Despite high feed costs, milk-feed ratio shows improvement

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After falling to its lowest level in history, the milk-feed ratio is slowing climbing back. 

On Thursday, the U.S. Department of Agriculture pegged the preliminary ratio for September at 1.46 ― up from 1.34 in July and 1.36 in August.

The improvement is due to higher milk prices.

The all-milk price used in USDA’s calculation rose from $18.10 per hundredweight in August to $19.10 per hundredweight in September.  

However, corn remains high at $7.35 per bushel (compared to $7.63 in August). Soybeans actually rose 10 cents per bushel from August to September, and alfalfa hay went up $2 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 1.46 ratio in September, a dairy producer could buy 1.46 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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AZ  |  September, 28, 2012 at 08:23 AM

Improvement? Still below even a 1.50? Less than half what it should be to be profitable? How about a headline that reads "Milk-feed ratio continues to show dairy to be unprofitable." There is no optimism to be gained by a 1.46 ratio. Don't try to show it in the headline.

pa  |  September, 28, 2012 at 10:18 AM

On the contrary, it is very easy to write about it when you're not the one actually writing out the checks to pay for that 'improved' ratio!

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