U.S. Dairy Cold Storage Update – Jan ’15
Butter – YOY Declines in Stocks Continue but at Lesser Rate Due to Weaker Exports According to USDA, Dec ’14 U.S. butter stocks continue to lag previous years, with stocks of 98.6 million pounds coming in 12.3% below last year’s levels and 16.0% below the five year average December butter stocks. The 12.3% YOY decline in butter stocks was the smallest deficit on a percentage basis in the past 13 months, although December butter stocks remain at a four year low for the month of December. Butter stocks were down 2.3 million pounds, or 2.2%, vs. Nov ’14 stocks despite butter stocks typically increasing from Nov – Dec. Most of the recent 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 55.2% YOY from May ’14 – Nov ’14, with Nov ’14 butter shipments down 68.2% 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 on YOY Basis for Second Consecutive Month Dec ’14 U.S. cheese stocks of 1.01 billion pounds continue to increase on a YOY basis, finishing up 3.2 million pounds, or 0.3%. The monthly YOY increase in cheese stocks was the second in a row after ten consecutive months of YOY declines were experienced from Dec ’13 to Sep ’14. American cheese stocks also increased for the second consecutive month, up 5.5 million pounds, or 0.9% YOY. 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 and Nov ’14 for the first times in 18 months. The Nov ’14 YOY decline in cheese exports was the largest in over five years on a percentage basis. Stocks increased on a YOY basis despite a 1.7% MOM decline in American cheese stocks and a 0.4% MOM decline in total cheese stocks. 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.