USDA’s World Ag Supply & Demand Estimates (WASDE) report, released this week, projects 2013 milk production to increase less than 1% compared to 2012, the smallest year-to-year change since 2009. And, depending on how the 2013 corn, soybean and hay crops progress, high feed costs have the potential to cap production well into 2014.

The wet, cool spring has delayed corn and soybean planting, pushing futures prices for major dairy feeds higher. And, with Upper Midwest alfalfa hay crops suffering high levels of winterkill, hay prices have also been on the rise.

Large dairy product inventories continue to weigh on dairy product and milk prices, with USDA lowering both 2013 and 2014 price projections slightly for both cheese and butter. According to the latest forecast, U.S. dairy farmers could see milk prices average about $19.80 per hundredweight in 2013, falling to about $19.25 per hundredweight next year.

One thing that will support U.S. dairy producer prices is the international market. Capitalizing on steady global demand and declining supply from some other exporting regions, dairy exports set records for both volume and value in April. Spurred on by unprecedented global milk powder sales, exports of dairy products on a total solids basis represented nearly 16% of total production in April, the highest percentage ever. An international draw-down of milk powder supplies could help support prices in the months ahead.

And, according to the U.S. Dairy Export Council, it’s a trend that could continue. Current and forecast conditions are favorable for U.S. suppliers. Tightening supplies and firm prices in the months ahead should enable U.S. exporters to boost their share of the global market