Dairy Skim – Jan 2023 US Cold Storage Report

Dairy Skim is a bite-size episode series where HighGround’s Eric Meyer and Betty Berning break down the latest USDA Dairy data release, the January 2023 U.S. Cold Storage Report. You can view the snapshot report here. Subscribe so that you never miss an episode!

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[00:04] Eric: Hello again! Eric Meyer here with your Friday, February 24th edition of the HighGround Dairy Skim: a bite-sized podcast reviewing one of the major fundamental US dairy reports. Today, USDA released the January 2023 Cold Storage report, which provides us with ending stock data for both cheese and butter.

Joining me on the Skim today is Betty Berning, HighGround’s newest team member as our contributing dairy economist. Before we get into the report, Betty is a native Minnesotan and lives north of Minneapolis with her family. So I’m curious Betty, as I’ve never asked anyone from Minnesota this before, what is a “hot dish” and why don’t you just call it a casserole?

[00:49] Betty: A very good question. From what I’ve been told, a casserole is planned and hot dish just happens. So, whatever you have in the house, you make a hot dish and I am not a fan even though I grew up in Minnesota. A Berning Family recipe—which, I have never made for my family, but some of my siblings continue to make it—is one pound ground beef, one pound elbow macaroni cooked, one bunch of celery chopped, a small can of vegetable beef soup and a can of water all mixed together at baked in the oven for 30 minutes or so. If it sounds good to you, you will love it but if you are like me and it sounds awful, it’s not for you. So, that is hot dish.

[01:30] Eric: Awesome. Well, I am excited to ask you about more Minnesota things as we get you acquainted with the team. Anyway, glad I asked!

[01:39] Back to the report. Given the recent drift higher in CME Spot butter prices, let’s start with butter. Betty, what did USDA provide us with in terms of inventory data and what do you think its potential impact is to the market?

[01:55] Betty: January butter stocks were neutral to expectations and weighed in at nearly 263 million pounds. From December to January, there is typically a seasonal build, and this year was no different with stocks increasing 46.4 million pounds, compared to the five-year average of 45.2 million pounds. So, nothing to really write home about there. January 2023 stocks grew 43.3 million pounds on a yearly basis, which is a nearly 20% jump from January 2022, when butter inventories were much weaker. This annual gain was the largest year-over-year rise in butter inventories since June 2021.

[02:36] Eric: So pretty much a neutral result there on the butter side. And looking at cheese, Natural American, which is mostly Cheddar inventories, actually fell 6.5 million pounds in January from the previous month, which is the second straight January where we’ve seen that decline. That was surprising given the amount of available milk in the Upper Midwest that we had heard during January. However, when you look at where prices were at during the month of January, at least half the month saw CME Spot levels at or above $2.00 per pound, even settling one day as high as $2.1975. How quickly we forget! It must tell us that either production was soft—which is hard to believe given milk output was decent—or that demand remained better than expected. With football playoff/super bowl pipeline refill taking place during that first half of January, that could have been enough to drive sales to drag inventories down a little.

[03:34] For total cheese stocks, those also had a slight decline versus the prior year, which was the first time that has occurred since April 2021. I think important to note that we’re in a different place versus last year when the world market was at a steep premium to the US, enticing a lot of exports. Over the past handful of months, the US has carried a premium to the rest of the world which means we will need to be more reliant on domestic demand until our prices find a level to stimulate exports. Because we aren’t there yet, it’s possible this data may not matter much and we will continue to drift along in the current range for cheese.

We’ll have a lot more insight in the written report coming out soon (view that report here). Thanks for tuning in everyone!

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