Dairy Inventories Send Mixed Messages

January 11, 2010 09:57 AM

 Milk production in November fell 1.0% below where it was a year earlier, and was 0.9% above October, on a per-day basis. During the month, sales of fluid milk, representing about 38% of all U.S. milk usage, remained about even with the prior year. Production of major dairy products in November was reported by USDA earlier this week. The major milk usage categories other than fluid usage, butter, powder, and cheese, combine to use about 40% of production. On a per-day basis, compared to October, butter production increased by 10%, nonfat powder production increased by 21%, and production of all cheese increased by 1.2%. 

·    The amount of butterfat products in cold storage at the end of November was 25.4% below a month earlier which, when combined with the 10% increase in production, should provide substantial support to current butter prices and gives credence to the futures prices for butter which have risen to the mid $1.50's in July. 
·    Production of nonfat dry milk increased on a per-day basis by 13.8%, and the amount in storage at the end of the month was 27% higher than the amount at the end of October. Production of skim milk powder more than doubled during the month, on a per day basis, compared to October. Inventories of SMP are not recorded.
·    The inventories at the end of November of all types of cheese and American cheese (67% of which is Cheddar) were about where they were at the end of October, and should provide support for current price levels. However, the amount of American cheese notably rose in November, for the first time in more than twenty years. The increase was small – it gets a one month pass.  
Grades for performance: butter ("A”), cheese ("B”), nonfat powders ("incomplete” – the numbers need checking, but current production seems to be clearly exceeding sales).

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