Low milk prices have been a key factor in keeping hay prices, especially alfalfa prices, from pushing even higher in many parts of the country this winter. That could change in the year ahead, according to Scott Brown, dairy economist with University of Missouri Extension.

“There are signs of hope,” Brown told attendees at the recent Heart of America Dairy Expo in Springfield. “We will see some margin recovery in 2013, but don’t look for anything like those record margins of 2008.”

On the upside, trends in international dairy markets could help bolster U.S. milk prices. Globally, milk supplies are tight. “The good news is that the U.S. has become a large net exporter (of dairy products),” Brown said.

Domestically, a 2012 drop in dairy cow numbers, although lower than what many dairy analysts were expecting, was coupled with a slowdown in overall milk production this winter. Those factors have been encouraging for the milk-price outlook.

Brown warned, though, that uncertainty over the weather and its effect on feed prices bears watching. “I can see a corn price with a $4/bu in front of it, but over $8 is possible with another dry year. With current tight corn stocks, any weather change will affect feed prices.”

In turn, that uncertainty will leave many milk producers facing tough choices, he said. “If you pay $7 for corn, do you keep milking or get out? If you look ahead and see a big corn crop coming, do you stay to see if feed costs drop?”

Brown’s bottom line: Look for an all-milk price of around $19.40/cwt in 2013 compared to $18.63 in 2012.