Rabobank’s June North American Agribusiness Review indicates U.S. dairy farmer income margins should remain decent through 2014.

The new report, from the Rabobank Food & Agribusiness Research (FAR) and Advisory group, said U.S. milk production “contintued to underperform when compared to other parts of the world” during the first four months of 2014, up just 1% year-over-year.

Midwest dairy farmers remained focused on paying down debt, buying feed forward and upgrading farm equipment, rather than ramping up output. California farmers, meanwhile, were capitalizing on high milk prices, with milk production up about 5% year-over-year for the January-April period. Lower corn and soybean prices are keeping income margins attractive.

While U.S. milk production has shown only modest expansion, it still managed to outstrip domestic consumption growth in recent months, the report said. This has enabled exporters to increase shipments.

Rabobank expects milk production growth to gain some traction during the second half of 2014, and be up 3% year-over-year during the period. However, lagging supply growth will slow the descent of prices.

Margins are expected to remain attractive well into the second half of 2014, attracting more investment. Milk production should will continue to grow at a decent clip into 2015, but increases in both domestic and global demand are also expected.