The latest “Agricultural Prices” report from the USDA shows the first significant improvement in the milk-feed profitability ratio this year.
The preliminary milk-feed ratio for September was 1.86, up from August’s ratio of 1.68 and well above last year’s ratio of 1.59.
But it’s still below 2.0. The last time the USDA reported a milk-feed ratio above 2.0 was in early 2011.
The all-milk price used in calculating the ratio increased by 30 cents this month, climbing from $19.50 per hundredweight in August to $19.80 per hundredweight in September.
Meanwhile, prices for corn, soybeans and alfalfa hay dropped. Corn prices dipped by nearly one dollar to $5.28 per bushel while soybeans tumbled 30 cents lower to $13.80 per bushel. Alfalfa hay dropped from $200 per ton in August to $196 per ton in September.
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 1.69 ratio in August, a dairy producer could buy 1.69 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.