Milk-feed ratio shows slight improvement

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Still in bad shape, but maybe poised for a rebound.

That describes the preliminary August milk-feed ratio of 1.35, released Friday afternoon by the U.S. Department of Agriculture.

It is a slight improvement over last month’s ratio of 1.29, which has since been revised upward to 1.34.

The improvement is tied to a higher milk price. The all-milk price improved from $16.90 per hundredweight in July to $17.80 in August, the USDA said.  

But even a 90-cent boost in the milk price can barely stay ahead of rising feed costs.

The price of corn increased from $7.14 per bushel in July to $7.54 in August, according to the USDA calculation. Soybeans increased from $15.40 per bushel to $15.90. Alfalfa hay rose in price by $5 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 1.35 ratio in August, a dairy producer could buy 1.35 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.

 

 



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