Milk production has exceeded year-earlier levels since last fall, recovering from the 1 percent decline that occurred in the 1995/96 dairy marketing year. The gains in milk production widened considerably during the spring and summer months as milk per cow recorded large increases relative to the depressed levels of the year before. The inventory of milk cows on farms still lags the year-ago level, with the decline especially apparent among states comprising the Seventh Federal Reserve District. Milk prices, although trending upward this summer, fluctuated widely over the past year. Nevertheless, the $13 per hundredweight average price estimated for September was far short of the all time record high of $16.50 recorded one year earlier. The resulting squeeze on earnings and forthcoming changes in the dairy support program are no doubt causing many dairy farmers to exit the industry.