U.S. Dairy Cold Storage Update – Jun ’15
Butter – Stocks Increase Sharply for Second Consecutive Month According to USDA, May ’15 U.S. butter stocks increased sharply for the second consecutive month, with month ending stocks of 264.3 million pounds finishing up 13.7% MOM and 26.2% YOY. The MOM increase of 31.9 million pounds, or 13.7%, was significantly larger than the ten year average April – May seasonal build of 18.0 million pounds, or 8.8%. Recent increases in butter stocks have resulted in May ’15 month ending stocks reaching three year average levels for the first time in 18 months. U.S. butter stocks typically increase seasonally through 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 12 consecutive months through Apr ’15. Cheese – Stocks Remain Higher on YOY Basis for Seventh Consecutive Month May ’15 U.S. cheese stocks of 1.11 billion pounds finished up 2.2% MOM and 4.1% YOY. The monthly YOY increase in cheese stocks was the seventh in a row after 11 consecutive months of YOY declines were experienced from Dec ’13 to Oct ’14. 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 May ’15 MOM build of 23.6 million pounds, or 2.2%, finished slightly higher than the ten year average April – May build of 19.5 million pounds, or 2.1%. Cheese production has remained strong but the additional supply has been partially offset by continued strong domestic demand, although cheese exports remained lower YOY for the seventh consecutive month in Apr ’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.