U.S. Dairy Cold Storage Update – Dec ’14
Butter – YOY Declines in Stocks Continue but at Lesser Rate Due to Weaker Exports According to USDA, Nov ’14 U.S. butter stocks continue to lag previous years, with stocks of 100.9 million pounds coming in 17.0% below last year’s levels and 9.1% below the five year average November butter stocks. The 17.0% YOY decline in butter stocks was the smallest deficit on a percentage basis in the past 12 months. Butter stocks were down 37.7 million pounds, or 27.2%, vs. Oct ’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 Oct ’14 – Nov ’14 decline in butter stocks was slightly less than the five year average October – November monthly decline of 40.4 million pounds, however stocks remain at a three year low for the month of November. 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 remain at significant premiums to international prices. U.S. butter exports have declined 52.9% YOY from May ’14 – Oct ’14, with Oct ’14 butter shipments down 80.4% YOY. Domestic butter exports were 128.1% greater than the previous year for the 12 month period leading up to May ’14. Cheese – Stocks Increase YOY for First Time in 12 Months Nov ’14 U.S. cheese stocks of 1.02 billion pounds increased YOY for the first time in 12 months, finishing up 19.4 million pounds, or 1.9%. Cheese stocks also increased on a MOM basis, up 20.3 million pounds, or 2.0%. Cheese stocks typically decline MOM from October – November, falling by an average of 15.3 million pounds over the past five years. American cheese stocks were particularly strong, up 11.3 million pounds, or 3.4% YOY and 1.8% MOM. Declines in YOY U.S. cheese stocks accelerated throughout the spring and summer months as milk production in key cheese producing states declined and U.S. cheese exports increased. This trend has begun to reverse course as milk production has stabilized in Midwestern cheese producing states while cheese exports declined YOY in Oct ’14 for the first time in 17 months. 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.