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Cheese and Butter Stocks Tumble

October 22, 2020

After easing through most of the summer, cheese stocks have again declined, according USDA’s Cold Storage report released today. Total cheese stocks contracted by 1.3% in September, falling to 1.36 billion pounds. At the end of September stocks sat below prior-year levels for the first time since March. Despite overarching challenges faced by the food industry, the decline in inventories reinforces the notion that cheese continues to move steadily through foodservice, likely aided by its ideal fit as an ingredient in many meals suited for delivery and carryout. Furthermore, government purchases, which were still active in September, kept tension on cheese demand and helped to whittle down inventories during the month.

The decline was especially pronounced for American cheese, which saw inventories fall by 2.2% in September to 772.6 million pounds. The CME spot market rally, which lifted Cheddar block prices by 77¢ over the course of the month, likely discouraged processors from moving cheese into aging programs and instead incentivized them to capitalize on the strong prevailing values by pushing Cheddar into the market.

Butter inventories tumbled in September, finishing the month 7.4% lighter than they were at the end of August. Although it is normal for butter stocks to fall between August and September, this year’s drop was the most aggressive September drawdown in three years. Nevertheless, at 343.9 million pounds, butter inventories were 18.3% larger than at the same point last year. Cream remains plentiful and given the uncertainty swirling around the holiday season, butter should be available as long as it can find its way into the proper formats.

After remaining quiet since Monday, Cheddar blocks found new strength in today’s spot session, rising by 3.25¢ to close at $2.7725/lb. Meanwhile, barrels staged a 9.5¢ rally to settle at $2.4025/lb., which narrowed the block-barrel price spread to its lowest level since early September.

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