Butter bearish in cold storage report

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Butter stocks have grown nearly 179 million pounds since the beginning of the year — an eye-popping amount, says Eric Meyer, president of the dairy division of HighGround Dairy, Chicago.

The only other year to come close to this was 2006, he notes, when stocks grew by 165 million pounds during the same time frame. But unlike 2006 where Jan-May butter production was nearly 80 million pounds heavier than the previous year, Jan-May 2013 production has only outpaced 2012 by 15 million pounds.

“Yikes,” Meyer says. “With demand this poor and more milk expected to flow into the Class II and IV supply chain — think Greek yogurt, nonfat dry milk/skim milk powder — later this year, we do not have a lot of confidence butter stocks will make a stronger-than-anticipated move lower. A seasonal uptick in butter prices may occur over the next 30-60 days but we have our doubts there is a significant move higher in the medium- to long-term until the U.S. figures out how to efficiently sell its excess butterfat.”

As for cheese stocks, the standout numbers are the month-over-month declines in both Natural American-style and Total Cheese in June, Meyer reports.

“It is pretty rare to see a monthly decline between May and June and (this is) only the third time since 2000 it has occurred,” he says.

In 2007, strong Class IV and dry whey prices sent April and May Natural American production lower by nearly 25 million pounds. But in 2013, April and May Natural American cheese production was up a combined 34.4 million pounds, he adds.

“Declining prices in June must have gotten buyers off the sidelines because a stronger-than-anticipated June milk production report last week suggests cheese production was strong,” Meyer notes. “We view this as a somewhat bullish short-term indicator to the cheese market — demand has likely resurfaced.”



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