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 Ugly Side: Milk Prices

As I write this column in late November, the class III futures have just closed at $15.33 for November, $14.68 for December, and $14.71/cwt for January 2016.  For the next 12 months, the Class III milk futures are averaging $15.59/cwt, which (IF these are accurate predictors) should provide Ohio dairy producers with a mailbox price averaging around $16.50/cwt over the next 12 months.  The Class IV futures prices are above the Class III for the next couple of months, then they drop into the $14.00 to 14.50/cwt range.  Needless to say, these prices are not good, even with $3.50/bu corn.  To compound the problem, I think that the futures markets might in fact be a bit optimistic.  There is a lot of milk produced around the world, especially in Oceania and Europe, which explains why non-fat dry milk is currently selling in the low $0.80/lb; it has to be priced this low to find export markets.  In short, milk prices in the foreseeable future will be a challenge to dairy producers.

The Good Side: Nutrient Prices

Feed prices have dropped significantly in the last year and all indications are they will remain low (“low” taken here in the context of the post ethanol era).  This brings significant opportunities not only to lock in very good prices on major commodities (e.g., corn, soybean meal, etc.) but also to evaluate how byproduct ingredients could fit your feeding program.

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 November 23, 2015.  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 currently a relative bargain at 4.9¢/Mcal.  This is important because a cow producing 70 lb/day of milk requires in the neighborhood of 33 Mcal/day of NEL. So, supplying the dietary energy required to produce milk is currently relatively inexpensive.  For MP, its current price ($0.556/lb) is nearly 2 times greater than its 6-year average ($0.28/lb). In short, protein prices are still relatively expensive but not as much as this time last year.  The cost of ne-NDF is currently discounted by the markets (i.e., feeds with a significant content of non-effective NDF are priced at a discount), but the discount of -1.7¢/lb is less than its 6-year average (-9¢/lb).  Meanwhile, unit costs of e-NDF are also at over 4 times their 6-year average, being priced at 14.9¢/lb compared to the 6-year average (3.3¢/lb).  Fortunately, a dairy cow requires only 10 to 11 lb of effective NDF, so the daily cost of providing this nutrient is only about $1.56/cow/day (i.e., 10.5 lb × $0.149 per lb).

Using these nutrient costs, we can estimate how much it should cost on an average to feed for a certain amount of milk production.  Using a target cow milking 70 lb/day at 3.7% fat and 3.1% protein and eating 50.4 lb/day of dry matter, the average feed costs should currently be in the neighborhood of $5.95/cow/day or $8.49/cwt.  These costs do not include the costs of feeding the dry cows nor the replacement herd.  At a production level of 85 lb/day, the average feed costs increases to $6.81/cow/day, while the feed costs for milk drop to $8.01/cwt. 

Table 1.  Prices of dairy nutrients for Ohio dairy farms, November 23, 2015.
Table 1

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on November 23, 2105 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 November 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, November 23, 2015.
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, November 23, 2015.


At Breakeven


Corn, ground, shelled
Corn silage
Distillers dried grains
Feather meal
Gluten feed
Meat meal
Soybean meal – expeller
Wheat middlings

Alfalfa hay – 40% NDF
Bakery byproducts
Brewers grains, wet
Whole cottonseed
41% Cottonseed meal
Gluten meal
48% soybean meal
Roasted soybeans
Wheat bran

Beet pulp
Blood meal
Canola meal
Citrus pulp
Soybean hulls
44% soybean meal


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.  For example, your nutritionist might be using some molasses in your rations for reasons other than its NEL and MP contents.


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, November 23, 2015.
Table 4