U.S. Dairy Cold Storage Update – Nov ’14
Butter – YOY Declines in Stocks Continue but at Lesser Rate Due to Weaker Exports According to USDA, Oct ’14 U.S. butter stocks continue to lag previous years, with stocks of 138.2 million pounds coming in 24.0% below last year’s levels and 8.7% below the five year average October butter stocks. The 24.0% YOY decline in butter stocks was the smallest deficit on a percentage basis in the past 11 months. Butter stocks were down 7.9 million pounds, or 5.4%, vs. Sep ’14 stocks as stocks 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 Sep ’14 – Oct ’14 decline in butter stocks was substantially less than the five year average September – October monthly decline of 36.1 million pounds, however stocks remain at a three year low for the month of October. Most of the recent 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 46.3% YOY from May ’14 – Sep ’14, with Sep ’14 butter shipments down 78.6% 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 Oct ’14 U.S. cheese stocks of 983.8 million pounds continue to remain lower on both a MOM and a YOY basis, down 3.0% and 3.5% YOY, respectively. Although stocks remain lower on a YOY basis, the Sep ’14 YOY decline of 3.5% was the smallest YOY decline in nine months. YOY U.S. cheese stock declines accelerated throughout the spring and summer months 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 while cheese exports have declined off of recent highs. Sep ’14 U.S. cheese YOY export growth of 8.1% reached a 16 month low. 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.