Dairy Skim – June 2023 US Cold Storage Report

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 June 2023 US Cold Storage Report. You can view the comprehensive analysis here. Subscribe so that you never miss an episode!

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[00:04] Betty: Hello and welcome back to the Dairy Skim, HighGround Dairy’s bite-size podcast intended to give the dairy industry some flavor into recent reports or events that can impact global commodity pricing. I am Betty Berning, HighGround’s Contributing Dairy Economist, and today, I’m analyzing USDA’s June Cold Storage data, which dropped just a little bit ago.

[00:30] The story of the report was declining May to June butter stocks of over 20 million pounds, which goes against the May to June trend of a small rise in inventories, making this bullish to our expectations. This was the biggest May to June drawdown since 1984. June’s total butter stocks of 347.5 million pounds were near the five-year average and bigger than June 2022. However, stocks only built 5% year-on-year and that’s the smallest number that metric has been in all of 2023.

[01:14] The big fall month-on-month in butter stocks, though, begs the question: What drove the decline? While we will know more as USDA pushes out June data in the coming weeks, a couple of guesses are strengthened demand domestically may be the cause, or slowing butter production in California. California produces about one third of the nation’s butter and milk volumes slow there seasonally—due to the hot weather—and some farmers are simply exiting the business out there, also causing milk volumes to slow. More to come on that.

[01:51] Moving on to the cheese complex, stocks of 1.5 billion pounds built 12.6 million pounds from May to June, going against the seasonal decline. This was the First May to June increase in total cheese stocks since 2018 and it was the largest build since 2015. This was slightly bearish to our expectations. On an annual basis, inventories increased against June 2022. This is the second time in 2023 that cheese stocks have increased versus 2022.

[02:28] Other cheese stocks built 16 million pounds month-on-month. This is actually the largest May to June increase going back to at least 1980. If we try to find a cause for that, it might be weak demand for this other cheese category, which includes things such as hard Italian and mozzarella, or perhaps cheesemakers just made more of these other cheese varieties in June. We will know more soon.

[02:54] Natural American cheese stocks equaled 853 million pounds. There is a lot less to write home about with this category. A modest 3.8 million pound drop from May to June (compared to the five-year drop of 12.4 million pounds), and those stocks built 0.8% from last June so not quite as exciting as other cheese or butter.

That’s what I have. Watch your inbox if you are a subscriber as there will be more detailed analysis coming either later tonight or early tomorrow morning. Thanks for tuning in everyone! We will have our regular Let’s Chat Markets podcast on Friday and we will talk more then! Take care.

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