Construction and application of milk-feed price ratio model - based on data from large scale dairy farms in China

Despite rapid development, the Chinese dairy industry still faces problems such as the lack of pricing power for dairy farmers, high fluctuations in raw milk and feed prices, imbalances between supply and demand, and low farming motivation. As an indicator with important geographical characteristics, the milk-feed price ratio (MF) is a critical reference indicator for setting raw milk prices and measuring farm profitability. The main aim of this study is to construct an appropriate milk-feed ratio model for China using statistical data for 2018-2020, which provides references for other developing countries. A vector error correction model was used to illustrate the long-term covariance between raw milk prices and feed prices in China and to analyze the feed structure of large-scale Chinese farms. The study found that the price weights of corn, soybean meal, corn silage, and alfalfa were 27%, 17%, 30%, and 26%, respectively, which are significantly different from those of developed countries, and the parameters of the model for the MF in different production areas in China also varied significantly. The milk-feed ratio in China has remained above 1.89 in the last three years. Seasonal variations in raw milk prices lead to a U-shaped trend in the MF. In recent years the MF in China has changed from a low level to a medium level, showing an upward trend, with large-scale farms at a profitable level.
Keywords: Application of MF; Granger causality test; MF model; Large scale farm