Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Eric Meyer discusses the April 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:
(0:14) Eric Meyer:
A very happy Friday to everyone, and here in the States, we are recording this brief podcast on the heels of a long weekend with Memorial Day this Monday, as we mourn the nations fallen who have protected the freedoms we enjoy. Eric Meyer here, President of HighGround Dairy, and this is The Dairy Skim, a bite-sized podcast giving you the highlights of important events impacting the dairy markets. This afternoon, the USDA just dropped the April 2024 Cold Storage Report, which provides the industry-ending stock data for both butter and cheese. For the sake of time, let’s get right into it.
(0:50)
While the Butter market has basically shrugged off any kind of bearish news the industry has thrown at it, settling today, CME Spot, over $3.12 per pound, and remember, it’s still May, inventory building from March to April was well beyond expectations, up more than 44 million pounds to 361 million at the end of April. This figure is up 29 million pounds from last year, and 63 million pounds above 2022’s bull market. The last time we saw a March to April build of this magnitude was during the anomaly year COVID in 2020, and we have to look back to 2016 to find a stronger increase from March. Looking at the January to April historical inventory build, 2024 has come in at 164 million pounds. This is the largest net in-movement of butter since 2020, but before that, we have to look all the way back to 2006.
(1:47)
On the surface, this data is bearish versus the current butter market value. But—and this will be the question the industry will be asking over the long weekend—does it even matter? Butter had felt tight this entire year, especially when looking for 80% salted bulk product at the CME. Is it in a different format, like committed retail-packed butter? Is it in 1 pound food service format? Is it stored away as unsalted bakery bulk butter? These are the questions we will be asking over the coming days, and one that market participants will have to look at when trading next Tuesday. Our guess is that the market will finally find some weakness as a result of this data, though material declines to a new price band are likely not going to happen given the bullish sentiment of global butterfat markets and the uncertainty of a hot summer.
(2:38)
Now onto cheese. The numbers appeared largely neutral in our view, with total cheese coming in up 5.6 million pounds in April from the previous month, very close to the longer-term average when removing the COVID year 2020 from the equation, when there was an incredible build in both cheese and butter stocks, its food service demand had hit a wall. Total cheese stocks in April have fallen slightly versus the previous year, now in both 2022 and 2023, mostly due to the other-than-American cheese styles, which is mostly cheddar. Stocks climbed a little higher versus March’s 5-year average, up 10.6 million pounds. Still, natural American stocks remained largely flat over the last 5 years, with the range coming in between 827 million and 842 million. This April, American cheese stocks came in at 839 million pounds. As usual, there have been very few surprises in the cheese ending stock data in recent months to move the needle in the U.S. market, and we expect the industry to shrug off this data come Tuesday morning and stick to other variables on cheese trade.
HighGround’s Betty Burning is taking a deeper dive right now into the Cold Storage data and will provide us with comprehensive analysis by Tuesday morning to see if we missed anything on this first look.
Have a great holiday weekend, and we look forward to talking with you more soon.
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