U.S. Dairy Cold Storage Update – Oct ’15
Butter – Stocks Continue to Decline Seasonally, Remain Significantly Higher on YOY Basis According to USDA, Sep ’15 U.S. butter stocks of 187.5 million pounds remained significantly higher on a YOY basis, finishing up 23.1%. Despite remaining higher YOY, stocks remained below three year average figures for the second consecutive month. Butter stocks declined by 24.7 million pounds, or 11.6%, from the previous month, which was consistent with the three year average August – September seasonal decline of 22.5 million pounds, or 11.2%. 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 12 month high in Sep ’15. U.S. butterfat exports have declined YOY for 16 consecutive months through Aug ’15. Cheese – Stocks Remain Significantly Higher YOY, Reach 32 Year High for Month of September Sep ’15 U.S. cheese stocks of 1.15 billion pounds finished down 1.5% MOM but up 13.4% YOY. The monthly YOY increase in cheese stocks was the 11th experienced in a row and the largest in the past five and a half years on a percentage basis. Cheese stocks declined seasonally MOM but remain at a 32 year high for the month of September. Cheese stocks have declined by an average of 2.0% from August – September over the past 10 years. 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. Strong cheese production has been partially offset by continued strong domestic demand, however cheese exports remained lower YOY for the 11th consecutive month in Aug ’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.