Down slightly from 2007, 2008 milk prices and gross income per cow were still strong. But higher costs reduced net income, and the year ended on a downslide, portending a rough first half of 2009.
By Dave Natzke
It’ll be hard to classify 2008 as the “good old days,” but on the gross income side of the ledger, it wasn’t bad.
Using USDA’s monthly milk production and price estimates, DairyBusiness Communications editors calculated the “average” gross income from milk sales generated annually by an “average” cow, based on “average” production and “average” all-milk price, by state (see Table 1).
The “average” U.S. cow produced 20,396 lbs. of milk in 2008, up from 20,204 lbs. in 2007. USDA’s preliminary 2008 all-milk price was $18.32/cwt., down 81¢/cwt from 2007. The result: a $128 decline in gross income per cow, with an estimated $3,737 generated in milk sales in 2008, compared to $3,865 in 2007.
Net income will take a bigger hit. USDA’s monthly Cost of Production report indicates costs for all feed (purchased and homegrown for all cows and replacements) in 23 states increased about $2.89/cwt. of milk sold in 2008 compared to 2007.
How does 2008 gross income compare to other years? Average gross income per cow was $2,574 in 2006; $2,976 in 2005; and $3,050 in 2004.
“Averages” tend to level out peaks and valleys, but individual state information provides some remarkable disparity. For example, among the 23 major dairy states, there’s more than a $1,530 spread between the state with the lowest gross milk income per cow in 2008 (Kentucky, at $2,693) compared to the highest (Michigan, at $4,223).
Looking ahead to 2009, milk production per cow should remain fairly steady, but USDA’s all-milk price forecast (as of Feb. 17) is in a range of just $10.95-$11.85/cwt., although Chicago Mercantile Exchange Class III futures prices are somewhat higher. Thus, 2009 average gross income per cow could drop below $2,500. Milk Income Loss Contract program payments will offset some of the decline.