Despite milk production at or near record levels, low milk prices and high input costs – including feed costs – have kept dairy profit margins narrow, says Lamar Adams, Mississippi State University (MSU) Extension dairy cattle specialist.

Milk prices are down about 21% from record-high levels in 2011, he says. “Many market analysts say domestic and global market conditions are positioned to continue placing downward pressure on milk prices and dairy farm profitability for the remainder of 2012 and into 2013.”

Mississippi dairy farmers receive about $17.50/cwt, or $1.51/gallon, for milk. In 2011, they took home $22.09/cwt, or $1.90/gallon. Only 109 dairies exist in the state, down from 178 in 2007.

Feed costs are a large part of milk’s production cost, agrees Rocky Lemus, MSU Extension forage specialist. “Mild winter weather allowed pastures to maintain a more uniform forage production of annual ryegrass, which shortened the feeding cycle. On the other hand, warmer days and cooler nights made bermudagrass grow, but it has a very low yield with early seed heading and reduced forage quality.”

A competition between aggressively growing annual ryegrass and warm-season grasses breaking dormancy was also triggered. Corn demand for ethanol production is driving feed prices, while high fertilizer prices are driving forage production costs, Lemus says.

“Fertilization accounts for nearly half of the expense of making hay. Dairy producers, like any other hay producers, need to adopt strategic fertilizer practices to reduce inputs.”