According to the “Agricultural Prices” report released by the U.S. Department of Agriculture on Thursday, the preliminary milk-feed profitability for June is 1.53 ― identical to 1.53 in May and similar to 1.54 in April and 1.48 in March.
No one would mind if the profitability ratio was stuck at a high level, but the opposite is true with ratios well below 2.0.
The all-milk price used in calculating June’s ratio was identical to May’s ― $19.70 per hundredweight.
In years past, a $19.70 milk price might have spelled healthy profits, but high feed costs have sucked a lot of the profit out of the equation.
In the latest calculation, the corn price rose slightly from $6.97 per bushel in May to $7.02 per bushel in June. Soybeans rose from $14.90 per bushel in May to $15.10 in June, while alfalfa hay dropped slightly from $221 per ton in May to $220 in June.
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 1.53 ratio in June, a dairy producer could buy 1.53 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.