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

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

Milk Prices

In the last issue, the February Class III price closed at $16.88/cwt and was projected to remain unchanged in March ($16.90/cwt) followed by an 85¢/cwt drop to $16.05/cwt for the month of April.  The Class III component price for the months of March and April actually closed about $1/cwt lower than expected at $15.81 and $15.22/cwt, respectively. The price for the months of May and June is expected to be similar to April at $15.20 and $15.30/cwt, respectively.

Although prices have taken about a $1.50/cwt cut since January, the price of milk is still optimistic and about $2/cwt higher than the average of spring 2016 ($13.37/cwt). Spring is also the time of year when markets naturally take a dip as farms reach a peak in production and cause a temporary surplus and drive down price. However, the current drop will likely not be a temporary one because of the Canadian “Class 7” pricing policy that was implemented at the end of March. In short, Canada is reducing the amount of imported American value-added products (e.g. ultrafiltered milk) to stimulate their own milk price. The sudden reduction has now forced some Midwestern and Northeastern producers to find alternatives (e.g. coops) or new processors to sell their milk. The government’s solution to now counter the policy will undoubtedly take more time than it did for the Canadians to implement the policy. As a result, I suspect the Class III price will likely take a hit, but it may not be until after the heat of summer. A price drop is especially convincing considering total milk production in the US for 2017 has routinely been about 1to 3% higher than last year. Bottom line, milk prices may again be a challenge to producers in the near future. If they will fall to levels comparable to two years ago is the ultimate question.

Nutrient Prices

As in previous issues, these feed ingredients were appraised using the software program SESAME™ developed by Dr. St-Pierre at The Ohio State University 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 May 22, 2017. 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.

Nutrient prices continue to remain relatively low as they have been for the past three years. For MP, its current price ($0.40/lb) has dropped slightly from the March issue ($0.44/lb) and is about 20% lower than the 5 year average ($0.48/lb). The cost of NEL increased about 0.5¢/lb to 8¢/lb but is much lower than the 5-year average of 11¢/lb. The price of e-NDF and ne-NDF are nearly identical to last month at 5¢/lb and -7¢/lb (i.e. feeds with a significant content of non-effective NDF are priced at a discount), respectively.

To estimate the cost of production at these nutrient prices, I used the Cow-Jones Index with cows milking 70 lb/day or 85 lb/day at 3.7% fat and 3.1% protein. In the last issue, the average income over nutrient costs (IONC) was estimated at $10.80/cwt for a cow milking 70 lb/day and $11.18/cwt for a cow milking 85 lb/day. For May, the IONC for our 70 lb/day and 85lb/day cows will be about 17% lower than March at an estimated $9.23/cwt and $9.60/cwt, respectively. This is also about 25% lower than they were in the January issue ($11.57/cwt and $11.94/cwt, respectively). These IONC may be overestimated because they do not account for the cost of replacements or dry cows; however, they should be profitable if greater than about $9/cwt. Overall, low nutrient prices should help producers remain afloat but expect margins to be very tight for the upcoming months.

Table 1. Prices of dairy nutrients for Ohio dairy farms, May 22, 2017.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on May 22, 2017 are presented in Table 2. Detailed results for all 26 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 specific point in time. 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 26 feed commodities used on Ohio dairy farms, May 22, 2017.

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 a column to the right since the last issue are red. Conversely, feedstuffs that have moved to the left (i.e. decreased in price) are green. These shifts (i.e. feeds moving columns to the left or right) in price are only temporary changes relative to other feedstuffs within the last two months and do not reflect historical prices.

Table 3. Partitioning of feedstuffs, Ohio, May 22, 2017.


At Breakeven


Corn, ground, dry

Alfalfa hay – 40% NDF

Blood meal

Corn silage

Bakery byproducts

Canola meal

Distillers dried grains

Beet pulp

Citrus pulp

Feather meal

Gluten meal

41% Cottonseed meal

Gluten feed

Soybean meal - expeller

Fish meal


48% Soybean meal


Meat meal

Soybean hulls


Wheat middlings

Whole cottonseed

44% Soybean meal


Wheat bran

Whole, 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 metabolizable protein 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, May 22, 2017.