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

Alex Tebbe  and April Frye, Graduate Research Associates, Department of Animal Sciences, The Ohio State University

Passing the Torch

It seems like yesterday that Dr. St-Pierre was teaching me (Alex Tebbe) how to interpret milk prices and use the SESAME software. Now, after nearly five years of writing this article, I must step down as my days are numbered, and I will soon be graduating. I have thoroughly enjoyed writing these articles, but I must pass the torch to April Frye, another bright and ambitious graduate student at The Ohio State University. Currently, April is working on her MS with Dr. Luis Moraes and has plans to continue her PhD in the Department of Animal Sciences. Because of April’s strong dairy background and prior experience working with feed prices, I know she is a great fit for sustaining this section of the Buckeye Dairy News. I will be excited to sit on the other side of the desk and read what April writes.

Milk Prices

In the last issue, the Class III futures for November and December were at $18.44 and $20.68/cwt, respectively. The Class III component price for November closed about $2/cwt higher at $20.45/cwt and was slightly lower in December at $19.37/cwt. The Class III future for January is slightly higher than December component prices at $19.91/cwt, followed by a nearly $3/cwt drop to $17.01/cwt in February.

Unfortunately, the $19 to 20/cwt Class III prices that we have seen the past 3 months probably will not last long. The higher than normal prices are primarily from a recent surge in exports as cheese and skim milk powder. This surge, however, has begun to tamper out. This is reflected in the lower Class III futures price. From now to deep into the late summer months, Class III futures are trading at around $17.50/cwt. The USDA has also projected a similar Class III price for 2020. Given no drastic changes in current tariffs or trade agreements, $17.50/cwt is probably an accurate estimate for all of 2020. If the Class III price stays between $17 to 18/cwt, producers should be able to make a profit but definitely not a fortune.

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 January 27, 2020. 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. 

When comparing the prices in Table 1 to 5 year averages, the current prices of nutrients are pretty good. For NEL and MP, they are both about 15% and 18% lower compared to the 5 yr. averages ($0.08/Mcal and $0.43/lb), respectively. However, the price of e-NDF is about 20% higher compared to the five-year average. This is, of course, from the difficultly in growing forages in Ohio during 2019. The net effect of decreased NEL and MP, and increased e-NDF is about a 5% reduction on overall feed cost compared to the 5 yr average ($0.109 vs $0.115/lb of dry matter).

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 January’s issue, the income over nutrient cost (IONC) for cows milking 70 lb/day and 85 lb/day is about $13.39 and $13.83/cwt, respectively. This is over $0.75/cwt more than estimates from November ($12.66 and $13.11/cwt, respectively). As a word of caution, these estimates of IONC do not account for the cost of replacements or dry cows. Overall, the above average milk prices and stagnant to low feed prices should be profitable, and they should give producers a chance to pay off debt or contract feed for 2020.

Table 1. Prices of dairy nutrients for Ohio dairy farms, January 27, 2020.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on January 27, 2020 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, January 27, 2020.

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, January 27, 2020.

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

Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, January 27, 2020.