Two major news releases from USDA on Tuesday, Feb.23, prompted a counterintuitive market reaction as prices firmed toward the end of the week.
The Cold Storage Report showed AA salted butter stocks at 328 million pounds through January 2021. To put that in perspective, that volume is near yearly highs that are not normally seen until midyear, after the spring flush. That 328 million pounds is the highest yearly starting stock number in history, and with stock build expected through Q2, inventories could easily reach 450 million pounds by June.
Clearly there is an abundance of butter in cold storage struggling to find a home with dine-in restaurant and food service segments still suffering from the lingering effects of the pandemic. The data suggests that butter will struggle to make any price gains in 2021 unless global demand pulls U.S. production in the forms of exports and co-ops switch over to making international-specification butter.
Meanwhile, the USDA milk production report showed a further 8,000 head increase in the national herd, bringing the total to 9.45 million heifers, up 89,000 YOY. Yield was higher as well, at 65.42 lbs of milk per cow per day, up a half a pound from a year prior.