The Dairy Products report released by USDA today contains estimates of September 2011 dairy product production, as well as manufacturer’s end-of-month stocks for dry proteins and lactose.
Market analysts at FCStone interpret these data as follows:
- Butter — slightly bearish. Butter production in September 137.6 million pounds, up 21 percent from a year ago and up 6.9 percent from a month ago (on a daily average basis). This slightly exceeded our estimate for total production of 136.7 million pounds but butter seems to be on the decline due to GDT results and this likely does little to stem those losses.
- Cheese — slightly bullish. September American cheese production was 337.0 million pounds, down 4.2 percent from a year ago; Mozzarella cheese production in September was 288.2 million pounds, down 0.9 percent from a year ago. A clear shift was seen in production from American cheese into the other cheese category as total cheese production was nearly in line with our expectation. That shift along with holiday demand may well be the reason for spot pricing holding strong in the face of the other mostly bearish dairy markets.
- Nonfat dry milk—bearish. Nonfat production in September was 103.9 million pounds, down 5 percent from a year ago. Production of skim milk powder was 35.6 million pounds, up 103.7 percent. Total powder production for September was up 10.4 percent year-over-year. Manufacturer’s stocks at the end of September were down 10.1 percent month-over-month, continuing to indicate strong demand. But with international prices softening, we wonder if SMP stocks are increasing? Or if perhaps we will see a shift back toward NFDM production (away from SMP) in the coming reports.
- Dry whey— slightly bullish. Dry whey production in September was 77.1 million pounds, down 0.8 percent from a year ago. Manufacturers’ stocks were falling down 2.7 percent for human product and down 9 percent for animal product from last month, leaving total stocks down 3.4%. We remain slightly bullish as inventories continue to decline slightly and production is not increasing to keep up.
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