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 futures for July and August were at $16.13 and $17.37/cwt, respectively. The Class III component price for July closed about $1.40/cwt higher at $17.55/cwt and was similar in August at $17.60/cwt. The Class III future for September is similar to July and August component prices at $17.48/cwt, followed by a small jump to $17.82/cwt in October. Overall, milk prices are pretty good compared to the 4-year Class III average ($15.36/cwt).

Looking further in advance, I do not expect the Class III milk price to change much until 2020. Currently, Class III futures are steady and trading between $17.50 and $18.00/cwt. The number of cows being milked in the US are also still going down and have reduced total milk production about 2% compared to 2018. However, exports are down about 2%, and any improvements in price because of lower milk production will likely be a wash.

Nutrient prices

As in previous issues, feed ingredients commonly used in Ohio were analyzed using the software program SESAME™ developed by Dr. St-Pierre at The Ohio State University. The resulting analysis can be used to appraise important nutrients in dairy rations, estimate break-even prices of ingredients, and identify feedstuffs that are significantly underpriced as of September 22, 2019. 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.  

Overall, commodity prices are starting to go down as crops are beginning to be harvested. The daily cost of feeding cows has also gone down slightly ($5.93 vs. $5.64/cow/day). This is mainly because the cost of NEL has gone down and is 27% lower than July (11¢/Mcal). The price of e-NDF is not very different from July (12¢/lb), whereas the costs of MP and ne-NDF have increased around 6 and 4¢/lb, respectively. In the near future, I would suggest producers and their nutritionist start locking in low prices on commodities and reformulating rations to enable feeding bargain feedstuffs in the long term.

In this issue, I also calculated a new corn silage price for the 2019 growing year: $48.26/ton (35% dry matter). This price is about 8% higher than the 2018 growing year ($44.60/ton) but is still a bargain compared to other common ingredients. The price I calculated is based on the crop value as if it was harvested for corn grain rather than silage. Because corn silage is dual purpose and provides marked amounts of both NEL and e-NDF for dairy cows, the true value of corn silage to the producer should actually be around $80.56/ton, about 40% higher than my calculation. However, corn silage quality varies considerably based on location (e.g. weather and growing conditions), harvesting and storage conditions, or practices as well as the corn hybrid planted. Using the 75% confidence intervals defined in Table 2 are better predictors of what corn silage may actually be worth to producers when accounting for this real world variability. The intervals, however, still do not contain the calculated value based off corn grain (i.e., the $48.26/ton estimate). Bottom line, corn silage should be a no brainer for making up the majority of the forage component for rations during the upcoming year, but only if you have stored enough – running out of corn silage in August will be a huge financial burden.

To estimate profitability at these nutrient prices, the Cow-Jones Index was used for average US cows weighing 1500 lb and producing milk with 3.7% fat and 3.1% protein. For September’s issue, the income over nutrient cost (IONC) for cows milking 70 lb/day and 85 lb/day cows is about $11.00 and $11.47/cwt, respectively. This is almost $2.00/cwt more than estimates from July ($9.17 and $9.67/cwt, respectively) and should be profitable for Ohio dairy farmers. As a word of caution, these estimates of IONC do not account for the cost of replacements or dry cows.

Table 1. Prices of dairy nutrients for Ohio dairy farms, September 22, 2019.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on September 22, 2019 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, September 22, 2019.

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 based on current nutrient values, 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 value) 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, September 22, 2019.

Bargains At Breakeven Overpriced
Corn, ground,dry Bakery byproducts Alfalfa hay - 40% NDF
Corn silage Beet pulp Blood meal
Distillers dried grains Gluten meal Citrus pulp
Feather meal Soybean hulls 41% Cottonseed meal
Gluten feed 48% Soybean meal Fish meal
Mechanically extracted canola meal
Hominy Soybean meal - expeller Molasses
Meat meal Whole cottonseed Solvent extracted canola meal
Wheat middlings Wheat bran 44% Soybean meal
    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 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, September 22, 2019.