No one ― even in the darkest days of 2009 ― ever imagined the milk-feed ratio going this low.
On Tuesday, the U.S. Department of Agriculture announced a preliminary milk-feed ratio of 1.29 for July. That was down significantly from June’s ratio of 1.38.
None of the milk-feed ratios on record, going back to 1985, have been this low. The lowest ratio recorded in 2009 was 1.45.
July’s number reflects escalating corn and soybean prices.
The corn price jumped almost $1 from June ― $6.37 per bushel to $7.36. The soybean price jumped even more from $13.90 per bushel in June to $15.60.
Alfalfa hay dropped $3 per ton to $198.
The all-milk price used by the USDA in calculating the ratio increased from $16.20 per hundredweight in June to $16.60 in July.
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 1.29 ratio in July, a dairy producer could buy 1.29 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 USDA’s monthly “Agricultural Prices” report.