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 Class III component price for July and August were similar at $14.10 and $14.95/cwt, respectively. For the month of September, the Class III future was projected to decrease slightly to $14.85/cwt and then jump almost a $1.50/cwt to $16.33/cwt in October. The Class III component price for the month of September and October closed at $16.09 and $15.53/cwt, respectively. Class III futures for November are about the same at $15.52/cwt followed by a $1/cwt drop in December to $14.50/cwt.

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 many commodities traded in Ohio, and to identify feedstuffs that currently are significantly underpriced as of November 25, 2018. 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.  

Per usual, commodity and nutrient prices are down. For MP, its current value has increased $0.03/lb from September’s issue ($0.35/lb) and is about 23% lower than the 5 year average ($0.48/lb). The cost of NEL is about the same as September (7.7¢/Mcal) and lower than the 5-year average (11¢/Mcal). The price of e-NDF and ne-NDF are not very different from last month at 8¢/lb and -3¢/lb (i.e., feeds with a significant content of non-effective NDF are priced at a discount), respectively. Now would be a good time to start locking in good prices on commodities and reformulating rations to enable feeding bargain feedstuffs long term.

To estimate the cost of production at these nutrient prices, I used the Cow-Jones Index for cows weighing 1500 lb and producing milk with 3.7% fat and 3.1% protein. For this issue, the income over nutrient costs (IONC) for cows milking 70 lb/day and 85 lb/day is about $9.78 and $10.17/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 when greater than about $9/cwt. The IONC for December are better than September ($9.15 and $9.53/cwt, respectively). Overall, profits for dairy farmers in Ohio are marginal to breaking even.

Table 1. Prices of dairy nutrients for Ohio dairy farms, November 25, 2018.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on November 25, 2018 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 or were adjusted to reflect their true (“Corrected”) value in a lactating diet. 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 27 feed commodities used on Ohio dairy farms, November 25, 2018.

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 in Ohio, November 25, 2018.

Bargains At Breakeven Overpriced
Corn, ground, dry Alfalfa hay - 40% NDF Mechanically extracted canola meal
Corn silage Bakery byproducts Citrus pulp
Distillers dried grains Beet pulp Fish meal
Feather meal Blood meal Molasses
Gluten feed 41% Cottonseed meal Solvent extracted canola meal
Hominy Gluten meal 44% Soybean meal
Meat meal Soybean hulls Tallow
Soybean meal - expeller 48% Soybean meal Whole, roasted soybeans
Whole cottonseed Wheat bran  
Wheat middlings    

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 a 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 Table 4.

Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, November 25, 2018.