Milk-Feed Margins Still Key to Profitability

With prospects for better milk prices this year, it’s still important to remember that the margin between milk prices and feed costs are still the key to profitability, says Virginia Ishler, an Extension dairy specialist with Pennsylvania State University.

That’s particularly true in the Northeast, where forage and grain prices are typically higher than the rest of the country. For example, Pennsylvania’s all-milk prices is typically 50₵ to 60₵ higher than the U.S. all-milk price. But Pennsylvania’s alfalfa hay price averaged $13/ton more in 2018 and $36/ton more in 2019. Corn and soybean meal prices were also higher.

“Using feed costs for an average milk production of 85 lb/cow, the margin and income over feed costs are always lower compared to other states,” she says. “In 2018, there was a 10₵ difference in margin per hundredweight between Pennsylvania compared and the other states.”

The difference was even greater in 2019 --68₵/cwt--mainly because of the larger difference in hay price. Therefore, she says, keeping home-grown feed costs in line has a significant impact on the milk-feed margin. Growing high-quality forage also minimizes reliance on purchased grain and protein purchases.

Equally important is milk per cow. “In today’s economy, cows should be averaging a minimum of 75 pounds of milk on twice a day milking and greater than 85 pounds on three times a day milking,” Ishler says. “Pounds of components (fat plus protein) should exceed 5.5 pounds.”

For more information on optimizing your milk/feed margin, click here.