For the average Illinois dairy producer, 2004 was one of the best years for profits in the past 20, according to a University of Illinois Extension study. The returns producers received per cow were the second highest in the last two decades.
"Record high milk prices more than offset increased costs resulting in total returns for dairy producers exceeding total economic costs in 2004," says 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."
The study was prepared from data generated by the Farm Business Farm Management Association (FBFM) throughout Illinois. The complete report can be found online at "Costs to Produce Milk in Illinois."
Illinois dairy cows were also more productive in 2004, according to the study. "Milk production per cow averaged 19,480 pounds," says 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 $2.48 per 100 pounds produced higher than the 2003 returns 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%, higher than the average price received in 2003.
"Based on 19,500 pounds of milk produced per cow, this increase in price increased total returns per cow by $753," says 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 non-feed costs for their enterprises. Feed costs in 2004 averaged $7.61 per 100 pounds of milk produced in 2004 compared to $6.95 in 2003. Non-feed costs per 100 pounds of milk produced were $7.69 in 2004 compared to $6.97 in 2003.
"Profit margins for dairy producers in 2005 should remain in the black," says Lattz. "Lower milk prices should be offset by lower feed costs. The average price received for milk in 2004 was 31% higher than the average in 2003. The average milk price for 2005 is projected to be about 4 to 5% less, or a little under $1 per hundredweight, than the average for 2004."
Lattz notes that while milk prices should decrease, feed costs should also be lower than in 2004.