U.S. cheese exporters are having a difficult time finding customers, reports Matt Gould in Friday’s Dairy and Food Market Analyst. As one exporter told us, “There aren’t enough bad (bearish) words to describe this market.” With Russia embargoing imports and China drowsy, the Europeans and the Kiwis are out in force looking for orders and winning business where the USA had been the supplier.
This export slow down for the USA means growing inventories. For the first time in 28 years, August American cheese inventories increased, according to the USDA Cold Storage report. Inventories grew by nearly two million lbs in Aug; a month when inventories are typically pulled down by about 14 million lbs. Other cheese inventories decreased a mere 1.1%. The draw down had averaged 2.5% over the last five years.
Cheese demand growth had been coming from overseas. Now, with exports abysmal, USA cheese prices will work their way lower until international orders pick up again. As it stands right this minute, USA prices have a long way to fall: European contacts have Cheddar trading near $1.59 lb; NZ fresh Cheddar moved at $1.38 lb. at the last GDT auction.
Butter inventories were also heavier than expected in Aug; down just 5 million lbs. from July. The drawdown had averaged 26 million lbs. over the past 5 years. The last time we saw such a limited drawdown was in 2009, when only 3 million lbs. left the cooler.