EU Gives Protein Market a Beating
USDA released the September Cold Storage Report on Monday. Total natural cheese stored in warehouses on September 30th totaled 1.305 billion pounds, down 2% from the August report but up 6% from last month's report. Butter stocks came in near 257 million pounds. That is 8% lower than last month and 5% behind year ago levels. Beef supplies fell 6% from a year ago but grew by 2% over last month. Overall 488 million pounds of beef were accounted for in storage.
Over the past couple of weeks, much attention has been given to U.S. protein markets as they have weakened substantially. Since the month of October began, November dry whey futures have dropped 4 cents/lb while November grade A nonfat dry milk is down a dime. Much of this weakness results from news out of the European Commission concerning their Intervention Program. The Intervention Program was established to act as a floor when milk prices are weak. The commission is allowed to purchase 60,000 metric tons of butter and 109,000 metric tons of skim milk powder between March 1st and September 30th each year at fixed prices. When ceilings are reached, added inventory is offered on a tendered basis.
Over the past 3 years, inventory levels have been reached and expanded on skim milk powder. 400,000 metric tons are currently sitting in the Intervention Program with discussions of reducing inventories to zero before the 2018 Intervention Program begins. With that talk, U.S. protein markets have taken a beating.