Dairy profitability ratio stuck at 1.52

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The latest “Agricultural Prices” report from the USDA showed few changes to the milk-feed profitability ratio, and though the ratio is still stuck in a rut, it’s still better than last year.

According to the report, July the milk-feed ratio was 1.52, unchanged from June and down slightly from 1.53 in May.

While it’s still better than July 2012’s milk-feed ratio of 1.34, it’s still well below 2.0.

The all-milk price used in calculating July’s ratio dropped, falling from $19.50 per hundredweight in June to $19.10 per hundred in July.

Prices for corn and alfalfa hay also dropped. Corn prices tumbled 14 cents this month to $6.83 per bushel, while alfalfa hay fell from $220 per ton in June to $209 per in July. Soybeans gained 30 cents this month with prices at $15.40 per bushel.

Read more about the milk-feed ration on page 48 of the report.

The milk-feed ratio is a rough measure of dairy profitability. It represents the pounds of 16-percent mixed dairy feed equal in value to 1 pound of whole milk. Therefore, with a 1.52 ratio in June, a dairy producer could buy 1.52 pounds of feed for every 1 pound of milk sold.

Some people question how valid the USDA’s milk-feed ratio is. See this story. But the USDA has been using the same formula for years, comparing the same commodities. Therefore, it can serve as a relative measure for comparing different points in time.

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