I have discussed butter in some of the articles I have written this year, as it has been an interesting market. The April Cold Storage report showed butter stocks increased, but more slowly than usual. Butter inventory increased by 14.1 million pounds, totaling 337.4 million pounds. The surprising aspect is that April inventory was 7% below April 2024. Cream supplies have been abundant due to record levels of butterfat content in milk, which has kept churning active with many butter plants running at capacity.
I wrote an article a month ago indicating that butter could be a sleeping giant that could be awakened as the year progressed. Looking back to December, we can see a trend of slower inventory growth despite the strong production of butter. Butter inventory in December 2024 was 11% above December 2023. January inventory was 9% above January 2024. February inventory was 3% above a year earlier, March was 4% higher, and April was 7% lower than April 2024. This could be developing a pattern similar to 2023. That year, the spot butter price remained in a range until late June, when it took off and moved to a new record high of $3.5025 per pound. The butter price this year has remained in a range since late February, but broke out of that range at the end of last week. Butter exports have been very strong compared to a year ago, with the U.S. price being very competitive in the world market. If domestic demand improves for both the retail and food service industries, the butter price may trend higher, as it did in 2023. It may not see the strength it did that year, but the price could increase significantly.
Another trend that has been discussed is the decrease in dairy cattle slaughter, which is worth repeating. The tight supply and high prices of replacements have resulted in farmers holding onto cows rather than culling as usual. Farmers have not needed to cull cows as heavily to generate income when milk prices are lower. The practice of breeding beef on dairy on a percentage of their herds has netted large benefits by producing substantial income. Some have realized that a cow that does not have a great milk average for one year for various reasons may bounce back with a much better average the following year. The positive aspect is that she is paid for rather than spending a substantial amount of money on a replacement. The April Milk Production report showed output was up 1.5% from April 2024, with production per cow up 11 pounds from a year ago. The nation’s dairy cow herd is at the highest level since March 2023 at 9.425 million head.
The April Livestock Slaughter report showed dairy cattle slaughter declining to 207,200 head, the lowest amount since June 2014. There have been 20 consecutive months with lower dairy cattle slaughter than the previous year.
As long as the outlook for milk prices improves and beef cattle prices remain high, this trend may continue.
Your Next Read: A Promising Horizon for U.S. Dairy
Robin Schmahl is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Robin’s office is located in Elkhart Lake, Wisconsin. Robin may be reached at 877-256-3253 or through the website www.agdairy.com.
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.
