The federal order benchmark milk price has dipped further but looks to be at the bottom for the year. The Agriculture Department announced the February Class III price at $13.40 per hundredweight (cwt.), down 60 cents from January, $3.48 below February 2017, and the lowest Class III since June 2016. The price equates to $1.15 per gallon, down from $1.20 in January and $1.45 a year ago.

Class III futures settlements March 2 portended a March price at $14.12; April, $14.09; May, $14.23; and June at $14.75, with a peak of $15.95 in October.

The February Class IV price is $12.87, down 26 cents from January, $2.72 below a year ago, and the lowest Class IV price since April 2016.

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California’s comparable Class 4b cheese milk price is $13.38 per cwt., up a penny from January, $2.43 below a year ago, and just 2 cents below the federal order Class III price. That is the lowest differential between the two since November 2016 when the 4b topped the Class III by 69 cents.

The February 4a butter-powder price is $12.72, down 21 cents from January and $2.68 below a year ago and the lowest 4a price since May 2016.

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Cash cheese prices strengthened as February came to a close and traders weighed the January Dairy Products report. Block Cheddar cheese closed March 2 at $1.56 per pound, up 6 1/2 cents on the week and 8 cents above a year ago, when it fell 9 1/2 cents. The barrels finished at $1.4750, up 1 1/2 cents on the week, 3 3/4 cents above a year ago, and a slightly higher than normal 8 1/2 cents below the blocks. Four cars of block traded hands on the week and 33 of barrel.

Midwestern cheesemakers are reporting steady retail and food service demand, according to Dairy Market News. Mozzarella and provolone buyers, some of whom are located in other regions, are expected to add orders ahead of the college basketball tournament season. Spot milk loads were mostly discounted, although there were a few loads above Class. With spring flush ahead, a number of Midwestern cheese producers have suggested that spot milk will only garner their interests if it is “noticeably discounted.”

Western cheese makers are “trying to gain clarity of market signals,” said DMN. “Each participant is performing their own exegesis of recent reports to predict what market conditions may take hold. Buyers suggest they are getting plenty of cheese offers throughout the West, seeming to validate the idea that stockpiles are heavy. While some cheese manufacturers report strong demand and a growing opportunity to export cheese, a few say they are competing against low-priced, European cheese in some international markets, such as Mexico. And although cheese contacts report a lot of sales activity, the bump for the Super Bowl did not meet expectations.” DMN adds that the market tone is “unsettled.” Facilities are running near full capacity and, with heavy milk supplies there is concern the coming spring flush could exacerbate dairy market woes.

Cash butter saw a March 2 end at $2.20 per pound, up 2 3/4 cents on the week and 3 3/4 cents above a year ago, on a whopping 80 sales for the week.

DMN says the “New Crop” butter rule which dictates that only butter produced after Nov. 30, 2017, can be traded on the CME after March 1, 2018, “could be affecting the market, as sellers do their best to liquidate older stocks.”

Butter microfixing is on the rise in the central region, according to DMN. That’s the process of thawing and cutting 68 pound blocks into consumer ready blocks or sticks. There are numerous reports that cream loads in route to butter plants are becoming more difficult to come by as Class II and III producers are reentering the cream market. Butter demand is solid even as prices are climbing and the butter market tone is somewhat bullish, according to DMN.

Butter inventories in the west are hefty. Domestic sales are flat to lower but DMN said demand from the export market is picking up “mainly due to a weaker value of the dollar and higher international butter prices.” But, total sales generally continue below current production levels, contributing to further growth of stocks.

Cash Grade A nonfat dry milk closed the week a penny lower, at 66 1/4-cents per pound, and 14 1/4-cents below a year ago. Four carloads found new homes on the week at the CME.

Meanwhile; a sharp drop in the U.S. All Milk price average, plus higher corn and hay prices, pulled the January milk feed price ratio lower again. The Agriculture Department’s latest Ag Prices report puts the January ratio at 2.19 down from 2.38 in December and 2.71 in January 2017.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.19 pounds of dairy feed containing that blend.

The January Margin Protection Program milk-feed margin was at $8.11 per cwt., lowest level since July 2016 and a drop from December’s $9.36 margin.

The U.S. All-Milk price averaged $16.10 per cwt., down $1.10 from December and $2.80 below January 2017. Michigan showed the lowest at $14.90, with California at $15.06, and Wisconsin at $16.30.

January corn averaged $3.29 per bushel, up 6 cents from December, after rising 8 cents in December, but is 11 cents per bushel below January 2017. Soybeans averaged $9.30 per bushel, unchanged from December and 41 cents per bushel below a year ago. Alfalfa hay averaged $152 per ton, up $4 from December and $26 per ton above a year ago.

The January cull price for beef and dairy combined averaged $63.30 per cwt., up $1.30 from December but is 70 cents below January 2017 and $8.30 below the 2011 base average of $71.60.

Milk cows averaged $1,620 per head in 2017, down from $1,760 in 2016. They averaged $1,600 in California, down from $1,750 in 2016 and Wisconsin cows averaged $1,680, down from $1,850 in 2016. 