Stable Nutrient Costs and Income for September

Dr. Normand St-Pierre, Dairy Management Specialist, The Ohio State University (top of page)

We have had a few ups and downs in the feed commodity markets this summer, but in all, there hasn't been much excitement one way or another. The effect of Katrina on feed prices, especially in the cottonseed complex, is still very speculative.

Milk prices have been amazingly resilient to substantial increases in supply. We must remember, however, that statistics on changes in milk supply use the prior year as the base. At this time last year, milk supply was lagging that of the prior year (2003). Thus, the current national supply is just slightly above where it was two years ago. In addition, there have been substantial changes in the structure of the U.S. dairy industry lately, enough so that old price benchmarks may not be appropriate anymore. There will be more about this in the December issue of Buckeye Dairy News.

Prices of nutrients, as calculated by Sesame using early September, prices are reported in Table 1. Overall, the price of net energy has gone DOWN during the last two months. Prices for fats and high fat byproducts have generally been trading lower, thus driving the cost of a unit of energy down. Digestible, rumen undegradable protein prices have been going up through the last 12 months, mostly reflecting changes in the marketing of animal protein products. Prices of effective and non-effective fibers are relatively stable and close to historical averages.

Based on wholesale prices in central Ohio, feed commodities can be partitioned into three groups in mid-September 2005 as shown in Table 2. A more detailed analysis of break-even prices is presented in Table 3.

Table 1. Prices of nutrients, central Ohio.

Table 2. Groupings of commodities, Central Ohio, September 2005.

Table 3. Commodity assessment, Central Ohio, September 2005.

Using published milk prices for August 2005 in combination with the calculated costs of nutrients reported previously and known nutritional requirements, we can calculate the cost of providing the necessary nutrients to support the production of 75 lb/cow/day of standardized milk. Results from these calculations are reported in Table 4. Both July and September results are substantially greater than the historical average of about $6.00/cow/day. Thus, profitability of Ohio dairy farms should still be good and above historical average.

Table 4. Nutrient costs and income over nutrient costs, Central Ohio.¹

¹Costs and income for a 1400 lb cow producing 75 lb/day of milk, with 3.6% fat, 3.1% protein, and 5.9% other solids. Component prices are for Federal Order 33, August 2005.
²NE_L = Net energy for lactation, RDP = rumen degradable protein, RUP = rumen undegradable protein, ne-NDF = noneffective neutral detergent fiber, and e-NDF = effective neutral effective fiber.