The past year’s relatively modest increase in U.S. milk production that faltered in the spring came to a full stop in June, when production and U.S. dairy cow numbers were both essentially unchanged from a year earlier. In July, the recent bout of intense dairy product retail price inflation also came back to Earth, with retail prices of fluid milk, cheese and butter all lower than a year earlier and retail prices of all dairy products up an average of just 1.3 percent. With that, dairy futures markets have been signaling for some weeks now that milk prices will rapidly improve in the remaining months of 2023, as will the DMC margins, which hit a record low of $3.65/cwt in June. But a third key driver of milk prices, namely U.S. dairy exports, continues to languish relative to the last two years of consecutive record-setting export volumes, potentially limiting the upside of price recovery.
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