Dairy profitability stuck in a rut

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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.

Read the report here (see page 47).

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.

 



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Loren Lopes    
California  |  June, 28, 2013 at 08:25 AM

The milk to feed ratio is a rough measurement of profitability but a true one. If you compare this to the average cost of production and than look at your own individual cost of production excluding outside income this will fine tune the picture. Milk is being produced from equity and other income or lack of income and is unsustainable. The dairy industry is under the foot of planned attrition. I hope this is identified and changed for the sack of all those young dedicated dairy farmers.


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