Grain Price Drop Boosts Dairy Profit Margins
Source: The DairyNews
In the agricultural sector, declining grain prices are providing a financial reprieve for dairy producers by reducing feed costs, a significant expenditure that can account for up to 50% of gross income on dairy farms.
This trend is injecting a dose of optimism into the dairy industry during a period marked by broader economic challenges across other agricultural sectors.
Gary Sipiorski, an independent dairy financial consultant, highlighted the substantial impact of feed costs on dairy operations, noting that these expenses vary significantly depending on whether the feed is purchased or produced on the farm. "Feed is the biggest cost for a dairy, and managing this cost is crucial for maintaining profitability," Sipiorski explained.
Phil Plourd, president of Ever.Ag Insights, provided a broader economic perspective, indicating that the convergence of lower feed costs and high milk futures is creating some of the best profit margins seen in the past two years. "While these figures are promising on paper, the reality on the ground can vary, and it remains to be seen whether these conditions will persist," Plourd noted.
Jay Matthews, vice president of the feed and dairy producer division at Ever.Ag, echoed this positive sentiment, advising dairy producers to take advantage of the current conditions. "Dairies should secure their feed supplies now, particularly with hedges on new crop purchases, to capitalize on favorable pricing and protect against potential market shifts," Matthews advised.
Monica Ganely, an analyst with the Daily Dairy Report and founder of Quarterra, provided data supporting the trend of decreasing feed costs. "Feed costs in May were nearly $3 per cwt lower than last year, marking the lowest level since 2021," Ganely reported. This drop in feed prices is helping to offset other rising costs and supports healthier profit margins for dairy producers.
Despite the current favorable conditions, experts warn against complacency. Matthews highlighted the risks posed by unpredictable weather and market fluctuations that could reverse these gains. "Producers need to stay vigilant and prepared for any shifts that could impact feed costs or milk prices," he cautioned.
Gary Sipiorski, an independent dairy financial consultant, highlighted the substantial impact of feed costs on dairy operations, noting that these expenses vary significantly depending on whether the feed is purchased or produced on the farm. "Feed is the biggest cost for a dairy, and managing this cost is crucial for maintaining profitability," Sipiorski explained.
Phil Plourd, president of Ever.Ag Insights, provided a broader economic perspective, indicating that the convergence of lower feed costs and high milk futures is creating some of the best profit margins seen in the past two years. "While these figures are promising on paper, the reality on the ground can vary, and it remains to be seen whether these conditions will persist," Plourd noted.
Jay Matthews, vice president of the feed and dairy producer division at Ever.Ag, echoed this positive sentiment, advising dairy producers to take advantage of the current conditions. "Dairies should secure their feed supplies now, particularly with hedges on new crop purchases, to capitalize on favorable pricing and protect against potential market shifts," Matthews advised.
Monica Ganely, an analyst with the Daily Dairy Report and founder of Quarterra, provided data supporting the trend of decreasing feed costs. "Feed costs in May were nearly $3 per cwt lower than last year, marking the lowest level since 2021," Ganely reported. This drop in feed prices is helping to offset other rising costs and supports healthier profit margins for dairy producers.
Despite the current favorable conditions, experts warn against complacency. Matthews highlighted the risks posed by unpredictable weather and market fluctuations that could reverse these gains. "Producers need to stay vigilant and prepared for any shifts that could impact feed costs or milk prices," he cautioned.
