In our opinion, today’s Cold Storage report was neutral for butter, but bearish for American cheese. Butter inventories are still well below normal. However, butter inventories are building. Thus we gave it a neutral call. For cheese, “other cheese” inventories are up just 2.5%, well in line with normal consumption. However, inventories of American cheese are building well above normal 5-year levels. Thus we called this report bearish for American cheese.

Cold storage inventories for butter on January 31, 2011 were 118.9 million lbs, down 29.2% from the same month a year ago. In addition, butter inventories grew 45.6% from the previous month. Despite relatively high prices for this time of year, butter inventories are being replenished.

American cheese inventories as of January 31, 2011 were 639 million pounds, up 8.6% from a year ago. December cold storage was revised down to reflect stronger export sales. American cheese inventories are growing, implying that domestic consumption and exports are below production levels. “Other cheese” inventory, which reflects in large part mozzarella, was up 2.5% from a year ago at 376.4 million pounds. Total cheese inventories in January were 1,051.7 million pounds, up 7.1% from a year ago. Most of this increase is clearly identified with growth in American cheese inventories.

Summary Statistics as of January 31, 2011:
• Butter¸ 118.9 million lbs, down 29.2%
• American cheese, total, 639 million lbs, up 8.6%
• Swiss cheese, 36.3 million lbs, up 38.7%
• Other natural cheese, 376.4 million lbs, up 2.5%
• Total cheese, 1,051.7 million lbs, up 7.1%