Butter stocks rose a whopping 12.46 percent from November to December, which is bound to have a negative impact on Class III milk prices.

According to the U.S. Department of Agriculture’s “Cold Storage” report on Friday, butter stored in warehouses rose from 93.52 million pounds in November to 105.18 million pounds in December.

It’s a “very bearish” sign, says Dave Kurzawski, dairy analyst with FC Stone/Downes-O’Neill.

“We would expect that this report offers credibility to the recent spot market and futures price declines and may lead to additional weakness when trading begins next week,” said a FC Stone release on Friday.

Spot butter prices have been in decline for several months. On Friday, the Grade AA butter price on the Chicago Mercantile Exchange closed at $1.57 a pound.

Butter prices are important because they help determine butterfat value — one of the key components of Class III prices.

Meanwhile, total natural cheese stocks in refrigerated warehouses on Dec. 31 were up 1 percent from November, but down 6 percent from Dec. 31, 2010, according to the Cold Storage report.

FC Stone says the cheese portion of the report should have a neutral effect on Class III futures.