U.S. milk production totaled 17.8 billion pounds in March, up 1.1% vs. the prior month and 0.9% greater than last year, according to USDA’s Milk Production report released this afternoon. Greater milk output is due primarily to stronger output per cow with a growing dairy herd as a secondary factor. Milk per cow increased 1.1% in March. The U.S. dairy herd stands at 9.218 million head, which is 3,000 head more than February 2014. USDA also revised the preliminary February dairy herd upward by 4,000 head to 9.215 million head. Year-over-year (YOY) comparisons of the dairy herd and milk per cow are unavailable as these statistics were not collected during last year’s fiscal sequester.

Regionally milk output gains are more pronounced in the West than east of the Rockies. In particular, key cheese-producing states, Minnesota and Wisconsin continue to post YOY declines of 3.8% and 1.6%, respectively, vs. last year. California, the number one milk-producing state, saw a 3.7% YOY increase in milk output. USDA’s most recent Dairy Market News report indicates that milk production in California and Arizona is past the seasonal peak. California typically peaks in milk output in March or April. Given the late spring weather conditions, milk production in the Midwest and Northeast is not expected to top-out until May or June.

The CME spot Cheddar block cheese price settled 3¢ lower at $2.25/lb. after a single trade. The barrel market was offered lower and closed at $2.25/lb. with an uncovered offer remaining on the board. May through July 2014 Class III futures closed double-digits lower in response to cash cheese trading.