Negative Economic Profit Margins for Dairy Producers in 2015, Likely to Continue Negative Trend in 2016

Lower milk prices resulted in negative economic returns for Illinois dairy producers in 2015, according to figures summarized by University of Illinois agricultural economists in cooperation with the Illinois Farm Business Farm Management Association.  The average net price received per 100 pounds of milk was $17.35, which was less than total economic costs of $19.17. The price received for milk in 2015 was the lowest since 2010. On a per cow basis, total returns from milk were $4,053 compared to the total cost to produce milk of $4,463 per cow. Total returns from milk per cow were the lowest since 2010 after 2014 being the highest on record at $5,730. The net returns per cow in 2015 were a negative $410. Total returns have exceeded total economic costs two out of the last ten years.  Milk production per cow for all herds averaged 23,355 pounds. The average was 627 pounds more per cow than in 2014. This is the highest level in milk production per cow. Trends in total costs and returns per cow for all herds are given from 2006 to 2015 in Figure 1. The profit margin (return above all cost) decreased-- from $662 in 2014 to negative $410 per cow in 2015. The last five-year returns above all costs has averaged a negative $320 per cow. During this period, returns above all costs per cow have varied from a negative $935 in 2012 to $662 in 2014. 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.