The latest “Agricultural Prices” report from the USDA showed movement in the milk-feed profitability ratio, and after staying in a rut for the last several months, the ratio is finally climbing.
According to the report, the August milk-feed ratio was 1.69, up from July’s ratio of 1.52 and well-above last year’s ratio of 1.37.
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 August’s ratio increased by 30 cents, raising from $19.00 per hundredweight in July to $19.30 per hundred in August.
Meanwhile, prices for corn, soybeans and alfalfa hay dropped. Corn prices tumbled 77 cents to $6.02 per bushel, while soybeans fell $1.50 lower to $13.80 per bushel. Alfalfa hay dropped from $209 per ton in July to $200 per ton in August.
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 1.69 ratio in August, a dairy producer could buy 1.69 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.