Weaker exports are behind rising dry whey and nonfat dry milk stocks.
With milk production still strong in the United States and dairy exports slowing, stocks of dry dairy products are piling up. Butter stocks, however, are still lower than a year ago despite much weaker exports and rising imports.
Exporters in November shipped 67.7 percent less butter overseas than they did a year ago. However, November butter exports at 2,894 metric tons were 42.7 percent larger than in October, likely due to a demand surge from Mexico and falling prices.
“Mexico was the largest buyer of U.S. butter in November,” says Sarina Sharp, agricultural economist with the Daily Dairy Report. Mexico replaced more distant markets like Saudi Arabia, Morocco, and Iran to become the largest buyer of U.S. butter in November.
“Due to the wide chasm between domestic and overseas butter prices over the past 10 months, U.S. manufacturers—until recently—have been unable to compete with their rivals in Europe and Oceania,” says Sharp. “U.S. manufacturers even saw U.S. market share erode due to cheaper foreign product.”
In November, the United States imported 3,187 metric tons of butter, the largest monthly import level in nearly two years. “If December imports are anywhere near levels seen in November, calendar-year butter imports will reach five-year highs,” says Sharp.
U.S. butter stocks at 100.9 million pounds as of Nov. 31, 2014, were 17 percent smaller than a year ago. November stocks also fell seasonally, down 27 percent from October levels.
Nonfat stocks nearly double last year’s level
November exports of nonfat dry milk rose 13.8 percent above October levels, but at 42,614 metric tons, they were 6.4 percent lower than the previous year. As with butter, demand for nonfat dry milk from Mexico also picked up. The country’s monthly nonfat dry milk purchases were the largest since June, accounting for more than half of the month’s export sales.
“Mexican buyers were clearly enticed by the steep drop in prices, which began in earnest in September,” says Sharp.
Despite a resurgence in sales to Mexico, month-ending November stocks of U.S. nonfat dry milk for human consumption of 216.9 million pounds were 10.6 percent higher than in October and a whopping 89.7 percent above a year ago, according to USDA’s Dairy Market News.
Whey stocks are also piling up. U.S. manufacturers of whey for human consumption produced 69 million pounds in November, or 5.8 percent less than the previous year, according to USDA. Despite lower year-over-year output, whey stocks rose dramatically, up 16.1 percent, from 53.5 million pounds at the end of October to 62.2 million pounds at the end of November. Whey stocks were also 6.2 percent larger than the prior year.
“Whey stocks typically ebb through summer and autumn, then begin to swell again in November or December,” says Sharp. “But last year, the October-to-November inventory build was unusually large. Declining exports are partly to blame for the rise in stock levels.” November whey exports of 87.6 million pounds fell 8.3 percent below November 2013 exports, and were 10.2 less than October on a daily average basis.
“Domestic demand for whey was also soft in November, despite the fact that dry whey prices faded throughout the month,” says Sharp. “Buyers remained on the sideline in anticipation of further declines.” In December, USDA’s Dairy Market News reported growing manufacturers’ inventories and softer prices. “If demand for U.S. whey begins to rebound, prices could remain under pressure until stockpiles diminish,” says Sharp.
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