Swimming in milk, drowning in red ink south of border

Tuesday, March 3, 2009

Ontario's producers can't supply enough milk and, unless trends change, won't meet their targets for matching supply to demand this year. Poor quality feed harvested during last year's rainy summer gets blamed.

But, on the other side of the border the opposite is true. There's way more milk than producers can sell and the price has dropped like a stone. According to U.S.Department of Agriculture reports at the end of January, the all-milk price of $13.80 per hundredweight for January was down nearly a third from $20.50 a year before. The ratio of the cost of feed to the price of milk is 1.65 to one, the lowest it has been since recording of this sign of profitability began in 1985, according to Dairy Herd Management magazine.

When the ratio is 3:1 it makes financial sense to buy feed to make milk, so profitability, at current soybean prices, is a long way off. BF