The National Milk Producer’s Federation (NMPF) March Dairy Market Report notes that while domestic use of milk continues to outpace production, prolonged weakness in world dairy markets is weighing more heavily on U.S. milk prices, particularly the price of skim solids.

Production of the major dairy commodities is continuing to increase faster than milk output, with the exception of the combined production of dry milk and whey products. This is a general trend that will probably continue.

The increasing inventories of butter and cheese are both a cause and a symptom of the weakened market. Cold storage stocks of butter and cheese are running well above a year ago. This is an indication that production is outpacing commercial use, and that production is pressuring prices.

On the trade side, U.S. exports have rose by almost 20 percent for nonfat dry milk/skim milk powder, but have continued to fall for butter, cheddar cheese and dry whey. The export reduction has had some affect on domestic prices.

The monthly Dairy Margin Protection Program (MPP-Dairy) margin, after spending the last third of 2015 well above the program’s payout range, dropped back close to the $8 threshold in January. Most forecasts are now projecting that the program will make payments every month through August, with the low point ranging from $6.50 to $7.00 per hundredweight, and there is indication that the all-milk price will average $1.60–$2.10 per hundredweight below 2015’s average for all of 2016.

Read the full report here.