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

April Frye White, Graduate Research Associate, Department of Animal Sciences, The Ohio State University

Milk prices

In the last issue, the Class III futures for May and June were at $12.22 and $17.52/cwt, respectively. The Class III component price for May closed just slightly lower than predicted at $12.14/cwt but closed $9/cwt higher in June at $21.04/cwt. The Federal milk order price for protein in June was $4.53/lb, leading to a higher Class III milk price. The Class III future for July is nearly double that of May at $24.23/cwt, followed by $22.84/cwt in August.

Nutrient prices

When comparing the prices in Table 1 to the 5-year averages, the current prices of nutrients are good. The price of NE_L is about 40% lower than the 5 yr. average ($0.08/Mcal). However, the price of MP and eNDF are about 1 and 64% higher compared to the 5-year averages ($0.42/lb and $0.08/lb, respectively). The price of MP is about 8% lower than May ($0.47/lb), but the price of NE_L and eNDF are both 14% and 8% higher than the last issue ($0.04/Mcal and $0.12/lb, respectively). Feed prices are shown in Table 2.

To estimate profitability at these nutrient prices, the Cow-Jones Index was used for average US cows weighing 1500 lb and producing milk with 3.9% fat and 3.2% protein. For July’s issue, the income over nutrient cost (IONC) for cows milking 70 and 85 lb/day is about $15.97 and $16.39/cwt, respectively. This is more than double the estimates from May ($7.13 and $7.56/cwt, respectively). The current IONC is likely to be profitable for Ohio dairy farmers and are reflective of the current high price for milk protein. As a word of caution, these estimates of IONC do not account for the cost of replacements or dry cows, for profitability changes related to culling cows, and the actual mailbox milk price received by dairy producers. Continued lower feed prices may provide some opportunity to recover from recent months.

Table 1. Prices of dairy nutrients for Ohio dairy farms, July 23, 2020.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on July 23, 2020 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 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.

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, July 23, 2020.

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 NE_L and MP contents.