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

Mr. Alex Tebbe, Graduate Research Associate, Department of Animal Sciences, The Ohio State University

The Ugly Side: Milk Prices

In the last issue, the price of class III milk closed at $14.47/cwt for January and the February future price was expected to fall even farther to $13.64/cwt. Fortunately, February closed slightly higher than expected at $13.80/cwt, but April futures are expected to drop slightly to $13.74/cwt. The Class IV futures prices are below the Class III at $12.75/cwt. These lower prices probably explain the 11 and 32% increase of cheese and butter, respectively, in cold storage since one year ago (according to the National Agricultural Statistics Service). The USDA did report, however, that US cows produced around 79 lb/cow more milk for the month of February compared to February of 2015, but this likely was due to the extra day we get for the leap year. According to Robin Schmahl, commodity broker and owner of AgDairy LLC, US and internationally analysts are continuing to push back price recovery into 2017 and this, in effect, may significantly reduce milk production for 2016.

However, we are not the only ones struggling with low milk prices in the world. Across the pond, British dairy farmers have taken their struggle with low milk prices by protesting in the streets of London, cows and all. Let’s keep our cows at home along with the hoof trimmer, and instead, take this time to gain profit by improving herd genetics, maximizing feed efficiency, or focusing on the oncoming planting and hay season.

The Good Side: Nutrient Prices

Feed prices have continued to stay low, and as in the last issue, the cost of metabolizable protein is continuing to drop. However, the cost of alfalfa hay went up $10/ton and is now on average $240/ton for 20% crude protein. Hopefully, producers have stored enough hay to carry themselves into the first cutting. It may also be profitable to limit alfalfa in rations by substituting other sources of physically effective fiber and protein until that time. If you choose this approach, be mindful of your milk fat percentage because it is currently the highest $/lb of all milk components.  

As in previous issues, these feed ingredients were appraised using the software program SESAME™ developed by Dr. Normand St-Pierre at Ohio State to price the important nutrients in dairy rations, to estimate break-even prices of all commodities traded in Ohio, and to identify feedstuffs that currently are significantly underpriced as of March 28, 2016. 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. For MP, its current price ($0.312/lb) has decreased from January’s issue ($0.437/lb) and coming within spitting range of the 6-year average ($0.28/lb).  This is good in counteracting the jump of NEL from last month ($0.083/lb) to $0.095/lb this month.  The jump is still slightly lower compared to its historical 6-year average of about 10¢/Mcal NEL. The cost of ne-NDF has also went up from last month from -7¢/lb to -6¢/lb, but it is still a market discount (i.e., feeds with a significant content of ne-NDF are priced at a discount). Meanwhile, unit cost of e-NDF is also at nearly 4 times its 6-year average, being priced at 11.5¢/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 $1.27/cow/day (i.e., 10.5 lb × $0.115 per lb).

To estimate the cost of production at these nutrient levels, I used a target cow milking 70 lb/day at 3.7% fat and 3.1% protein eating 50 lb/day. In this model, the average costs should be around $5.80/cow/day or $8.29/cwt of milk.  The same cow producing 85 lb/day will increase average feed costs to $6.36/cow/day but lower the cost to $7.95/cwt of milk. Our efficient cows that produce more milk and maintain a high milk fat percentage are currently the best cows on the farm given that both butterfat $/lb and energy $/lb are higher than in the past. In essence, our Jersey herds have a bright future if the current feed and milk markets are maintained. I must note, however, these costs neither include the costs of feeding the dry cows nor the replacement herd. All in all, this is about the same as it was in January.

Table 1. Prices of dairy nutrients for Ohio dairy farms, March 28, 2016
Table 1
A blank means that the nutrient cost is likely equal to zero
~ means that the nutrient cost may be close to zero
* means the nutrient unit cost is unlikely to be equal to zero
** means that the nutrient unit cost is most likely not equal to zero

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on March 28, 2016 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 March 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, March 28, 2016.
Table 2

For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis. Feedstuffs that have gone up in price or in other words moved to a column to the right since the last issue are in red. Conversely, feedstuffs that have moved to the left (decreased price) are in green.

Table 3. Partitioning of feedstuffs, Ohio, March 28, 2016.


At Breakeven


Bakery byproducts


Alfalfa hay – 40% NDF

Corn, ground, shelled

41% Cottonseed meal

Beet pulp

Corn silage

Whole cottonseed

Blood meal

Distillers dried grains

Soybean meal - expeller

Brewers grains, wet

Feather meal


Canola meal

Gluten feed

Wheat bran

Citrus pulp

Meat meal


Fish meal

48% CP soybean meal


Gluten Meal

Wheat middlings





Soybean hulls



44% CP soybean meal



Roasted soybeans

As coined by Dr. St-Pierre, 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.


For those of you who use the 5-nutrient group values (i.e., replace MP by rumen degradable protein and digestible rumen undegradable protein), see the table below.

Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, March 28, 2016.
Table 4
A blank means that the nutrient cost is likely equal to zero
~ means that the nutrient cost may be close to zero
* means the nutrient unit cost is unlikely to be equal to zero
** means that the nutrient unit cost is most likely not equal to zero