February 27, 2017

Butter, Cheese Stocks Remain Plentiful

 |  By: Know Your Market

By Matt Tranel, risk management advisor, Commodity Risk Management Group

The USDA released their January edition of the Cold Storage report last week and showed us that butter and cheese stocks remain plentiful. Cheese stocks grew 3% from December and 5% from a year ago. Butter stocks climbed 34% from December and 16% from January 2016.

The 16% climb in butter was a 57 million pound increase from December, although a correction on the December report contributed to it.

Cheese stocks grew 34 million pounds from December levels and are contributing to the fall we’ve seen in the block and barrel markets. Last week barrel markets began the week with a 7₵ premium to the block counterpart. The volatile spread of late swung in the opposite direction, leaving the cheddar blocks at a premium of 5.75₵ to barrels. This was a 12.75₵ swing for the week.

In other markets, corn began last week testing the $4 December number but was unable to break through, falling later in the week to finish close to $3.90 per bushel. Soybeans saw a softer trade all week as well and ended up losing 11₵ and closing the week at $10.07 per bushel.

The softer tone came on the heels of the USDA Ag Outlook Forum where they predicted corn acres to be at 90 million acres, a 4.3% decline. Soybeans came in at 88 million acres, a 5.5% addition from last year and wheat was pegged at 46 million acres down 8.3% from last year.