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Background

A January 2011 examination of ERS's monthly milk cost-of-production (COP) estimates raised questions about the continued validity of the estimates, given recent volatility in the price of dairy feed. Questions about the calculation of the monthly State-level estimates, and the timing, availability, and representativeness of the data used were raised within ERS.  As a result, publication of the series was suspended until ERS initiated an expert review process and received comments and recommendations on the monthly milk COP estimation procedures.   

On the basis of reviewers' comments, ERS took the following actions:

  1. Discontinue the estimation of monthly State-level milk COP estimates.  The lack of monthly State-level input price data compromises the ability to provide accurate monthly estimates.
  2. Continue publishing annual national and regional milk COP estimates.  Annual national estimates of milk COP have been mandated in successive farm bill legislation since 1973.
  3. Publish annual State-level milk COP estimates based on NASS's annual State-level input price data.  These estimates reflect differences in input market conditions across States.
  4. Publish annually updated milk COP estimates by size of operation based on information drawn from ARMS data and NASS's annual State-level input price data.  Expert reviewers noted the importance of having data that show milk cost differences by size of operation.
  5. Publish monthly milk COP estimates for the nation using the most recent national ARMS milk COP per hundredweight and NASS's monthly, national input price indices.   In the absence of monthly State-level prices, this is the only valid monthly series that can be estimated.

The estimates for items 2-4 are updated biannually, with preliminary estimates released in May of the subsequent year and final estimates released in October.  For example, 2010 preliminary estimates were available in May 2011 and final estimates in October 2011.  National monthly milk COP estimates (item 5) are updated during the last week of each subsequent month.

Monthly milk COP estimates by State, published prior to the expert review, are available from January 2003 through December 2010 16x16 - ZIP. Note: These estimates are presented as a historical record only and should not be used for analytical purposes. We recommend that national monthly and annual State-level or size-based milk COP estimates starting in 2005 be used as the basis for milk cost of production calculations.

Last updated: Thursday, July 05, 2012

For more information contact: William McBride

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