The nation’s milk production has slowed from earlier expectations but still could rise enough to be at a record level in 1988, an Agriculture Department report said. Part of the slowdown was attributed to higher feed costs resulting from the smaller drought-reduced grain harvests. Milk output declined in 1987 to 142.5 billion pounds from a record 143.4 billion pounds in 1986. This year’s production was forecast last spring to rise 2% to 3% from 1987. But the department said in its new outlook report that 1988 milk production may increase only “around 1%" from last year’s level, but could still exceed the record level of two years ago.