December 29, 2016

U.S. Butter and Cheese Stocks Plunge in November

 |  By: Fran Howard

Market optimism is rising as 2017 nears. Not only is global milk production slowing in several regions of the world, but U.S. demand for butter and cheese is robust.

 “Large drawdowns in November U.S. butter and cheese stocks and increased Chinese dairy imports should bring some holiday cheer to dairy producers,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill.

 U.S. commercial stocks of butter in November posted a record-large decline by volume of 67.3 million pounds from October levels, according to USDA’s recent Cold Storage report. At 160.9 million pounds, November butter stocks fell 29.5% from October levels. Despite the dramatic drawdown, November butter stocks are still 21.2%, or 28.1 million pounds, larger then they were a year ago, the report shows.

 “The real quandary is whether butter stocks will increase or decrease in December,” notes Ledman. “Over the past decade, the results have been mixed.” In five of the past 10 years, she says stocks grew in December, and in five years, they declined.

 “Butter churns are typically active over the holiday weekends, when surplus cream is widely available, but current lofty butter prices could have tempered the appetite of some butter manufacturers to grow stocks in December,” she says.

 American cheese stocks also fell in November, down 3.2%, or 23.3 million pounds, to 712.7 million pounds. As of the end of November, however, American cheese stocks were still 1.8% larger than the previous year.

 “Cheese vats were expected to remain full over the holiday weekend, which will add to year-end cheese stocks,” notes Ledman. Year-end cheese stocks will be reported in USDA’s Cold Storage report released in late January.

 At the same time U.S. cheese stocks are nearing year-ago levels, Chinese imports of cheese are accelerating. China’ cheese imports surpassed both prior-month and previous-year imports in November. In total, China imported 10,968 metric tons, or 24.2 million pounds, of cheese in November. That’s up nearly 50% from a year ago and 38% more than in October, notes Ledman.

 “While New Zealand accounted for 58% of China’s November cheese imports, Australia and the United States posted market shares of 17% and 10%, respectively,” Ledman notes. “China’s year-to-date cheese imports are also strong and are running 31% ahead of the same period a year ago.”