the industry’s standard unit of measurement, is 11.63 gallons.
The biggest driver behind milk’s surge is newfound international demand, which is strongest in China and India.
Long droughts in Australia and New Zealand have sapped those nations’ milk production, and European Union production is down, as well. Those supply and demand factors exacerbate the impact of higher gasoline and animal feed costs on American milk prices.
The milk price runup last year spurred three price increases for Johnstown feta cheese maker Euphretes, most recently a 5 percent hike in November. But the hikes have not hurt demand; in fact, Euphrates has increased its cheese production.
“For us, there’s no change in sales. People still eat cheese,” said Euphrates Financial Controller Besnik Fetoski.
The milk hikes forced Agri-Mark to implement more than one price increase on its McCadam and Cabot cheddar cheese products made in New York and Vermont. But the Northeast cooperative of 1,300 dairy farmers is not complaining about the higher milk prices, because its members benefit from those hikes.
“We’re all in the same boat, but we’re happy about the higher [milk] prices. Production costs are a concern,” said Agri-Mark spokesman Doug DiMento.
The Methuen, Mass.-based co-op next month should post record profits for 2007. Agri-Mark has cheese manufacturing plants in Chateaugay, Franklin County, Cabot, Vt., and Middlebury, Vt.
Agri-Mark also has almost 80 members in the Capital Region and Mohawk Valley, including 27 in Montgomery County. The milk Palatine Valley uses for its cheese comes from Agri-Mark farms.
In Palatine, Spencer expects to stick to the biweekly production schedule for a few months or until demand picks up. By spring he hopes milk prices will fall back to normal levels.
“There’s not a whole lot of adjustments we can make. We’re just so darned small,” he said.