Archive for cheese stocks

August 2024 Cold Storage Report: Cheese Falls Short, Butter Oversupplied

August 2024’s Cold Storage Report reveals a cheese deficit and a butter surplus. What does this mean for your dairy business? Find out more.

Summary:

August 2024’s cold storage report presents a mixed scenario for dairy farmers and industry professionals. Cheese stocks fell 7 million pounds short of forecasts, marking a 6.4% decline from last year. This shortfall partially resulted from a significant revision to July’s data. Although CME cheese blocks were initially undervalued in August, they rallied by mid-September. Conversely, butter stocks exceeded expectations by 5 million pounds, showing a 10.8% increase from the previous year, despite a minor downward revision to July’s numbers. This mixed performance underscores the importance of staying informed in an ever-changing market, as these unexpected shifts could influence your dairy operation‘s future.

Key Takeaways:

  • Cheese stocks for August were 7 million pounds lower than forecast.
  • Cheese inventory dropped by 6.4% compared to last year.
  • July’s cheese stock revision was downward by 3.5 million pounds.
  • CME blocks were slightly undervalued in August but rallied in September.
  • Butter stocks exceeded expectations by 5 million pounds.
  • Butter stock levels increased by 10.8% from last year despite a 1 million pound downward revision in July.
  • Q3 stocks/use ratio suggests butter prices could drop below $3.00.
dairy product stocks, cheese stocks, butter stocks, CME blocks, market prices, refrigerated warehouses, frozen poultry supply, frozen fruit supplies, Italian cheese shortage, Q3 stocks/use ratio

The August 2024 Cold Storage Report reveals significant changes in dairy product stocks: cheese stocks are down by 7 million pounds compared to forecasts, a 6.4% decrease from the previous year, while butter stocks have surged, arriving 5 million pounds higher than expected and up 10.8% from last year. According to the research, CME blocks were undervalued in August but recovered with a rise in early September, and butter is now trading below $3.00 owing to increasing supplies. This mixed picture of lower-than-expected cheese and more significant butter stockpiles may influence market patterns and prices in the coming months.

ProductAugust 2024 Stocks (lbs)Expected Stocks (lbs)Year-on-Year Change
Cheese1,175 million1,182 million-6.4%
Butter319 million314 million+10.8%

August 2024: Dairy, Poultry, and Meat Stock Dynamics Revealed

On August 31, 2024, total natural cheese stockpiles in refrigerated warehouses were down marginally from the previous month and by 6.4% from August 31, 2023. Butter stockpiles fell 8% from last month but increased 10.8% from a year earlier.

On August 31, 2024, total frozen poultry supply was up marginally from the previous month but down 5% from a year before. Total chicken stockpiles were up slightly from last month but down 9% from last year. Total pounds of turkey in freezers were somewhat lower than the previous month but up 2% from August 31, 2023

Total frozen fruit supplies were up 3% from the previous month and 9% from a year earlier. Total frozen vegetable supplies were up 16% from the previous month but down 11% from a year earlier.

Total red meat supplies in freezers were down 1% from last month and 2% from the previous year. Total pounds of frozen beef were down 2% from the previous month and somewhat lower than last year. Frozen pork supplies were marginally higher than last month but 3 percent lower than last year. Pork belly stocks were down 39% from last month and 30% from the previous year.

Caught Off Guard: The Unexpected Cheese Stock Shortfall Explained

The unexpected drop in cheese stockpiles, which is 7 million pounds shy of projections, has surprised many. This shortage, indicating a 6.4% decrease from the previous year, is a significant reduction given the steady demand for cheese throughout the market. The question on everyone’s mind is, what caused this discrepancy?

The July figures were revised, resulting in a 3.5 million-pound reduction, mainly impacting Italian cheese kinds. This lower change affected the original projection, causing a ripple effect that altered the August prognosis.

The undervaluation of CME blocks in August exacerbated the problem. Despite the decrease in inventory, the market did not instantly respond. However, we witnessed a correction in early September when CME blocks rallied. This comeback offset the original undervaluation by bringing market prices in line with lower inventory levels.

Butter Surplus Saga: August’s Unexpected Inventory Windfall

The butter stocks narrative in August deviated significantly from predictions, with a surplus of 5 million pounds over predicted quantities. This difference represents a noteworthy 10.8% rise over the previous year. While impressive, this expansion comes with its own set of challenges.

It’s worth noting that July’s butter stockpiles were revised lower by 1 million pounds, raising concerns about the accuracy and fluidity of these data. Since these adjustments impact market perception and strategy, they must be scrutinized appropriately. Caution and thoroughness in analyzing such data are crucial for making informed decisions.

So, what does this imply for butter prices? The Q3 stocks/use ratio provides a fascinating narrative. This ratio predicts that butter prices should remain below $3.00, which is now reflected in market movements. Prices have remained negative, owing to increased volume and open interest, bolstering the argument for a butter market valued below $3.00.

This report serves as a timely reminder to monitor inventory fluctuations and market signals as they predict price patterns and guide business choices.

External Forces at Play: Weather, Trade, and Feed Costs Influencing Dairy Stock Levels 

Going further into the cold storage records, we discover various external variables that might have altered cheese and butter stock levels. Notably, weather conditions have a significant impact. This year, unexpected weather patterns hindered fodder production, lowering milk output across numerous dairy farms. A hotter-than-average summer in key dairy areas reduced fodder quality, lowering feed prices and straining cattle. This resulted in lesser milk output and less cheese availability.

Additionally, international trade policies put enormous pressure on dairy exporters. Recent disruptions in global commerce, notably strained trade ties with significant dairy importers and exporters, have resulted in uncertainty and swings in export volumes. Tariffs and international policy revisions significantly impact the price and availability of dairy products. For instance, cheese exports dropped due to more onerous trade restrictions, increasing supply deficits.

Furthermore, fluctuations in feed prices have had a significant effect. Rising grain and hay prices stretched dairy producers’ profit margins, and part of these expenses were passed on to processing facilities via increased milk pricing. This economic pressure drove processors to modify their production tactics, concentrating on less perishable goods and contributing to more enormous butter stockpiles.

Understanding these external influences is critical to understanding the dairy sector’s difficulties and complexity. While internal logistics and management play an essential role, it is apparent that external factors such as weather, trade rules, and feed costs have a significant impact on stock levels and, therefore, market pricing. This knowledge puts you in a position of control and preparedness.

Historical Perspectives: Analyzing Cheese and Butter Inventory Trends

Knowing how current stock levels compare to earlier years might give helpful information. Cheese inventories have varied, but the 6.4% decline in August stands out. Cheese stockpiles have consistently trended higher over the last decade, so this dip is an exception rather than part of a more significant trend.

However, butter inventories have been more unpredictable. While a 10.8% rise may seem unexpected, it is consistent with past patterns of changes caused by cyclical production cycles and market demand. Similar rises have happened over the last five years, albeit this year’s jump is on the upper end of the range.

Preparing for Market Shifts: Navigating Cheese and Butter Stock Trends 

The forecast for cheese and butter supplies in the following months is becoming a significant subject among dairy specialists. Cheese stockpiles, already lower than predicted, will likely remain tight as we enter the year’s final quarter. This means that prices may continue to be excessive, particularly if demand remains robust. Farmers should regularly monitor inventory levels and market demand to adapt their production plans appropriately.

Butter supplies, which have startled us with their unanticipated excess, are predicted to continue this trend if present production rates and lower-than-expected domestic demand remain unchanged. In conclusion, butter prices may stay under pressure, perhaps falling below $3.00. Farmers may consider this a chance to improve their storage and distribution techniques to avoid adverse income effects.

How can farmers prepare for these anticipated changes? To begin, keeping informed requires frequent perusal of reports and market analysis. Leveraging forward contracts and hedging methods may be helpful to risk management tools. Farmers can also consider diversifying their product offers to ensure a continuous financial flow. Farmers can weather future uncertainty by concentrating on efficient operations and cost control.

Finally, being proactive and adaptive will be critical. Preparation and strategic planning may make all the difference in an industry characterized by volatility and unpredictability.

Strategizing for Shifting Markets: Adapting Your Dairy Operation 

What do shifting stock and pricing swings signify for your dairy business? The cheese shortage may look worrying, but it may also result in better pricing for manufacturers who can capitalize on the reduced supply. How will you adjust your output to capitalize on this opportunity? Could investing in specialist cheese kinds, especially Italian ones, provide a competitive advantage?

On the other hand, the unanticipated butter excess provides a unique difficulty. With prices falling below $3.00 owing to an increasing stock/use ratio, dairy farmers and allied enterprises must tread cautiously in this hostile environment. Will you adapt your butter output or look into different products to stay profitable?

Consider market methods like diversifying your product portfolio or locking in pricing with futures contracts. How may these strategies help you maintain your income despite the volatility? Consider how these changes may affect your business and seek new solutions to maintain long-term viability in a changing market context.

Consumer Impact: Price Shifts and Purchasing Patterns at Stake 

It’s critical to evaluate how these inventory levels may affect customers. Will the lower cheese inventory and increased butter supply significantly change retail prices? Prices have historically risen as inventory levels fall owing to supply restrictions. This might make your favorite block of cheddar or mozzarella a little more expensive in the coming months. Conversely, an oversupply of butter may result in more steady or cheaper pricing, which would be a welcome respite given the high cost of other supermarket items.

How may this transition influence customer behavior and demand? When prices rise, customers typically change their shopping patterns. Increased cheese prices may encourage families and restaurants to seek alternatives or cut consumption. Conversely, competitive butter pricing may increase consumption, encouraging bakers and home chefs to use more in their recipes. This pricing dynamic may cause significant changes in purchasing habits in homes and across the food service sector.

The Bottom Line

The August cold storage report indicated a significant deficiency in cheese stockpiles and an unexpected excess in butter. Cheese inventories declined by 7 million pounds from previous estimates, indicating tighter supply and likely price revisions. In contrast, butter stockpiles increased by 5 million pounds more than expected, driving prices down in a dismal market. These divergent patterns highlight the need for adaptive market strategies and regular reassessment of inventory management practices.

What does this imply for your dairy business? How will you respond to these market changes and capitalize on new opportunities? Staying informed and proactive is more important than ever. With economic elements in motion, staying on top of these developments will undoubtedly influence your performance. Continually assess the broader economic situation and be prepared for the unexpected.

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Markets are not Bullish or Bearish, but Indecisive: Cheese Stocks Shrink Amid Soaring Milk Demand.

Find out how rising milk demand is reducing cheese stocks and affecting prices and exports. Will this trend keep changing the dairy market? Learn more here.

The dairy market is changing in a terrain defined by uncertainty. Growing demand for milk here and abroad has resulted in declining cheese supplies.

Over successive months, cheese supplies in cold storage have dropped, leading to a dramatic price rise and difficulties for new exporting companies. Reflecting this, the USDA observes, “Cheese markets are not bullish or bearish, but indecisive.” LaSalle Street shows this feeling with changing spot Cheddar block and barrel pricing.

“Cheese markets are not bullish or bearish, but indecisive.” – USDA

These factors affect home as well as foreign markets. While decreasing mozzarella sales and high prices discourage new export contracts, they show steady domestic demand for cheese. The erratic character of market dynamics points to stormy times ahead for those involved.

Spring Surprises: An Unanticipated Shift in Cheese Production and Inventories

MonthProduction Volume (Million Pounds)Year-over-Year Change (%)
January1,102+1.2%
February1,018+0.9%
March1,165-0.7%
April1,150-1.0%
May1,190-1.5%

Driven by the ‘spring flush,’ when cows produce more milk, spring often marks a period of higher cheese output in the dairy sector. This surplus of milk leads to more significant, less expensive supplies for cheese makers, which in turn drives more manufacturing and inventory build-up. However, this year, the situation was different due to rising milk costs and growing demand, resulting in a contraction in cheese supplies.

Still, spot milk prices were high this year as cheese’s local and export demand increased. This odd situation resulted in cheese supplies declining from March through May, the lowest May inventories since 2019.

The present situation emphasizes how global demand and price changes may disrupt established dairy industry supply lines.

Demand Dynamics: Unpacking the Surge in Milk Consumption and Its Ripple Effects 

Time PeriodExport Demand (Million Pounds)Domestic Demand (Million Pounds)Total Demand (Million Pounds)
Q1 20232501,2001,450
Q2 20233001,2501,550
Q3 20233201,2801,600
Q4 2023 (Projected)3401,3001,640

For several reasons, both domestic and export milk demand has increased. American tastes for dairy goods like unique yogurts and handcrafted cheeses have changed. This shift in consumer preferences is further fueled by the economic recovery after the pandemic, which has increased disposable income and a greater focus on health and nutrition, thereby boosting the demand for dairy products.

Globally, U.S. milk products are much sought after because of their competitive price and superior quality. Rising Asian and Latin American emerging markets are increasingly looking for nutrient-rich diets. Additionally, increasing exports ease trade barriers.

This demand increase has limited milk supplies for cheese manufacture. Usually, the spring flush period sees an excess of inexpensive milk aimed toward cheese manufacturing; however, rising milk costs and growing demand have altered this year and resulted in a contraction in cheese supplies. The increase in milk costs has made cheese production more expensive, leading to a decrease in cheese supplies.

Strong export markets and rising domestic consumption have pressured milk supply, pushing cheese makers to negotiate a limited milk procurement scene. Strong cheese demand and shortage have caused market instability and price rises.

A Season of Scarcity: The Decline in Cheese Stocks Reveals Market Vulnerabilities

Month201920202021202220232024
January1.371.411.481.501.521.46
February1.351.381.451.471.501.44
March1.331.351.421.451.471.41
April1.321.331.411.431.461.38
May1.311.321.391.411.441.34

This year’s noteworthy drop in cheese supplies Cheese stockpiles at the end of May amounted to 1.44 billion pounds, a 3.7% decline from May 2023, marking the lowest May total since 2019.

While prices were flat in June as the market battled to draw fresh export business, this inventory loss caused a price spike in April and May. While sales of mozzarella dropped, home demand for other cheeses remained robust. With CME spot Cheddar blocks climbing 6.5ȼ to $1.91 per pound and barrels sliding 4ȼ to $1.88, the USDA labeled the market “indecisive.”

Global Competition Heats: U.S. Cheese Exporters Face Escalating Prices and Adverse Exchange Rates

MonthCheese Exports (Million lbs)YoY Change (%)Export Price ($/lb)
January60.5+2.4%1.75
February58.2+3.1%1.78
March59.8+1.8%1.80
April61.3+4.5%1.85
May62.0+3.0%1.82

Exporters are battling intense worldwide competition and rising cheese costs. Both domestic and export demand has raised prices, so U.S. cheese-less competitiveness abroad has suffered. This has made it difficult—a difficulty that still exists—to get fresh export contracts.

The strong U.S. currency makes American goods more costly for overseas consumers, aggravating the situation. A lower euro helps European producers; they have raised milk output, strengthening their market share. This increase in European production, particularly in Poland, sharpens the competitiveness of American exporters.

Additionally, changing agricultural policy, European nations are slowing down dairy herd declines and boosting cheese production capacity. New EU rules mandating Dutch farmers to distribute manure across more extensive regions might lower cattle numbers but have little effect on total output shortly.

Despite the challenges, U.S. exporters have the opportunity to navigate the high domestic cheese prices, robust overseas market, and the currency’s economic impact. The key to maintaining a strong presence in the global cheese market lies in strategic orientation, creative pricing, and innovative marketing techniques. These strategies can help the industry adapt to the changing landscape and continue to thrive in the worldwide cheese market.

Domestic Cheese Demand Anchors Market Amidst Uncertainty

Type of CheeseQ1 2023 Demand (Million lbs)Q2 2023 Demand (Million lbs)Growth Rate (%)
Cheddar4504704.4%
Mozzarella5205352.9%
Other Cheeses3003206.7%

Despite the market’s unpredictability, the robust domestic demand for certain cheese types provides a sense of stability. While mozzarella sales may have dipped, the consistent demand for other cheeses has helped maintain market buoyancy amidst fluctuating prices and inventory levels. The enduring popularity of Cheddar, in particular, has been a boon for local manufacturers. The strong demand for a variety of cheese options is a testament to the industry’s ability to navigate market uncertainty.

Whey Market Dynamics: A Tale of Domestic Resilience and Export Challenges

ProductDomestic PriceExport PriceTrend
Whey Protein Concentrate$0.45/lb$0.38/lbStable
Whey Powder$0.49/lb$0.37/lbIncreasing

Though exports are sluggish, domestic solid demand supports the whey product industry. While export loads are in the mid $0.30s per pound, USDA notes that some load categories are grabbing rates “at and above the $0.45/lb. Mark.” The prices of CME spot whey powder have increased by 2ȼ to a four-month high of 49ȼ by local demand. Although export difficulties still exist, the domestic market demonstrates confidence, which leaves the whey product market in a unique and somewhat dubious state.

Butter Resilience and Emerging Fears: High Inventories Yet Potential Shortages Loom 

MonthButter Stocks (million pounds)CME Spot Butter Prices ($/lb)
January360$2.95
February370$3.05
March375$3.10
April378$3.12
May380$3.125

Butter stockpiles rose by 3.4% by the end of May to 380 million pounds, the highest level since 2020 and 1993. Still, worries about a possible shortfall later in the year cloud this increase. Rising milk prices and hot weather have boosted CME spot butter prices to $3.125, up 3.5ȼ this week, illustrating the market’s response to high domestic demand and growing expenses.

Milk Powder Puzzles: Navigating the Setbacks in Global and Domestic Markets

MonthCME Spot Nonfat Dry Milk (Price per lb.)Notable Market Movements
January$1.05Stable with minimal shifts in market dynamics
February$1.08Minor increase due to lower production volumes
March$1.12Gradual upward trend as export demand briefly rises
April$1.15Peak due to supply chain disruptions
May$1.10Initial decline after export challenges emerge
June$1.18Brief recovery, but long-term outlook remains uncertain

A disappointment at the Global Dairy Trade Pulse auction highlights the declining milk powder industry. CME spot nonfat dry milk is down 2.25ȼ to $1.1825. Soft worldwide demand causes prices to struggle to gather even with minimal U.S. production. Reduced global demand limits price rises even if local output levels fall short of past highs.

European Dairy Gains Momentum: Navigating Increased Production and Stringent Regulations in a Competitive Export Landscape

Europe’s increasing production capacity stands out as the worldwide dairy industry adjusts to competition and demand. With Europe and the UK producing around 31.5 billion pounds in April, a 0.3% rise from April 2023, European milk production exceeded last year’s levels in February, March, and April. While lousy weather hindered growth in Ireland and the UK, Germany and France reported modest output gains.

Reflecting local agricultural efficiency, Poland saw a 5.4% year-over-year increase. Still, this expansion presents some difficulties. New rules meant to satisfy EU climate pledges fall on European farmers. Though there are expectations for slower legislative changes after recent elections, current rules continue.

The EU Nitrate Directive ends Dutch dairy farmers’ exemption from manure derogation rules, aggravating their logistical problems. A 1.3% decline in Dutch milk output in April resulted from almost 40% of Dutch farmers needing help finding adequate space for manure spreading, reducing their cattle numbers.

Strict rules and this higher output are changing the competitiveness of dairy exports. A significant dollar deficit for American goods gives European manufacturers an advantage and complicates the export scene for American exporters.

Market Outlook: A Complex Interplay of Domestic Growth and International Competition 

The market’s state shows a combination of domestic strength and foreign challenges. Domestically, growing expenses have driven strong demand for milk and certain cheeses, driving prices even if sales of mozzarella have slowed down. The recent increase in CME spot whey powder indicates this demand has also bolstered whey product prices.

Globally, when European manufacturers raise their production, more competition and an unfavorable exchange rate pose challenges to U.S. cheese exporters. Further strict environmental rules complicate the supply scene even further.

Futures in Class III and IV mirror industry challenges. While fourth-quarter Class IV contracts climbed somewhat, stabilizing in the mid-$21s per cwt, third-quarter Class III futures decreased; the July contract fell 81ȼ to $19.46 per cwt.

Although dairy farmers face market instability, decreased feed costs and high-class III and IV milk prices provide some hope for alleviation in a convoluted worldwide market.

Grain Market Turmoil: Corn Futures Plummet as USDA Reports Upend Expectations

MonthCorn Price (per bushel)Soybean Price (per bushel)Wheat Price (per bushel)
January$5.50$13.00$6.20
February$5.30$12.80$6.10
March$5.10$12.60$6.00
April$4.85$12.40$5.90
May$4.65$12.20$5.80
June$4.45$12.00$5.70

After USDA’s Acreage and Grain Stocks figures, December corn futures reached a three-year low. Farmers planted 1.5 million more acres of maize than the early spring poll expected—91.5 million acres. Soybean acreage dropped 400,000 acres to 86.1 million.

September corn futures plummeted 32ȼ to $4.085 per bushel from a massive stockpile of corn acres. The December contract dropped 32ȼ as well, to $4.215. Though there is flooding in the Northern Plains, grain is plentiful and helps keep feed prices down.

The Bottom Line

Recently, the dairy market has shown a combination of volatility and resilience. Unlike past patterns, rising demand has reduced cheese supplies, pushing prices higher but not maintaining them. Strong domestic whey demand helps raise spot prices even in lean export markets. Though possible shortages due to weather and higher milk costs loom, butter supplies have risen. European competitiveness and worldwide demand issues are testing the milk powder sector.

Ahead, the dairy market is expected to negotiate challenging terrain. European manufacturing advantages and political demands might affect world commerce, posing difficulties for American manufacturers. Strong domestic dairy demand might help the price, but global economic and environmental issues will always be critical. Stakeholders have always to be vigilant and ready for changes in the industry.

Key Takeaways:

  • Cheese stocks have decreased significantly, with inventories at their lowest since 2019, influencing price changes.
  • Domestic milk demand continues to soar, while both domestic and export demands are impacting cheese production and pricing.
  • The whey product market remains strong domestically, though export challenges persist.
  • Butter stocks are high but fears of shortages later in the year have driven prices up.
  • Milk powder market faces setbacks due to soft global demand, despite light U.S. output.
  • European dairy production is ramping up, creating stiffer competition for U.S. exports amidst regulatory challenges.
  • Grain market upheaval as USDA reports higher-than-expected corn inventories and planted acreage, leading to a dip in corn futures.
  • Lower feed costs are anticipated to benefit dairy producers in the face of volatile market conditions.

Summary:

The dairy market is experiencing a shift due to increasing demand for milk both domestically and internationally, leading to declining cheese supplies. This year, the situation was different due to rising milk costs and growing demand, resulting in a contraction in cheese supplies. The USDA has observed that cheese markets are not bullish or bearish, but indecisive. This situation affects both domestic and foreign markets, with decreasing mozzarella sales and high prices discouragering new export contracts. The current situation emphasizes how global demand and price changes may disrupt established dairy industry supply lines. Both domestic and export milk demand have increased due to changing consumer preferences, economic recovery after the pandemic, and rising Asian and Latin American emerging markets seeking nutrient-rich diets. Strong export markets and rising domestic consumption have pressured milk supply, pushing cheese makers to negotiate a limited milk procurement scene. The decline in cheese stocks has revealed market vulnerabilities, with cheese stockpiles at the end of May averaging 1.44 billion pounds, a 3.7% decline from May 2023. The erratic character of market dynamics points to stormy times ahead for those involved in the dairy industry.

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