Wednesday's butter trading at the CME Group closed up $.0550 to $1.5600.
The butter price has remained steady or appreciated at the CME Group since March 15, 2010. Butter manufacturers continue to aggressively pursue available cream supplies for churning. Futures prices are at a premium to cash currently and encouraging producers to put extra stocks away for needs later in the year. Export inquiries are reported to be good as prices show strength. Domestic needs are being met with the most demand into retail accounts for print. Food service accounts continue to lag as the economy recovers. Butter stocks are tighter than usual for this time of year. According to the CME Group, weekly butter stocks increased 2.35 million pounds last week to stand at 57.8 million pounds. This is the second consecutive week of upward storage numbers. This total compares to 76.6 million pounds in 2009 and 119.1 million pounds in the comparable week in 2008. Stocks in storage at the CME Group have not been this low since 2001 for this date. In 2001 butter pricing was at an average $1.8200 for the month of April and hit $2.088 in August.
According to the Foreign Agricultural Service, exports of butter and milkfat for January-February 2010 total 11.9 million pounds, up 36% from January-February 2009. The top three export destinations, their volume and change from last year are as follows: Saudi Arabia 5.1 million pounds, +54%; Morocco 804,000 pounds, no sales reported last year; Russia 703,800 pounds, no sales were reported last year. Other significant sales were, Canadian sales of 682,000 pounds, were up 51%; United Arab Emirates sales of 432,000 pounds, were more than five times last year, +406%; and Egyptian sales of 461,200 pounds, no sales were reported last year for January-February. The top three countries accounted for 55.6% of the exports for the period. The exports account for 3.9% of production in the U.S. for January-February.
Favorable weather patterns in many parts of the country are contributing to earlier than usual ice cream and mix demand. Butter producers are stating that cream prices are firm, thus it is becoming more difficult for them to procure cream and generate favorably priced butter for current and future needs. Most butter producers are comfortable with their churning schedules and clearing surplus volumes to inventory with confidence. Overall butter buying interest slowed this week as most buyers are assessing their holiday carryover stock levels before re- entering the marketplace. Many retail buyers are stating that feature activity prior to the recent holiday period cleared good volumes of print butter.
Cumulative output for the year for the U.S. is 303.2 million pounds, down 5.4% from the same period in 2009. This works out to a decline of 17.2 million pounds. The Commercial Disappearance for selected Dairy Products for November 2009- January 2010 for butter stood at 445.1 million pounds, down 2.6% from the same period last year as reported by the Economic Research Service.
An explanation offered is a number of butter manufacturers maintaining "hand-to-mouth" inventory levels. This resulted in atypical competition for cream for post holiday manufacturing, when butter manufacturers were faced with ice cream manufacturers resuming production with a "vengeance" in some of the East, as well as continuing strong cream cheese manufacturing. Cream demand by Class II product manufacturers coupled with somewhat low butter inventories have acted in unison to keep cream demand robust.
This week, some Northeast balancing plants report extremely high cream demand from the customer base, keeping cream off spot markets
Many butter producers anticipate that cream supplies will be less available this fall than in recent years, thus generating butter at this time for use during the second half of 2010 is what should be done.
Butter producers are hopeful that ice cream production will not increase too rapidly after the holiday and they will have some time to generate additional butter stock for future needs.
Supplied by Robert.Hunter@ams.usda.gov 608.250.3217