The May Cold Storage report, released Wednesday, shows commercial American cheese stocks at 504.0 million pounds. That’s a decline of 1.4 percent compared to April 2001, and a decline of 12.9 percent when compared to May 2000.

This drop came as a surprise since cheese inventories have increased each May since 1983. In addition, cheese stocks typically grow during the first five months of the year. This year, however, stocks have slipped by 18.8 million pounds since January.

Meanwhile, the report shows butter stocks climbed 26 percent in May to 135.1 million pounds – an increase of 28.2 million pounds above April. The large increase in butter stock is more than most were expecting.

In light of this report, the movement of more butter into storage will likely weaken Class IV butter prices. Meanwhile, the unexpected decline in cheese stocks should provide some additional strength to Class III futures prices and to the cash cheese prices for blocks and barrels.