Butter – Production Lagging with Stocks at a Two-Year Low According to USDA, U.S. butter production continued to lag behind last year’s production through the first quarter of the ’13-’14 year. December ’13 U.S. butter production of 161.1 million pounds was 6.9% behind ’12-’13 production and 2.7% lower than the three year average December butter production. ’13-’14 YTD butter production was 2.3% lower than last year and only 0.8% higher than the three year average butter production. Last month it was reported that December ’13 U.S. butter stocks declined to a new 24 month low. Cheese – Production Lagging as Cheddar Loses Market Share Total U.S. cheese production was up through the first quarter of ’13-’14, however U.S. cheddar cheese production was down 2.8% YOY in December ’13 and down 1.5% YOY through the first quarter of ’13-’14. Cheddar cheese lost market share of total U.S. cheese production for the fifth straight year in 2013 (Jan-Dec), as shown in the chart below. Dry Products – SMP Production Explodes while NFDM and Whey Fall Recent U.S. production trends continued in the dry whey, nonfat dry milk (NFDM), and skim milk powder (SMP) markets. After a 2.8% YOY increase in November ’13, December ’13 U.S. dry whey production declined 8.0% YOY. U.S. dry whey production has declined YOY in 11 of the past 12 months with an average YOY change of -6.1%. The recent shift in U.S. NFDM and SMP production, with a stronger emphasis on SMP production, also continued in December ‘13. SMP production is more suited to the requirements of most global markets. NFDM production has declined YOY in 11 of the past 12 months with U.S. SMP production increasing YOY in each of the past 12 months. See the table below for a summary of key U.S. dairy product production in December ’13.