The preliminary milk-feed ratio of 1.45, announced by the U.S. Department of Agriculture on Monday, ties the ratio set in June 2009, which was the lowest point in a bad year.
The milk-feed ratio is a rough approximation of dairy profitability using current feed costs and milk prices.
High feed costs and dropping milk prices have been responsible for the dismal performance of the milk-feed ratio in recent months. The all-milk price used by the USDA in calculating the ratio dropped from $17.20 per hundredweight in March to $16.90 in April.
April’s corn price was down slightly from March ― $6.14 per bushel versus $6.35 ― but the soybean price increased from $13 per bushel in March to $13.80 in April. Alfalfa hay increased, as well, from $201 per ton to $207.
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.