The March Federal order benchmark milk price dropped $1.50 Friday as the Agriculture Department announced the Class III manufacturing grade milk price at $12.78 per hundredweight (cwt). That’s still $2.34 above the level it was a year ago but $5.22 below March 2008 and pulls the 2010 average down to $13.85. That compares to $10.18 at this time a year ago and $18.12 in 2008. The Class IV price is $12.92, up 2 cents from February, and $3.28 above a year ago.

Class III futures portend another small drop in April, which settled Thursday at $12.72. May rebounds to $13.28, June $14.00, and July at $14.49, with a peak of $15.08 in September before beginning the traditional seasonal decline.

The NASS cheese price averaged $1.3632 per pound, down 14.8 cents from February. Butter averaged $1.4388, up 7.8 cents. Nonfat dry milk averaged $1.0454, down 3.6 cents, and dry whey averaged 37.61 cents, down 1.6 cents.

California’s 4b cheese milk price is $11.13 per cwt., down $1.82 from February but 68 cents above a year ago and $1.65 below the comparable Federal order Class III price. The 4a butter-powder price is $12.84, unchanged from February, but $3.17 above a year ago.

Cheese prices ended March and started April on an upswing. The blocks closed Thursday, April 1, at $1.43 per pound, up 10-1/2-cents on the Good Friday holiday shortened week, and 15 cents above a year ago and that’s no “April fools.” The barrels closed at $1.3750, up 6-1/4-cents on the week, and 11-1/2 cents above a year ago. Only two cars of each traded hands. The NASS-surveyed U.S. average block price lost 3.3 cents, slipping to $1.3019. Barrel averaged $1.2895, down 1.2 cents.

Butter closed at $1.4950, up a half-cent on the week and 31-1/2 cents above a year ago. Seven cars were sold. NASS butter averaged $1.4511, down 0.6 cent.

Cash Grade A nonfat dry milk closed the week at $1.2250, up 7-1/2 cents on the week. Extra Grade closed at $1.1650, up 4-1/2 cents. NASS powder averaged $1.0534, up 0.9 cent. Dry whey averaged 36.89 cents, down 0.1 cent.

Alan Levitt, editor of the CME’s Daily Dairy Report, said in Tuesday’s broadcast that, once cheese prices got down to the mid $1.20s, it “gave buyers the green light to come back off the sidelines.” He suspects they were waiting until they felt the price had bottomed out. He finds it “encouraging that the sellers are the ones who have moved off to the sidelines and the prices increased on unfilled bids.”

Still, Levitt is cautious. Increases in the commodity prices and milk futures are encouraging, he said, but “It’s going to take a sustained rally in the cheese market to keep futures from falling back again. The futures are priced at a premium compared to where cheese prices are.”

Buyers recognize that there’s a lot of cheese in storage, running about 10 percent above a year ago and “this is the time of year when you’re continuing to build stocks.” Spring is starting to hit in the upper Midwest, according to Levitt, with milder weather, “so we’re seeing a seasonal increase in milk volume.”

Production is also trending higher in California but Levitt says the volume is still below a year ago because they have a lot fewer cows in the herd. Other parts of the country are also seeing their spring flush so “it may be a while before we can say that things have fully turned the corner but it’s certainly encouraging.”