Milk Prices, Costs of Nutrients, Margins and Comparison of Feedstuffs Prices

Dr. Normand St-Pierre, Extension Dairy Management Specialist, Department of Animal Sciences, The Ohio State University

The Good Side: Milk Prices

As I write this column in late August, the Class III futures have just closed at $22.24/cwt for August and $23.89/cwt for September.  Last month, the Class III milk settled at $21.60/cwt, an increase of $4.20 over July of last year.  For the balance of 2014, the Class III futures are averaging $21.84/cwt.  On the feed side, corn has come down from a peak this spring with Chicago Mercantile Exchange (CME) September futures now at about $3.56/bu and December futures at $3.63/bu.  Soybean meal futures for September are currently trading around $435/ton, steadily dropping to $349/ton by next December.  Using prevailing cash prices for feeds, we estimate that the feed costs to produce a hundredweight of milk in Ohio are in the $9.50 to $10.50/cwt range.  This leaves milk margin over feed costs somewhere between $12.00 and $14.00/cwt, resulting in net margins between $5.00 and $6.00/cwt.  Clearly, milking cows is currently a profitable business, but much of the additional margins are being used to replenish cash reserves that were depleted during the difficult time that the industry went through until late summer of 2013, and also to make much needed re-investments in machinery and equipment.

A Greatly Improved Picture: Nutrient Prices

As usual in this column, I used the software SESAME™ that we developed at Ohio State to price the important nutrients in dairy rations to estimate break-even prices of all major commodities traded in Ohio and to identify feedstuffs that currently are significantly underpriced as of August 25, 2014.  Price estimates of net energy lactation (NEL,$/Mcal), metabolizable protein (MP, $/lb – MP is the sum of the digestible microbial protein and digestible rumen-undegradable protein of a feed), non-effective NDF (ne-NDF, $/lb), and effective NDF (e-NDF, $/lb) are reported in Table 1. Compared to its historical 6-year average of about 10¢/Mcal, NEL is now priced much more reasonably (11.0¢/Mcal) than it has been over the last 12 months.  This is important because a cow producing 70 lb/day of milk requires in the neighborhood of 33 Mcals of NEL/day.  This means that providing the required dietary energy for an average cow should cost in the neighborhood of 33 x 0.11 = $3.63/day.  For MP, its current price (63.3¢/lb) is more than 2 times greater than its 6-year average (28¢/lb).  Thus, we are currently in a period of normal energy prices, but considerably above average protein prices.  The cost of ne-NDF is currently discounted by the markets (i.e., feeds with a significant content of ne-NDF are priced at a discount), and the discount of -21.1¢/lb is much above the 6-year average (-9¢/lb).  It is summer time, a period when high fiber byproducts are typically a bargain.  Meanwhile, unit cost of e-NDF is at about 3 times its 6-year average, being priced at 9.4¢/lb compared to the 6-year average (3.3¢/lb).  Fortunately, a dairy cow requires only 10 to 11 lb of e-NDF, so the daily cost of providing this nutrient is about $0.99/cow per day (i.e., 10.5 lb × $0.094 per lb).  So from a historical basis (i.e., using averages from the last 6 years as the bases of comparison), feeds and their nutrients are still expensive but not as much as last year.

Table 1.  Prices of dairy nutrients for Ohio dairy farms,
mid-August 2014.
Table 1

Economic Value of Feeds

Results of the Sesame analysis for central Ohio in mid-August are presented in Table 2. Detailed results for all 27 feed commodities are reported.  The lower and upper limits mark the 75% confidence range for the predicted (break-even) prices.  Feeds in the “Appraisal Set” were those for which we didn’t have a price.  One must remember that Sesame compares all commodities at one point in time, mid-August in this case.  Thus, the results do not imply that the bargain feeds are cheap on a historical basis.

Table 2.  Actual, breakeven (predicted) and 75% confidence limits of 27 feed commodities used on
Ohio dairy farms, mid-June 2014.
Table 2

For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis.

Table 3. Partitioning of feedstuffs, Ohio, mid-August 2014.


At Breakeven


Alfalfa hay – 40% NDF
Bakery byproducts
Corn, ground, shelled
Corn silage
Distillers dried grains
Feather meal
Gluten feed
Gluten meal
Soybean meal – expeller

41% Cottonseed meal
Cottonseed, whole
Roasted soybeans
Wheat middlings

Beet pulp
Blood meal
Brewers grains, wet
Canola meal
Citrus pulp
Meat meal
Soybean hulls
44% soybean meal
48% soybean meal
Wheat bran

As usual, I must remind the readers that these results do not mean that you can formulate a balanced diet using only feeds in the “bargains” column.  Feeds in the “bargains” column offer savings opportunity and their usage should be maximized within the limits of a properly balanced diet.  In addition, prices within a commodity type can vary considerably because of quality differences, as well as non-nutritional value added by some suppliers in the form of nutritional services, blending, terms of credit, etc.  Also, there are reasons that a feed might be a very good fit in your feeding program while not appearing in the “bargains” column.


A few people have asked that I publish the results using the 5-nutrient group (i.e., replace metabolizable protein by rumen degradable protein and digestible rumen undegradable protein).  A table containing these results is provided herewith.

Table 4. Prices of dairy nutrients using the
5-nutrient solution for Ohio dairy farms,
mid-August 2014.
Table 4