Milk-feed ratio continues to improve

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Amid the oppressive heat and relentless heat, July’s milk-feed ratio hit a staggering 1.34 -- lower than even the darkest days of 2009. In its latest Agriculture Prices report released on Wednesday, the USDA showed signs that the ratio is rebounding.  

The USDA pegged the preliminary ratio for October at 1.68. This is up from 1.46 last month, which was later revised to 1.58.

The all-milk price used in USDA’s calculations rose from $19.60 per hundredweight in September to $21.10 per hundredweight in October. In July the all-milk was reported at $16.90 per hundredweight.

Though milk prices have increased in the past few months, feed costs have also soared.

The corn price used in USDA's calculations remains high at $6.95 per bushel, compared to $6.89 in September. Though soybeans dropped by 10 cents per bushel from September to October, they are still $2.40 above last year’s report. Alfalfa hay jumped by $7 per ton.

The milk-feed ratio is a rough measure of dairy profitability.

The milk-feed ration represents the pounds of 16-percent mixed dairy feed equal in value to 1 pound of whole milk. Therefore, with a 1.68 ratio in October, a dairy producer could buy 1.68 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, available here.



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