Feed Costs Squeeze Dairies Again

January 11, 2012 10:40 PM

With high forage costs and grain prices threatening profit margins for dairy producers, a Purdue Extension agricultural economist says it’s important to keep an eye on the bottom line.

"Despite higher milk prices, rising feed costs have caused a decline in the milk-to-feed price ratio," says Nicole Olynk.

Part of the challenge for dairies has been high corn and soybean prices. Another major factor in dairy feed ration costs has been rapidly rising prices of hay and other forages, Olynk says. Prices have continued to rise into the fall and winter and average $203 per ton for alfalfa.

"Dairy farms better able to control their own feed production—specifically forage production—may be best positioned to survive the feed prices," Olynk says.

In the coming year, she says, there are several reasons for producers to be both optimistic and cautious. Milk production is expected to increase by about 1.4% per cow, which means a higher milk supply, but which can also mean lower prices.

Another area dairy producers should keep an eye on is farm policy. There have been several proposals for dairy pricing reform in Congress, which, Olynk says, have generated much discussion about supply management, margin protection and Federal Order reform.

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