U.S. Dairy Cold Storage Update – Aug ’15
Butter – Stocks Remain Significantly Higher on YOY Basis, Finish up 40.7% According to USDA, Jul ’15 U.S. butter stocks of 254.5 million pounds remained significantly higher on a YOY basis, finishing up 40.7%. The YOY percentage increase was the largest experienced in the past 31 months. Butter stocks declined by 1.5 million pounds, or 0.6%, from the previous month, however the MOM decline was significantly less than the three year average June – July seasonal decline of 16.8 million pounds, or 6.7%. Recent increases in butter stocks have resulted in Jul ’15 stocks remaining above three year average levels for the third 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 nine month high in Jul ’15. U.S. butterfat exports have declined YOY for 14 consecutive months through Jun ’15. Cheese – Stocks Remain Significantly Higher YOY, Reach 31 Year High Jul ’15 U.S. cheese stocks of 1.16 billion pounds finished up 1.8% MOM and 10.2% YOY. The monthly YOY increase in cheese stocks was the ninth experienced in a row and the largest in the past 26 months on a percentage basis. On an absolute basis, total cheese stocks reached a 31 year high, finishing at a level not experienced since 1984. 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 20.2 million pounds, or 1.8%, was a contraseasonal move when compared to the three year average June – July decline in cheese stocks of 2.5 million pounds, or 0.2%. Strong cheese production has been partially offset by continued strong domestic demand, however cheese exports remained lower YOY for the ninth consecutive month in Jun ’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.