Milk-Feed Ratio: Lowest Since June 2009

US - The preliminary April 2012 Milk-feed Price Ratio is 1.45 according to USDA’s Agricultural Prices report released this afternoon, reports Daily Dairy Report.
calendar icon 1 May 2012
clock icon 2 minute read

The Milk-feed Ratio reflects the purchasing power of one pound of milk. In other words, one pound of milk can buy 1.45 pounds of 16% protein dairy feed. This is the lowest Milk-feed Ratio since June 2009, when dairy farm profitability hit rock bottom. Key factors in the ratio include: the All Milk Price at $16.90, down 30¢ from the prior month; prices received for corn $6.14/bu. down 21¢; soybeans $13.80/bu. up 80¢; and alfalfa at $207/ton, $7 higher.

Attendees at the 2012 ADPI & ABI Annual Conference, held in Chicago this week, listened to Tim Hunt, Global Dairy Strategist for Rabobank International, Mark Russo, Meteorologist, Chesapeake Energy Corporation and Stephen Nicholson, Commodity Procurement Specialists/Economist for International Food Products present key economic drivers in the dairy industry for 2012.

Russo and Nicholson agreed that current weather conditions could provide for a favorable U.S. corn harvest and hence lower prices during the second half of 2012. However, market participants should be aware that extreme heat during pollination and continued demand from China could be two factors that buoy the corn market. Tim Hunt compared the current milk supply/demand relationship to fitting a watermelon into a pipeline. Hunt points out that milk checks received by dairy producers outside the United States have yet to transmit lower global dairy product prices. In some markets, a 15% to 20% decrease is expected in the second half the year. “Medium term price recovery is a question of when not if,” stated Hunt. In closing, he noted a third quarter Class III price estimate of $15.67 followed by a fourth quarter estimate of $17.83/cwt.

The CME spot barrel cheese price closed down 0.75¢ after four trades from $1.4350/lb. down to $1.4275/lb. The block market settled unchanged at $1.5350/lb. with no trading activity. The spot butter market was offered 0.5¢ lower and closed at$1.3550/lb. NDM closed unchanged after no trading activity at $1.1475/lb. and $1.1075/lb., respectively.

Further Reading

- You can view the full report by clicking here.

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