Illinois Ag Economist Reports Costs And Returns To Dairy Producers

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Source: University of Illinois, Bradley Zwilling, Illinois FBFM Association and Department of Agricultural and Consumer Economics

Higher costs coupled with higher milk prices resulted in positive cash returns but continued negative economic returns for Illinois dairy producers in 2022, according to figures summarized by the Illinois Farm Business Farm Management Association.

The average net price received per 100 pounds of milk was $25.36, which was less than total economic costs of $26.49, but still higher than feed and cash operating costs of $21.14. The price received for milk in 2022 was $6.07 higher than 2021. On a per cow basis, total returns from milk were $6,376 compared to the total cost to produce milk of $6,589 per cow. Total returns from milk per cow increased from 2021. The net returns per cow in 2022 were a negative $213. Total returns have exceeded total economic costs only once out of the last ten years. During that same time period, total returns have exceeded feed and cash operating costs.

Milk production per cow for all herds averaged 25,085 pounds. The average was 1,355 pounds more per cow than in 2021.

Costs and Returns

Trends in total costs and returns per cow for all herds are given from 2013 to 2022 in Figure 1. The economic profit margin (return above all cost) decreased– from a negative $1,021 in 2021 to negative $213 per cow in 2022. The last five-year returns above all costs have averaged a negative $684 per cow. During this period, returns above all costs per cow have varied from negative $213 in 2022 to negative $1,021 in 2021. In Figure 1, labor and interest charges are included in total costs only. Most dairy producers will incur hired labor and cash interest expense and would include them as cash operating costs.

The 2022 economic returns were $3.24 per 100 pounds produced less than the 2021 returns. The average net price received for milk was $25.36 per 100 pounds. This is $6.07 per 100 pounds or thirty-one percent higher than the average price received in 2021. Based on 25,085 pounds of milk produced per cow, this increase in price increased total returns per cow by $1,523. The average net price received for milk for the last five-year period is $19.59 per hundred pounds. Dairy assistance and patronage returns related to the dairy enterprise would add about 39 cents per 100 pounds of milk produced to returns in 2022.

While the price received increased, so did feed and nonfeed costs per 100 pounds of milk. Feed costs in 2022 averaged $14.68 per 100 pounds of milk produced as compared to $13.43 in 2021. In 2022, feed costs were at their highest level ever. The 2022 feed costs were $2.50 above the last five-year average of $12.18. Feed costs were about 55 percent of the total economic cost to produce milk. Nonfeed costs per 100 pounds of milk produced were $11.81 in 2022 compared to $10.24 in 2021. Total nonfeed costs were the highest recorded in 2022.

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