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Last week the Wall Street Journal reported on an interesting story that lies at the intersection of economics and cheese. According to the paper, the Italian government is planning a bailout for, of all things, the Parmigiano-Reggiano industry. The bottom line is that at current prices the cheese costs more to produce than it does to purchase; a cheesemaker cited in the article spends €8 to produce a kilogram of cheese that he then sells for €7.40.
Parmigiano-Reggiano is one of the world's great food treasures—deliciousness distilled. But why is it so expensive to produce? For one thing, D.O.P. regulations state that the cheese must be aged for at least one year, and most are aged for 18 months or more. Keeping that much inventory on hand—inventory that needs to be turned and cleaned regularly—is expensive.
Another factor the Journal article mentions is the fragmentation of the industry. Most producers are small-scale and independent, without the clout to negotiate better wholesale prices nor the size to benefit from economies of scale. Ironically this is one of the very reasons that the cheese has maintained such a high level of quality in a post-industrialized society.
But it seems the supply is simply outpacing demand. Parmigiano prices are kept artificially low to compete with similar cheeses that are produced more cheaply, like Grana Padano. Italy is hoping that with a cash infusion of €50 million it can help the Parmigiano producers ride out the current economic storm. (Needless to say, the mozzarella di bufala producers are now asking where their bailout is.) The government is also hoping that exports might help keep the industry afloat, as the international demand for the cheese continues to increase.
Whatever the case may be, this is an industry worth saving. Though government bailouts might not be the best way to go about it (perhaps there are ways to guarantee that producers are paid a fairer price for their goods), the world would be a much worse place without this king of all cheeses, Parmigiano-Reggiano.
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