U.S. Dairy Cold Storage Update – Oct ’14
Butter – Stocks Continue to Decline According to USDA, Sep ’14 U.S. butter stocks continue to lag previous years, with stocks of 146.1 million pounds coming in 37.3% below last year’s levels and 22.1% below the five year average September butter stocks. Butter stocks were down 18.9 million pounds, or 11.5%, vs. Aug ’14 stocks as they continue to seasonally decline throughout the second half of the year. Butter stocks typically reach their seasonal peaks in May before declining from June to November as holiday demand increases. The Aug ’14 – Sep ’14 decline in butter stocks was 12.4% less than the five year average August – September monthly decline, however stocks remain at a four year low for the month of September. Most of the YTD declines in butter stocks can be attributed to an increase in exports, which accounted for 76% of last year’s seasonal drawdown. U.S. butter exports have shown weakness throughout the past several months as U.S. butter prices have traded at significant recent premiums to international prices. U.S. butter exports have declined 34.6% YOY from May ’14 – Aug ’14, with Aug ’14 butter shipments down 59.8% YOY. Domestic butter exports were 128.1% greater than the previous year for the 12 month period leading up to May ’14. Cheese – YOY Declines Continue, but at Decelerating Rate Sep ’14 U.S. cheese stocks of 1.01 billion pounds continue to remain lower on a YOY basis, down 5.4% YOY. Cheese stocks also declined 2.6% on a MOM basis, despite the Aug ’14 stocks figure being revised 1.3% lower. Although stocks remain low on a YOY basis, the Sep ’14 YOY decline of 5.4% was the smallest YOY decline in eight months. YOY U.S. cheese stock declines have accelerated throughout the past several months leading up to August and September as milk production in key cheese producing states declined and U.S. cheese exports increased. Milk production has begun to stabilize in Midwestern cheese producing states and Jul-Aug ’14 U.S. cheese exports declined 7.6% from the Mar-Jun ’14 average shipments, reducing recently experienced YOY stock declines. 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 26.2% for U.S. butter stocks.