The March Federal order Class III benchmark milk price crept higher this week, propelled by higher cheese, butter and dry whey prices. The USDA announced the price at $18.10 per hundredweight, up 32 cents from February, but $4.35 below March 2022. The first quarter average stands at $18.44, down from $21.25 a year ago, and compares to $15.98 in 2021.

Mid-Thursday morning Class futures portended an April price at $18.61; May, $17.77; June, $18.08; and July at $18.62, with a peak of $19.60 in October.

The Class IV price is $18.38, down 48 cents from February, $6.44 below a year ago, and the lowest since December 2021. Its three-month average is at $19.08, down from $23.97 a year ago, and compares to $13.71 in 2021.

We have plenty of product to sell, despite February milk production only being up 0.8 percent from 2022. The Dairy Products report shows cheese production totaled 1.109 billion pounds, down 7.9 percent from January output which was revised down 4 million pounds, and was up just 0.4 percent from February 2022. Output for the two months totaled 2.3 billion pounds, up 1.6 percent from the same period a year ago.

Italian cheese totaled 460 million pounds, down 8.0 percent from January and 1.4 percent less than a year ago. American output slipped to 453.1 million pounds, down 9.1 percent from January but up 2.4 percent from a year ago, with YTD at 951.8 million pounds, up 4.1 percent. Mozzarella totaled 365.0 million pounds, down 7.1 percent from January, but up 1.6 percent from a year ago. YTD, at 758.1 million, was up 0.5 percent.

Cheddar production, the cheese traded at the CME, fell to 325.4 million pounds, down 28.5 million pounds or 8.1 percent from January’s count, which was revised down 2.2 million pounds, but was up 17.3 million pounds, or 5.6 percent, from February 2022. YTD Cheddar stood at 679.3 million pounds, up 6.1 percent from 2022.

Butter output dipped to 186.4 million pounds, down 14.9 million pounds or 7.4 percent from January, but was up 2.9 million pounds or 1.6 percent from a year ago. YTD butter output was at 387.7 million pounds, up 2.7 percent from a year ago.

Yogurt production totaled 401.3 million pounds, up 7.4 percent from a year ago, and hard ice cream output hit 59.1 million pounds, up 7.7 percent from a year ago.

Dry whey production totaled 66.5 million pounds, down 10.2 million pounds or 13.3 percent from January and down 3.8 million pounds or 5.7 percent from a year ago. Stocks grew to 69.4 million pounds, up 6.4 million or 10.2 percent from a year ago.

Nonfat dry milk output climbed to 178.5 million pounds, up 3.5 million pounds or 2.0 percent from January and up 7.7 million or 4.5 percent above a year ago. Stocks jumped to 310.0 million pounds, up 39.5 million pounds, or 14.6 percent from January, and up 21.6 million pounds or 7.5 percent from a year ago.

Skim milk powder production totaled 38.2 million pounds, down 6.4 million or 14.4 percent from January, but 8.6 million pounds or 28.9 percent above a year ago.

StoneX says the more-than-expected surge in cheese is “bearish in and of itself, but when considered in the context of lighter than expected inventories from the February Cold Storage report we surmise that cheese disappearance, both domestic as well as export, was likely quite strong in February.”

The report is bearish on butter, says StoneX, “But like with cheese, inventories of butter in February were lower than expected and implies better than expected demand. It would seem fair to suggest that the staying power of late in the $2.30s is the result of good demand at budget price levels. The report also likely underscores dismal domestic and export demand of nonfat dry milk.”

The March 21 Global Dairy Trade auction removed hopes of things turning around. The weighted average dropped 4.7 percent, biggest loss since October 2022 and followed a 2.6 percent drop March 21, 0.7 percent on March 7, and 1.5 percent decline on Feb. 21.

Traders brought 52.5 million pounds of product to market, down from 59.1 million on March 21, and the average metric ton price fell to $3,227 U.S., down from $3,361.00 on March 21.

Anhydrous milkfat led the declines, down 7.2 percent, after falling 3.8 percent on March 21. Whole milk powder followed, down 5.2 percent, after a 1.5 percent descent. Butter was down 3.3 percent after falling 3.0 percent last time, and buttermilk powder was down 3.3 percent. Skim milk powder was down 2.5 percent, after falling 3.5 percent on March 21.

Cheese was the only positive, up 3.8 percent, after leading the declines last time with a 10.2 percent drop, and that after dropping 10.2 percent on March 7.

GDT 80 percent butterfat butter equates to $2.0333 per pound U.S., down 6.8 cents after losing 6.7 cents on March 21, and compares to CME butter, which closed Thursday at $2.3175. GDT Cheddar, at $1.8902, was up 5.2 cents, after dropping 20.7 cents last time and 26.2 cents the time before that. Thursday’s CME block Cheddar closed at $1.83. GDT skim milk powder averaged $1.1699 per pound, down from $1.2012, and whole milk powder averaged $1.3846 per pound, down from $1.4641. CME Grade A nonfat dry milk closed at $1.1250.

HighGround Dairy says, “Even though the direction of the result was expected, the scale of the price slide is a surprise. As has been the trend in 2023 so far, GDT values continue to correct lower, with light demand the headline driver. With a poor macroeconomic outlook still in play, it would be remiss to assume this is the bottom of the market,” HGD warned.

Adding to the woes, February U.S. dairy exports fell below a year ago for the first time since January 2022. While the second largest February ever, the total, at 458.5 million pounds, was down 0.3 percent, according to the USDA’s latest data.

HighGround Dairy cited “Higher dairy product prices at the end of 2022, when these exports were booked, and weaker international dairy demand, which slowed sales. Shipments to Mexico, the top dairy export market with nearly 30 percent share, grew again in February compared to prior year levels. Exports to China also increased year-over-year. However, dairy products sailing to other Asian markets, such as Japan, South Korea, Indonesia and the Philippines, fell.”

Cheese exports totaled 72.5 million pounds, down 0.2 percent from February 2022, but up 6.8 percent year to date. Butter totaled 7.6 million pounds, down 31.8 percent from a year ago and down 21 percent YTD. Nonfat-skim milk powder totaled 139 million pounds, off 0.5 percent from a year ago, but 6.5 percent ahead YTD. There were 35.6 million pounds of dry whey exported.

Ron O’Brien, president of New Zealand-based Nui Markets North America, cited some contributing factors for the depressed GDT and lower exports in the April 10 ‘Dairy Radio Now’ broadcast. They included interest rate hikes in New Zealand, additional whole milk powder being added to the offerings, and farmers selling futures. O’Brien said the weakening price situation in Oceania is due to buyers “sitting on their hands.”