MD_DA410
DA
MD DA410 BUTTER - NORTHEAST

MADISON, WI.  August 27, 2008 (Report 35)

NORTHEAST BUTTER

CME Group butter trading last week totaling 9 loads, was a 
fraction of the levels of trading for the two prior weeks when 72 
loads sold.  Even as this week opened Monday with another 9 sales 
and none Tuesday, prices as of Tuesday remain 4 1/4 cents lower 
than the closing price last week Monday.  Even with relaxed 
availability of cream on spot markets, some plant managers report 
being uncertain as to whether to increase production levels or 
draw on inventory in the immediate future, as they evaluate the 
substantial recent CME Group sales and price movement.  This 
comes as the August 22, 2008, NASS Cold Storage report shows 
nearly 248.2 million pounds of butter in storage in all 
warehouses as of July 31, 2008, slightly over a 10.2 million 
pound (4%) decrease over the prior month stocks and a 9% decline 
from butter stocks one year ago.  Against this backdrop, cream 
spot loads are reported to be more readily available this week 
than the last several weeks.  Prices have also eased although, 
they continue to vary depending on location within the region and 
the timing of required delivery.  One industry participant 
observed that, with the holiday weekend ahead and resulting loss 
of 1 day of production in most plants, many buyers "expect a 
bargain" on the cream, and many buyers are getting reductions on 
spot prices. Even so, spot prices quoted, while generally eased, 
still ranged from the mid 130's to the mid 140's in different 
parts of the region.  Cream is readily available within this 
price range, whether for delivery early or mid this week, or into 
the weekend.  Throughout the region, whatever the spot price 
level, it tends to be relaxed from last week.  Some suppliers of 
cream are offering greater price discounts for buyers who can 
delay taking delivery until Friday or Saturday, immediately prior 
to the Monday Labor Day Holiday. There are several factors cited 
for driving price reductions and cream availability. One is 
continuing overall reduction of demand from many ice cream 
manufacturers, even though there remain some manufacturers who 
are continuing relatively heavy production focused on beginning 
to build inventory of  4th  quarter special holiday flavors. 
Another factor is continued school openings with resulting 
increases of cream from standardization of school milk supplies. 
Most schools in the southeast have now opened for the year with 
the exception of a few districts in Virginia. There are also 
reports of less demand for cream moving from the East into the 
Central region. Retail demand for butter is being encouraged by 
retail promotions in the Boston area. Even with reduced butter 
inventories, eased cream availability and some retail promotional 
activity, there is an uneven situation as to churning activity. 
While there were reports of increased churning in some plants, 
elsewhere there were reports of little churning in the face of 
steady sales, with a goal of further reducing inventories. One 
plant manager commented that some people in the industry are 
concerned with currently reduced butter prices from levels in the 
first days of August and even last week. Based on that downward 
price trend they express hesitance to undertake production 
increases right now. There seems to be a desire by some managers 
concerned with the price trend, to watch the market awhile longer 
to better assess price trends.  Finally, butter exports continue. 
Cooperatives Working Together (CWT) on August 25, 2008 announced 
that last week it accepted 2 export assistance bids for the sale 
of 440,925 pounds of butter to Morocco. With the accepted bids 
last week, CWT's total 2008 export obligation for butter totals 
34.2 million pounds.  Sales of bulk butter f.o.b. East are 
reported in a range from flat market to 5.0 - 7.0 cents over the 
C.M.E. price average. 


1100C Eric K. Graf   eric.graf@usda.gov