This month’s Dairy Market Report from the National Milk Producers Federation (NMPF) shows that increased production per cow and expectations for additional milk production growth has dampened the outlook for milk prices for the remainder of 2016.

The report also finds that rising inventories have placed pressure on pot market prices for Cheddar cheese. The pressure will soon be reflected in the U.S. Department of Agriculture Agricultural Marketing Service (USDA/AMS) Dairy Product Price Survey, as well as in Federal Order Class III prices.

While nonfat dry milk and dry whey prices remain in line with world market-driven, depressed levels, butter prices continue to hold at around $2 a pound. The anticipated low milk prices, along with the recent rally in grain prices during the spring planting and growing season, have pushed projections for the dairy-income-over-feed-cost margin to the lowest levels seen since 2013. USDA’s NMPF decision tool for the Margin Protection Program (MPP) is now indicating that the MPP margin may fall below $6.00 per hundredweight for the May-June period.

Exports for most major product categories are still down this quarter, and few are showing small increases with the exception of anhydrous milk fat (AMF). AMF exports, go almost entirely to Mexico, are already greater than 50% above their levels for all of 2015.

This quarter, imports were equivalent to just 4% of milk solids production. Butter imports were 90% above this time last year, and cheese imports were up by a third. Milk protein concentrates and casein imports were also up, but only by single-digit percentages. These increases seem roughly proportionate to the U.S.–world market price gaps for milkfat, cheese and dairy proteins.

The entire report can be accessed online here.