The nation’s benchmark milk price took another temporary dip. The Agriculture Department announced the May Class III price at $16.52 per hundredweight, down 35 cents from April, but $3.14 above May 2010, $1.78 above California’s comparable 4b milk price, and equates to about $1.42 per gallon. That put the year’s average at $16.65, up from $13.57 at this time a year ago, and compares to just $10.23 in 2009 and $17.86 in 2008.

Class III futures portend a rather large recovery next month. The June contract settled Friday at $18.95, July at $20.00, August $19.35, September $18.98, October $18.35, November $17.98, and December at $17.65. Those prices would result in a 2011 average of $17.88, up from $14.41 in 2010 and $11.36 in 2009.

The May Class IV price is $20.29, up 51 cents from April, $5.00 above a year ago, and the highest since November 2007. Its 2011 average now stands at $18.86, up from $13.74 a year ago.

The National Agricultural Statistics Service (NASS) surveyed cheese price averaged $1.6534 per pound, down 4.5 cents from April. Butter averaged $2.0292, up 3.2 cents. Nonfat dry milk averaged $1.6120, up 4.4 cents, and dry whey averaged 49.29 cents, up 1.2 cents from April.

CME cash cheese prices continued to climb in the Memorial Day holiday shortened week. The block price closed the first Friday of June Dairy Month at $2.05 per pound, up a dime on the day, 24 cents on the week, and 65-1/4-cents above that week a year ago. The blocks gained 42-3/4-cents in three weeks.

Barrel closed at $1.96, up 14-1/4-cents on the week, and 60-1/4-cents above a year ago. Only one car of block traded hands on the week and none of barrel. The NASS U.S. average block price hit $1.6570. The barrels averaged $1.6863. Both are up 1.8 cents.

News in the cheese market is positive with commercial disappearance up from a year ago and exports strong however there are a few clouds. Cheese production is expected to increase as more milk goes to the vat due to school closings, plant upgrades, expansions, and new plants. Furthermore, USDA’s Dairy Market News (DMN) reports that some of their contacts believe the higher prices will impact exports. Cheese stocks are also very high.

Cash butter reversed gears this week and closed Friday at $2.1425, down 3-3/4-cents on the week, but still 56-3/4-cents above a year ago. Nineteen cars traded hands on the week. NASS butter averaged $2.0466, up 5.2 cents.

The butter market also saw great commercial disappearance as exports claimed two-thirds of the increase from a year ago, and stocks are well below a year ago. Seasonal demand could be very strong from ice cream manufacturers. But, high prices, as with cheese, could impact exports however.

Cash Grade A nonfat dry milk inched a quarter-cent higher, to $1.6425 on a sale, and Extra Grade held all week at $1.61. NASS powder averaged $1.6262, up 0.9 cent, and dry whey averaged 50.35 cents, down 0.1 cent.

Looking “back to the futures;” the Class III contract’s average for the last half of 2011 was $17.64 per hundredweight on May 6, $17.49 on May 13, $18.22 on May 20, $18.39 on May 27, and $18.72 on June 3.

Unfortunately, dairy farm profitability is tempered by high feed prices.The latest Ag Prices report put the May feed price ratio, at 1.74, the lowest in 22 months, according to Dairy Profit Weekly’s Dave Natzke, who adds that 3.0 is considered profitable. The all milk price, at $19.40 per cwt., was down 20 cents from April, but $4.40 above a year ago.

Alfalfa hay costs were up $31 from April, averaging a record $186 per ton, $65 more than May 2010. Corn was down 20 cents from April, at $6.15 per bushel, but $2.67 above a year ago, and soybeans were down a dime, to $13 per bushel, $3.59 above a year ago.

The cost of feed to generate 100 pounds of milk hit a record $11.15, according to the DDR, up 44 cents from April, “and with an all-milk price of $19.40, that left income over feed costs of $8.25, about 10 percent below the 10-year average.”