Butter – Lower Production, Tight Stocks Continue According to USDA, U.S. butter production continued to lag behind last year’s production through February. Butter production has declined YOY for five of the past six months, with February ’14 U.S. butter production ending 4.6% behind ’12-’13 production. ’13-’14 YTD butter production is 2.9% lower than the previous year through the first five months of the production season. Lower production has resulted in a significant decline in domestic butter stocks. Butter stocks declined to a 24 month low in December before rising seasonally in January and February. February ’14 butter stocks ended 31.3% below the previous year’s level. Cheese – YOY Production Declines Slightly, Cheddar Continues to Lag YOY U.S. cheese production declined for the first time in 11 months, as February ’14 production registered a 0.6% YOY decline. Total U.S. cheese production remains 1.8% ahead of last year through the first five months of the ’13-’14 production season, despite production being hampered by lagging cheddar cheese production. U.S. cheddar cheese production declined 0.8% YOY in February and is 1.2% behind ’12-’13 production YTD. Cheddar cheese lost market share of total U.S. cheese production for the fifth straight year in 2013 (Jan-Dec) and production has declined YOY in four straight months. Dry Products – Dry Whey Production Trend Continue, Powder Production Trend Reverses U.S. dry whey  production continued to decline, with February ’14 production down 15.1% YOY. U.S. dry whey production has declined YOY in 13 of the past 14 months with an average YOY decline of 8.8% as U.S. manufacturers continue to shift toward higher-value whey protein products including whey protein concentrates (WPC) and whey protein isolates (WPI). YOY WPC and WPI production increased 24.1% and 19.2%, respectively in February ‘14. Total February ’14 dry whey, WPC, and WPI production declined by 1.7% YOY. The trend of increasing SMP production and decreasing NFDM production experienced a reversal for the first time in several months. February ’14 U.S. NFDM production increased 2.3% YOY and 7.5% over the five year average February NFDM production. The YOY increase was only the second in the last 12 months and the largest in 14 months. February ’14 U.S. SMP production declined 19.4% YOY, which was the first YOY decline in 19 months. February ’14 combined production of NFDM and SMP was 2.8% lower than the previous year. SMP production as a percentage of total NFDM and SMP production saw record highs early in the ’13-’14 production season, but reached a ten month low in February ’14. SMP production is more suited to the requirements of most global markets; however plants typically convert milk into NFDM during periods of strong production because SMP does not have to be standardized to 34% protein. California, the leading powder producing state in the U.S., increased milk production by 5.3% and NFDM production by 22.7% in February ‘14. California accounted for 48.1% of NFDM production in February ’14, up from 40.1% in February ’13. U.S. NFDM production outside of California remained weak as it declined 11.3% YOY in February ’14. U.S. NFDM/SMP exports declined to a 12 month low in February. See the table below for a summary of key U.S. dairy product production in February ’14.