Feed high cost was the grinch that stole December.

The milk-feed profitability ratio was a disappointing 1.88 in December, according to the Dec. 30 “Agricultural Prices” report by the U.S. Department of Agriculture.

It’s not until the ratio reaches 3.0 that it is considered profitable to buy feed and produce milk.

The ratio was below 2.0 for most of 2011. It peaked at 2.14 in March.

As Greg Scheer, dairy analyst for Doane Advisory Services in St. Louis points out, the yearly average for 2011 was 1.89.

"The annual average for 2011 was down from the 2.07 average ratio in 2010," he adds. "The ratio held well below the level typically needed to trigger expansion in the dairy herd. However, U.S. dairy cow numbers in November of 9.216 million head were up 91,000 head from 2010.

"Milk prices in 2011 were record high, but high feed costs limited profitability. The preliminary estimated annual average farm level all-milk price for 2011 was $20.14/cwt , compared to the previous record high annual average of $19.13 in 2007," Scheer says.

The all-milk price used in December’s calculation was $19.80 per hundredweight, down 60 cents from November’s $20.40. The corn price was $5.44 per bushel, down 40 cents from November. The soybean price dropped, as well, to $11.10 per bushel. The price of alfalfa hay increased $1 per ton from $198 in November to $199 in December. The alfalfa hay may be understated, however. In many parts of the country, premium alfalfa hay costs more than $270 per ton — if it is available at all.

Source: “Agricultural Prices” report, USDA