Milk profitability ratio drops in January

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There’s a well-known phrase, “All that glitters is not gold.”

That could be the headline for the dairy portion of the “Agricultural Prices” report issued by the U.S. Department of Agriculture on Tuesday.

Despite an all-milk price of $19.20 in January, the milk-feed profitability ratio fell to 1.77, which is one of the worst levels since the disastrous year of 2009. The ratio was 1.81 in December.

It is not until the ratio reaches 3.0 that it is considered profitable to buy feed and produce milk.

The reason the ratio is so low is the high cost of feed.

The corn price used in January’s calculation was $5.90 per bushel, up four cents from December. The soybean price rose, as well, to $11.70 per bushel. The price of alfalfa hay dropped $7 to $192 per ton; however, that price appears to be an underestimation. In many parts of the country, premium alfalfa hay costs more than $280 per ton — if it is available at all.

See “Mesa dairy farmer needs feed costs to drop.”

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Dr Gerald Poppy    
Cedar Rapids Iowa  |  February, 01, 2012 at 09:48 AM

The milk profitability ratio is not a good indicator of profitability in dairy because it is a ratio. A better tool to use is milk income minus feed cost. The milk profitability ratio should be eliminated from the dairy vocabulary.

Ted Foster    
Vermont  |  February, 01, 2012 at 10:43 AM

I agree with Dr Poppy. The income over feed costs is a much better indicator or profitability. The only thing that the ratio is good for is telling our non farm cousins that profit is nill.

MA  |  February, 02, 2012 at 04:00 AM

A rose is a rose by any other still stinks!!

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