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 September and October were at $17.48 and $17.82/cwt, respectively. The Class III component price for September closed about $0.80/cwt higher at $18.31/cwt and was slightly higher in October at $18.72/cwt. The Class III future for November is similar to September component prices at $18.44/cwt, followed by a $2.20/cwt jump to $20.68/cwt in December. Right now, milk prices are really good in comparison to the beginning of the year (January 2019 Class III price: $13.96/cwt).

Currently, the Chicago Mercantile Exchange (CME) Class III future prices have been trading in the $17 to 18/cwt range. Milk prices in Ohio should average within this range or slightly higher for the beginning of 2020. This is because national demand for cheese and the price of milk protein continues to increase. Global demand for nonfat dry milk is also expected to pick up in the near future, which should drive milk prices even further. Lastly, although USDA projects total milk production for 2019 to be about the same or slightly higher than 2018, this may not be true given the 2019 forage crisis. I am predicting that the lower than average forage quality will probably hamper milk production, and the Class III milk price will average $18 to 19/cwt until spring of 2020. Regardless, these higher milk prices should allow producers an opportunity to pay off some long-term debt or contract feed for 2020.     

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 November 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.  

Currently, the daily nutrient cost of feeding cows ($6.00/cow/day) has also gone up about $0.40/cow/day since the last issue (September $5.64/cow/day). This is primarily because the cost of MP has gone up since the last issue (September $0.30/lb) but is still much lower than the 5-year average for MP ($0.43/lb). The price of NEL is down around 2¢/Mcal since September and its 5-year average ($0.084/Mcal). The price of e-NDF is not very different from September (12.7¢/lb), whereas ne-NDF has increased around 6¢/lb. The e-NDF and ne-NDF prices are both about 5¢/lb more than their 5-year averages and are reflecting the challenges of growing forage for the 2019 growing year.

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 November’s issue, the income over nutrient cost (IONC) for cows milking 70 lb/day and 85 lb/day cows is about $12.66 and $13.11/cwt, respectively. This is over a $1.60/cwt greater than estimates from July ($11.00 and $11.47/cwt, respectively). Although overall cost to feed cows has gone up slightly, higher milk prices are still increasing IONC. The current IONC should also be very 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, November 22, 2019.

Economic Value of Feeds

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

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