The Agriculture Department announced the April Federal order Class III benchmark milk price at $15.50 per hundredweight (cwt.), down 84 cents from March and $3.02 below April 2023, brought down by falling prices in cheese, nonfat dry milk, and whey. The four-month Class III average stands at $15.77, down from $18.46 at this time a year ago and $22.04 in 2022.

Late Friday morning, Class III futures portended a May price at $18.36; June, $19.09; and July at $19.19, with a peak of $19.28 in September.

The April Class IV price is $20.11 per cwt., up 2 cents from March, $2.16 above a year ago, and the highest Class IV since November 2023. Its four-month average is at $19.86, down from $18.80 a year ago and $24.31 in 2022.

CME butter and cheese prices continued to strengthen. Like a beach ball held under water, butter popped above $3 Wednesday and closed Friday at $3.0750 per pound, highest since Nov. 3, 2023, 10.50 cents higher on the week, and 63 cents above a year ago. The record high is $3.5025 on Oct. 6, 2023. There were 43 trades on the week and 90 for the month of April, up from 53 in March.

“Bulls continue to lead the charge on butter markets,” says Dairy Market News, which credited the moderate increases in year-over-year and monthly stocks in the March Cold Storage data. But, cream availability remains wide open.

Western butter output is also strong as cream availability is “comfortable.” Some butter makers are securing additional loads for churning to build stocks for anticipated third and fourth quarter demand. Domestic demand is steady for salted butter and stronger for unsalted, though export demand is moderate.

Contacts at the ADPI annual meeting this week in Chicago were mostly bullish on butter, says DMN. StoneX stated in its May 2 Early Morning Update: “There was a modest change in perceptions of the (cheese) markets’ potential. As the bearish demand story we’ve dealt with all year subsides slightly, concerns around available milk supplies found a way into more conversations. Ultimately, this dynamic can best be characterized as skepticism around price strength.”

Block Cheddar saw its Friday finish at $1.79 per pound, up 4 cents on the week, sixth week of gain, highest since Oct. 19, 2023, and 17.75 cents above a year ago. The barrels finished 10.75 cents higher at $1.88, 35 cents above a year ago. Sales totaled 2 cars of block on the week and 113 for April, up from 83 in March. Barrels totaled 9 for the week and 82 for the month, up from 62 in March.

Cheese demand continues to strengthen, according to Midwest cheesemakers who are beginning to turn away customers and tell current customers that requests for extra volumes will not be possible. Barrel makers say any extra is spoken for. Production is somewhat steady in the region however, as more processing comes online. Milk availability has begun to tighten and last week’s low spot price of $5-under Class III had yet to be reported at mid-week.

March U.S. dairy exports took a hit following an increase in February. Sailings totaled 527 million pounds valued at about $740 million, down 4.5 percent in volume and down 9.2 percent value, according to the May 2 Daily Dairy Report.

HighGround Dairy economist Betty Berning reported in the May 8 Dairy Radio Now broadcast this was the smallest March total since 2020. Volumes to the top three markets dropped significantly, down 22 percent to Mexico, down 27 percent to China, and 4.9 percent less to Japan. But exports to Canada and South Korea saw notable increases of 27 percent and 74 percent respectively, and exports to Southeast Asia grew for a second month, up 4 percent.

Nonfat dry milk exports tumbled 18.4 percent as shipments to Mexico were down 37 percent. Nonfat dry milk is “languishing,” says Berning, “As there’s not a lot of demand out there and prices have traded in a tight band since January 2023.”

The bright spot was record cheese exports, with 110.3 million pounds leaving our shores, up 20.5 percent from March 2023. Berning said that March bested the previous record set in June 2022, thanks to increased sales to Mexico, South Korea and Japan. Cheddar exports were up 24.7 percent, as lower U.S. prices in fall 2023 persisted into 2024.

Back on the farm, a higher All Milk Price and lower soybean and hay prices nudged the March milk feed price ratio higher for a second month. The latest Ag Prices report shows the ratio at 2.17, up from 2.13 in February, and compares to 1.55 in March 2023.

The All-Milk Price averaged $20.70 per cwt., with a 4.28 percent butterfat test, up a dime from February, but 30 cents below March 2023, which had a 4.19 percent test.

Milk production margins moved above $11 per cwt. for the first time since November 2023 and were 22 cents per cwt. above February, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo.

“Income over feed costs in March were above the $8 per cwt. level needed for steady to higher milk production for the seventh month in a row,” writes Brooks. “Input prices were mostly lower, but all three input commodities remained in the top nine for March all time. Feed costs were the eighth highest ever for the month of March and the eighty-second highest of all time. The ratio was also above the 5-year average for the second month in a row,” Brooks said.

He also stated that “Higher profitability levels, along with fewer available replacement heifers expected to calve in 2024 pushed quarterly prices received for milk cows to the highest level since October 2014.”

“Dairy producer profitability for 2022 in the form of milk income over feed costs, was $11.91 per cwt.,” he said. “The profitability was $4.12 above 2021 and $2.50 higher than the 2017-21 average. In 2022, the increase in milk income over feed costs was a result of the milk price increasing more than feed prices rose. Income over feed in 2022 was above the level needed to maintain or grow milk production.”

Brooks says milk income over feed costs for 2023 came in at $8.13 per cwt. and were near the level needed to maintain or grow milk production. Profitability was down $3.78 per cwt. from 2022’s level and $1.59 lower than the 2018-22 average.

“Milk income over feed costs for 2024, using April 30 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $14.30 per cwt., a gain of $6.17 versus 2023. Income over feed in 2024 is $1.57 per cwt. higher than last month and would be above the level needed to maintain or grow milk production,” Brooks concluded.

Meanwhile, the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. says “Dairy margins improved over the second half of April as a rally in milk more than offset strength in the feed markets. A continued decline in milk production is helping to support the market with strong demand for dairy products keeping a firm tone across the complex.”