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| Jason's reply below sums up a lot of what I am hearing out in the countryside. Also, from Dairy Herd Management-
Yikes! It’s never been this low
By Dairy Herd staff | Friday, January 30, 2009
The milk-feed price ratio in January was the worst it’s ever been since the USDA began using the profitability measure in 1985.
According to the Jan. 30 “Agricultural Prices” report, the January ratio was 1.69. A year ago, it was 2.65, indicating higher profitability.
The retraction is the result of lower milk prices. The all-milk price of $13.80 for January is down $1.80 versus December and nearly 33 percent lower than a year ago when it was $20.50.
Feed prices used to calculate the ratio increased, except for baled alfalfa hay. The cost per ton of baled alfalfa hay fell $6 to $149. Meanwhile, the corn price rose five cents to $4.15 per bushel. That also is 17 cents higher than a year ago.
The price of soybeans increased from $9.24 to $9.92 per bushel — a 68-cent gain. One year ago, soybeans were $9.95 per bushel.
A ratio of 1.69 means that a dairy producer can buy 1.69 pounds of feed for every pound of milk sold. Whenever the ratio meets or exceeds 3.0, it is considered profitable to buy feed and produce milk.
Source: USDA
It seems to me that the sudden drop in pay price is what is hurting the most. Also, in the last year I have been hearing about cost of production in the $16.50 to $17 range. Cost per pound of dry matter fed is anywhere from $.10 - $.13.
I am hoping that the economists are correct that this is an over correction in the market and the industry will be out of this in 6-8 months. I just hope that is soon enough!
Just my observations...
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Milk price question
