Tip of the Month
September 2007
(Archive)

Tracking Milk Prices and Feed Costs

by Kenneth Bailey, Associate Professor in the Department of Agricultural Economics and Rural Sociology, and Virginia Ishler, Nutrient Management Specialist and Manager of the Penn State Dairy Farm

IOFC (income over feed costs), which is measured in dollars per cow per day, is shown in this 6-page (PDF format) article to be superior to USDA's milk-feed ratio in times of rising feed costs. It is more apparent what is being measured when using IOFC so milk producers will better understand this estimate. Also, it is a better measure to use for management purposes since milk producers can track their monthly measure of IOFC and compute monthly averages, develop plans and budgets, and manage their operations to hit these monthly targets. IOFC can also be used in conjunction with the futures markets to help milk producers make better decisions regarding when to lock in milk prices and feed costs.

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Tracking Prices and Costs continued