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Virginia Cooperative Extension - Knowledge for the CommonWealth

Milk:Feed Price Ratio says it all

Dairy Pipeline: October 2002

Charles C. Stallings
Extension Dairy Scientist, Nutrition

USDA agricultural economists calculate and report a term called milk to feed price ratio. It is designed to reflect the price of milk relative to the price of feed. To calculate it they take the price of a pound of milk divided by the price of a pound of a 16% protein ration composed of corn, soybean meal, and alfalfa hay. We see significant changes in milk production when this ratio gets out of typical proportions. Typically a ratio of 2.5 to 3.0 results in no change in national milk production. The estimated ratio for August 2002 was 2.2 compared with 3.0 in January 2002 and 3.6 in August 2001. Two factors are causing this current drop. One is low milk price and the other is higher feed prices. These ratios are reported on a national basis and reflect much of what is the case in the mid-west. Currently I calculate the price of a ration would be about $.06/lb. of air-dry feed based on cost of Virginia feed ingredients. For the milk:feed ratio to be 2.5 to 3.0 a Virginia milk price of $.15 to .18 would be needed. For accurate estimation of milk price the MILC (Market Income Loss Contract) payments should be added in and may increase the received milk price by 8% or more. What does this mean? First, it means we will likely have less cows and milk in 2003 hopefully returning the situation to a positive situation for dairy producers. Next, it is not possible to project the price of feeds because harvest is not complete but the assumption would be prices will remain higher. We can't do much with the price of milk but we can evaluate rations and reduce over feeding of all animals including replacements. Balancing rations with up to date forage tests will return more now than when feeds are cheap. My experience has been that we many times over supplement rations with protein and phosphorus resulting in excess nutrients to dispose of. Now is a good time to evaluate your feeding programs for those and other nutrients.

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