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Dairy stocks aren’t lowering as fast as they should

A dairy economist says while the recent cold storage report was bearish for dairy markets, he was surprised by butter stocks numbers.

Nate Donnay with StoneX says butter inventories were only down half as much as he expected for October compared to last year which might indicate retail demand for the holidays could have been pulled forward earlier in the year.

“This very week October number is either suggesting that early demand that we saw during July, August, and September was the frontloading of holiday demand or that the holiday-related demand was not frontloaded at all,” he says.

Donnay says milk production is still weak while cheese production remains strong which means butter production is likely to stay weak moving forward. 

Donnay says the report’s Italian cheese stocks also indicate mozzarella demand has not bounced back from the pandemic.

“I don’t know where we’ve lost the Italian or mozzarella cheese demand, but it appears to be much weaker than the American varieties,” he says.

Donnay says rapidly rising covid cases in Europe are also something to watch with lockdowns possible and impacts to foodservice unknown.

Donnay shared his thoughts on the latest dairy reports during his weekly outlook forecast.