Dairy profitability appears to have hit a plateau

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According to the “Agricultural Prices” report released by the U.S. Department of Agriculture on Friday, the milk-feed profitability ratio was 1.55 in May, up slightly from 1.54 in April and 1.48 in March.

Regardless, things aren’t good when the ratio is this far below 2.0.

The all-milk price used in calculating May’s ratio rose, climbing from $19.50 per hundredweight in April to $19.80.

Yet, prices for soybeans and alfalfa hay rose, which offset the advantages of a higher milk price. Soybeans rose from $14.40 per bushel in April to $14.80 in May, while alfalfa hay rose from $215 per ton to $221 in May. The corn price fell slightly from $6.97 per bushel in April to $6.88 in May.

Read the report here (see page 40).

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 1.55 ratio in May, a dairy producer could buy 1.55 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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