U.S. Dairy Cold Storage Update – Jul ’15
Butter – Stocks Remain Significantly Higher on YOY Basis According to USDA, Jun ’15 U.S. butter stocks of 254.7 million pounds remained significantly higher on a YOY basis, finishing up 27.8%. The YOY percentage increase was the largest experienced in the past 22 months. Butter stocks declined by 10.1 million pounds, or 3.8%, from the previous month, however the MOM decline was in line with the three year average May – June seasonal decline of 10.5 million pounds, or 4.3%. Recent increases in butter stocks have resulted in Jun ’15 stocks remaining above three year average levels for the second consecutive month. U.S. butter stocks typically reach their seasonal peak in May, followed by seasonal drawdowns until lows are reached during the winter months. The most recent seasonal drawdown in butter stocks of 104.7 million pounds was less than half of the prior year’s seasonal drawdown due to a significant reduction in export demand. Throughout the period, YOY U.S. butterfat exports declined by 89.1 million pounds, or 55.9%, as domestic butter prices traded at a significant premium to international butter prices. Domestic butterfat exports remained weak through the early months of 2015, despite U.S. butter prices converging downwards towards international prices. More recently, the domestic butter price premium has once again increased, reaching a six month high in May ’15. U.S. butterfat exports have declined YOY for 13 consecutive months through May ’15. Cheese – Stocks Remain Higher on YOY Basis for Eighth Consecutive Month Jun ’15 U.S. cheese stocks of 1.14 billion pounds finished up 2.6% MOM and 8.1% YOY. The monthly YOY increase in cheese stocks was the eighth experienced in a row and the largest in the past 22 months on a percentage basis. Cheese stocks have remained higher YOY in recent months as milk production has strengthened in Midwestern cheese producing states while weakness in cheese export markets has continued. The Jun ’15 MOM build of 29.2 million pounds, or 2.6%, was significantly higher than the three year average May –June build of 4.3 million pounds, or 0.4%. Strong cheese production has been partially offset by continued strong domestic demand, however cheese exports remained lower YOY for the eighth consecutive month in May ’15. U.S. cheese stocks typically exhibit a smaller degree of MOM and YOY variation than U.S. butter stocks. Cheese stocks do not have as large of a seasonal build as butter stocks, with the five year average Nov – Jul seasonal build in cheese stocks representing a 12.7% increase in stocks vs. a 121.1% increase in butter stocks. The reduced seasonality exhibited in U.S. cheese stocks has led to less volatile YOY variation, with cheese stocks having a five year average absolute YOY change of 5.3% compared to 26.3% for U.S. butter stocks.