Stocks Ample for Milk Supply Outlook

US - USDA’s Cold Storage report indicates that American cheese and butter stocks are adequate given strong milk production and poor fluid milk demand, writes Mary Ledman, Sara Dorland, Sarina Sharp and Karen Endres on 24 April 2012.
calendar icon 24 April 2012
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This combination has resulted in greater dairy products production, some of which has moved into storage. American cheese stocks totaled 621.9 million lbs. as of Mar. 31. During the first quarter 2012 (Q1 2012), American cheese stocks increased by 10.9 million lbs. compared to last year’s uncharacteristic 19.5 million lb. stock drawdown. Compared to previous years, this year’s inventory build is modest and only surpasses Q1 2009, another year with a plentiful milk supply.

Butter stocks as of Mar. 31 reached 210.6 million lbs. Butter stocks increased by 103.7 million lbs. during Q1 2012. That build is second to 2006’s build of 136.7 million lbs. Despite the strong build, current butter stocks are on par with 2008 and 2009 stock levels.

CME spot Cheddar cheese trading was very active today as 14 loads of cheese traded. The spot barrel market traded as low as $1.45/lb. before being bid higher.

A barrel transaction at $1.47/lb. closed the market a penny higher. The block market traded as low as to $1.52/lb. before closing on a bid at $1.5225/lb., down 0.5¢.

The MAY and JUN Class III contracts traded 50¢ to 60¢ lower in response to below the market trades, but recovered later in the day. The CME spot butter and NDM trading was less eventful. The CME spot butter market settled unchanged at $1.4125/lb. with three at-the-money bids on the board. Both CME Grade A and Extra Grade NDM closed unchanged after no trading activity at $1.1675/lb. and $1.1275/lb., respectively.

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