How will high feed prices impact milk production this year?

By Kat Jack and Chris Gooderham

Feed prices have been on the climb for most of this season, putting pressure on farm finances, but what impact are they likely to have on milk production?

High feed prices on their own aren’t necessarily a problem, provided farmers can afford them. What’s more important is feed prices relative to milk prices – which we calculate in the Milk to Feed Price Ratio (MFPR).

Historically, we have seen that extreme levels of the MFPR correspond with a reaction in milk production. In other words, farmers make changes to their herd size or yield goals based on the financial situation. For example, when the MFPR hit a low in 2016, milk production reduced. When the MFPR then peaked in 2017 and 2018, we saw production increase.

The relationship isn’t always clear though, because there are numerous other factors influencing milk production. Over the last three years, the MFPR has remained relatively stable, predominantly between 1.16 and 1.30, and milk production has also remained relatively stable. It is when the MFPR goes outside these boundaries that we see an impact on milk production.

At the recent Milk Forecasting Forum, we looked at the factors driving feed production and demand. The general expectation was that feed prices would continue to increase in the short term, pushing the MFPR down. Our latest estimate would put the MFPR at 1.16 in February, at the bottom of the “stable zone” that we’ve seen since 2018. Any further increase in feed prices would drop the MFPR into the “contraction zone” where milk production historically has been impacted. For every further £10 per tonne increase in feed prices, milk prices would need to rise by 1ppl in order to prevent the MFPR from dropping into that zone.

Global commodity prices have been moving upwards since the start of 2021, and if these flow through into milk prices, it may be enough to offset any future feed price increases. If not, then, based on historic relationships, we can expect some downward pressure on milk production later in the year.

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