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Projected Positive Economic Profit Margins for Dairy Producers in 2017 After Continued Negative Margins in 2016

Lower milk prices resulted in continued negative economic returns for Illinois dairy producers in 2016, 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 $16.28, which was less than total economic costs of $18.14. The price received for milk in 2016 was the lowest since 2010. On a per cow basis, total returns from milk were $3,895 compared to the total cost to produce milk of $4,332 per cow. Total returns from milk per cow were the lowest since 2010. 2014 was the highest on record at $5,730. The net returns per cow in 2016 were a negative $437. Total returns have exceeded total economic costs two out of the last ten years.Milk production per cow for all herds averaged 23,959 pounds. The average was 604 pounds more per cow than in 2015. This is the highest level in milk production per cow.Trends in total costs and returns per cow for all herds are given from 2007 to 2016 in Figure 1. The profit margin (return above all cost) decreased-- from a negative $410 in 2015 to negative $437 per cow in 2016. The last five-year returns above all costs has averaged a negative $364 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.

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