Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Betty Berning discusses the July 2024 US Cold Storage Report. Customers can view the snapshot report here. Subscribe so that you never miss an episode!
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Transcript:
(0:13) Betty Berning:
Hello everyone, happy Friday, and welcome back to the Dairy Skim, HighGround Dairy’s bite-sized podcast intended to give the dairy industry some flavor into recent reports or events that can impact global commodity pricing. This is Betty Berning, HighGround Dairy’s Contributing Dairy Economist, and it is almost the weekend. USDA has given us a Friday report, it’s July’s Cold Storage, and these numbers were neutral to our expectations.
(0:45)
Total butter stocks fell by 23 million pounds from June to July, the largest drawdown between those two months since 2013, but inventories are decent, they sit at 354 million pounds, and that’s 25 million pounds better than in 2023, and almost 40 million pounds stronger than in 2022. As most of you probably remember, in 2022 and in 2023, that’s when butter prices went to $3 per pound in the fall. So, although the month-to-month drawdown was sizable with the big build in stocks earlier this year and current spot prices sitting at a lofty $3.13 per pound, it seems as though the market has this factored in, and as we’ve been saying for months, it is really hard to be bullish on butter when it’s over $3 per pound. Before 2024, the highest August butter price was $3.0825 per pound, and that was in 2022 when butter inventories were much smaller. We’re higher than that today, folks. So, one other thing to note here on butter is that USDA raised June’s totals by 3.2 million pounds, an increase that also puts a little more butter in the bank. Let’s say in 2024, that’s a 0.9% revision.
(2:13)
On to cheese, which continued to dwindle. Cheese in warehouses summed to 1.407 billion pounds in July, falling by 10.2 million pounds from June. That’s more than the five-year average of a 6.4 million pound decrease. Notably, July’s total was the smallest for the month since 2020, and sits 6% smaller than July 2023. It was American cheese that pushed these totals lower. Stocks fell to 794 million pounds, a 7.4 million pound decline from June, and that’s definitely bigger than the five-year average between those two months, which is a 1.9 million pound decrease.
(3:00)
Through June, significantly less cheddar has been made in 2024 as other products are prioritized and milk supplies here in the US are just smaller than a year ago too. It seems like the lower production of cheddar is continuing to weigh on stock levels. Other than American cheese, stocks also fell month on month and year over year, with warehouses holding 613 million pounds of product in July. The month-to-month decrease of 2.8 million pounds was actually a little stronger than the five-year mean of a 4.6 million pound decline. However, it is important to note that the 613 million pounds in storage was the smallest total for the month since 2020. Overall, these results for cheese were neutral to our expectations and supportive of current markets.
(3:49)
Cheese markets have rallied since mid-July on tight milk supplies seasonally and due to fewer cows than a year ago. Plus, there’s also bird flu that’s keeping milk per cow down. Evidence of the tighter milk supplies can be seen in the Upper Midwest Spot Basis, which sits at its highest price, $2.63 CWT over Class III pricing. That’s the highest price since 2019. The team at HighGround anticipates that, well, cheese markets step back a little bit this week. Prices will be supported in the $1.90 to $2.00 per pound range and today’s stock levels definitely show that.
I will be doing some more analysis so subscribers, watch your inbox for even more details. Thanks everyone, have a great weekend and cheers!
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