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"Record-high milk prices more than offset increased costs,
resulting in total returns for dairy producers exceeding total
economic costs in 2004," said Dale Lattz, U of I Extension farm
management specialist who did the study. "The average net price
received per 100 pounds of milk in 2004 was $16.37, which was
more than the total costs of $15.30. "On a per-cow basis,
total returns from milk were $3,189, compared to the total cost
to produce milk of $2,980 per cow."
Lattz noted that in three of the last five years total costs
have exceeded total returns. Only four times in the past 10
years have total returns exceeded total economic costs.
The study was prepared from data generated by the Farm
Business Farm Management Association throughout Illinois. The
complete report can be found online at
http://www.farmdoc.uiuc.edu/manage/
enterprisecost_index.html. Click on the report titled
"Costs
to Produce Milk in Illinois."
[To download Adobe Acrobat Reader for the PDF
file, click here.]
Illinois dairy cows were also more productive in 2004,
according to the study.
"Milk production per cow averaged 19,480 pounds," said Lattz.
"This average is 127 pounds more per cow than in 2003. It was
the third-highest level ever. The highest was in 2001, when milk
production was 20,175 pounds per cow."
The 2004 returns were higher than the 2003 returns by $2.48
per 100 pounds produced, due to higher milk prices. The average
net price received for milk was $16.37 per 100 pounds. This is
$3.86 per 100 pounds, or 31 percent, higher than the average
price received in 2003.
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"Based on 19,500 pounds of milk produced per cow, this increase in
price increased total returns per cow by $753," said Lattz. "Dairy
assistance payments from the Farm Service Agency and patronage
returns related to the dairy enterprise were not included in our
figures. This would add about 55 cents per 100 pounds of milk
produced to returns."
The higher milk prices were essential because producers also
faced increased feed and nonfeed costs for their enterprises. Feed
costs in 2004 averaged $7.61 per 100 pounds of milk produced in
2004, compared with $6.95 in 2003. Nonfeed costs per 100 pounds of
milk produced were $7.69 in 2004, compared with $6.97 in 2003.
"Profit margins for dairy producers in 2005 should remain in the
black," said Lattz. "Lower milk prices should be offset by lower
feed costs.
"The average price received for milk in 2004 was 31 percent
higher than the average in 2003. The average milk price for 2005 is
projected to be about 4 to 5 percent less, or a little under $1 per
hundredweight, than the average for 2004."
Lattz noted that while milk prices should decrease, feed costs
should also be lower than in 2004.
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences]
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