Milk to feed price ratio finally starting to rise

Published 19 October 16

Comparing feed prices to milk prices is another tool to indicate the financial pressures on farm. Feed costs typically account for between 30% and 40% of the total cost of production. The lower the ratio, the more difficult it will be for farmers to cover their cash costs and, in particular, feed costs with returns for milk.

Over the last 5 years, the ratio of farmgate milk price# to feed price* has averaged 1.06. Since early 2015, the ratio has been running below 1, mainly off the back of falling farmgate milk prices. The ratio hit its lowest level in at least 15 years of just 0.82 in June 2016, but has lifted slightly since this date.

The lift has been achieved from higher farmgate prices, while feed prices remained relatively stable up until August. Defra has not yet released the September farmgate milk price. However, dairy feed prices did increase by 4% between August and September, so farmgate prices will need to lift by more than this amount to ensure the ratio continues to improve.

Feed to milk price ratio

Notes:

Feed prices are normally one of the key on-farm costs, although the level will vary greatly from farm to farm. As such, the ratio should only be used as a guide to on-farm economics.

# Based on the Defra average GB farmgate milk price in ppl, adjusted to exclude retrospective bonuses and aligned contracts.

* Based on the average price of Farm Brief’s Intensive energy dairy feed in pence per kg.