Even assuming that retail milk prices were determined by the dairyman's cost of production (they aren't), the influence of the price of corn would be minimal. A Holstein dairy cow will produce about 8 gallons of milk per day. A $.50 increase in the cost of corn translates into an average increase in the cost of a lactating cow's daily feed ration of about $.15, or $.02 per gallon (and even that assumes the dairyman has no ability to substitute other ingredients such as ddg's in the ration).
Go look at the CBT charts and rethink your position...
As a farmer who sells feed (high-test alfalfa hay) to California dairies, here’s the secret of what causes milk prices to go up/down the most:
The numbers of fresh cows in milking parlors. Period, end of discussion. Feed prices aren’t the driving factor.
When the dairymen control the number of springers they’re going to bring on-line, they can keep milk prices high.
When the dairymen see high milk prices, they start raising a lot of heifers to add to their lines, and when those heifers drop, then they crater milk prices, usually within three to six months.
It’s the old saying: Show the American farmer a profit, and he’ll rather quickly show you a surplus.
Milk prices have been higher than they are now very recently. Matter of fact, it was only back in 2002/2003 that Class I milk was up at over $19/cwt in the CA market.
The price then promptly crashed downwards to about $10 to $11/cwt for 18 months, because too many dairy farmers expanded cow numbers too fast.
Last summer’s heat wave took out quite a few cows in the southwest, so dairy prices started going back up. The dairy co-ops started encouraging farmers to not replace milkers as they were culled in the last year, so they’ve re-established some profitable price levels for fluid Class I and Class III milk.
The price of the feed going into the TMR rations for milkers is a very small component of any increase in milk prices. Matter of fact, I can tell you what happens when there is an abundance of milk (and low fluid milk prices) and dent corn or corn silage prices go up: hay prices go down, because the dairy farmers try to screw the hay farmers out of pricing power for alfalfa hay as long as there is surplus hay out there.
Only when they got the number of milkers and replacements down to a point where they quit dumping milk at $10/cwt into the market did the price of milk start going up again.
BTW — as the price of corn goes up, you should see what the California dairymen substitute into their TMR’s: beet pulp, pumpkins, silage soybean mush, DDG’s, you name it. It is pretty humorous to watch .... unless you’re a hay farmer.