After falling to its lowest level in history, the milk-feed ratio is slowing climbing back.
On Thursday, the U.S. Department of Agriculture pegged the preliminary ratio for September at 1.46 ― up from 1.34 in July and 1.36 in August.
The improvement is due to higher milk prices.
The all-milk price used in USDA’s calculation rose from $18.10 per hundredweight in August to $19.10 per hundredweight in September.
However, corn remains high at $7.35 per bushel (compared to $7.63 in August). Soybeans actually rose 10 cents per bushel from August to September, and alfalfa hay went up $2 per ton.
The milk-feed ratio is a rough measure of dairy profitability.
The milk-feed ratio represents the pounds of 16-percent mixed dairy feed equal in value to 1 pound of whole milk. Therefore, with a 1.46 ratio in September, a dairy producer could buy 1.46 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.
The ratio is found in the USDA’s monthly “Agricultural Prices” report.