Milk prices reported in the media can be confusing and misleading information for farmers, the dairy industry, and the public. The basis for measurement and reporting varies widely within many countries, let alone when currency is taken into account.

In general, the price of milk is expressed as a value per volume or weight of milk. For example: cents per liter (cpl); dollars per quintal ($ / quintal); gold euro per 100 kilograms. The main problem with these price bases is that the actual payments for milk are typically for the fat, protein, and other solids components – very few dairy processors pay for the water! You need to know the composition of the milk and this composition changes from farm to farm and from country to country. There is no standard composition when it comes to comparing local and international prices. Below are some of the factors to consider when making comparisons.

Badge: This is an obvious issue, but the choice between: the current daily rate should be considered; the annual average conversion rate; the weighted average conversion rate. In the latter case, the currency exchange rate should be weighted according to the timing of payments to farmers.

Composition of fats and proteins:It is normal for farmers to charge based on the fat and protein composition of the milk. This can have a dramatic effect on the price of milk when expressed in cpl. Thus, for example, the price of cpl milk for a jersey cow with high dairy components may be more than 50% higher than that for a Fresian / Holstein cow.

The typical composition of cow’s milk in the main world exporters of dairy products is: Europe: 4.2% fat, 3.4% protein; US 3.7% fat, 3.0% protein; New Zealand: 4.7% fat, 3.7% protein; Australia 4.1% fat, 3.3% protein.

To add to the confusion, USDA reported milk prices in $ / cwt are based on a fat composition of 3.5% and Eurostat milk prices are based on 3.7% fat.

There is no standard for the price of milk in Australia and New Zealand and the safest measure of local price is when it is expressed as $ / kilogram of milk solids ($ / kg DM). Milk solids are defined as the sum of the measurements of fat and protein in milk.

Mass or volume measurement: In addition to the fat and protein composition of the milk, you also need to know whether the test measurement is expressed as mass / mass (eg kg / kg) or mass / volume (eg kg / liter). The typical density of milk is close to 1.03 grams / liter, so an error here can affect the calculation of the price of milk by 3%.

True or raw protein: Crude protein is an estimate of milk protein composition based on nitrogen measurements (usually by Kjeldahl nitrogen tests). The protein content of milk is calculated from an international standard factor of nitrogen x 6.38.

True protein is an estimate of actual milk protein based on a calibrated near-infrared measurement. The difference between crude protein and true protein is called “non-protein nitrogen” (NPN).

The true protein measurement is estimated to give a result 0.1 to 0.2% lower than crude protein. This can affect the calculation of the price of milk by up to 5%.

In the US and Australia, the protein content of milk is generally reported as true protein, while in the EU and New Zealand, crude protein is more frequently used.

Calculation example: Here is an example of how you can convert the reported milk price from one country to another taking into account the above factors:

A US farmer is paid $ US 11.50 / cwt for milk with a composition of 3.7% fat and 3.0% true protein on a mass / mass basis.

A farmer in New Zealand wants to know what this equates in $ NZ / kg DM with milk solids being equal to fat + crude protein. Assuming an exchange rate of $ NZ 1.00 = $ US 0.70, and that crude protein = true protein + 0.15%, the calculation is as follows:

$ US 11.50 / quintal = $ NZ 16.43 / quintal

Milk composition = 3.7% fat + (3.0 + 0.15)% crude protein = 6.85% mass / mass of milk solids

1 cwt of milk / 220.4 = 45.4 kilograms

$ NZ $ 16.43 / cwt / 45.4 / 0.0685 = $ NZ $ 5.28 / kg DM CP (crude protein)

For an Australian farmer, it is not necessary to adjust crude protein: milk solids = 3.7% + 3.0% = 6.7%. Assuming an exchange rate of $ AU 1.00 = $ US 0.87:

$ US 11.50 / quintal = $ AU 13.22 / quintal

$ AU 13.22 / cwt / 45.4 / .065 = $ AU 4.35 / kg DM TP (true protein)

A UK farmer wants to know what this is in pennies per liter with his typical milk composition of 4.2% fat and 3.4% crude protein (~ 3.25% true protein). This question is a bit more difficult because we do not know the value of the individual components of fat and protein. The best we can do is assume that the value of the milk solids is the same. That will give a reasonably close approximation if the fat to protein ratio is similar in both cases. Assuming: $ US 1.00 = 63 English pence

$ US 11.50 / cwt = 724.5 pence / cwt (7.25 British pounds / cwt)

724.5 pence / quintal / 45.4 = 16.0 pence / kilogram

16.0 pence / kilogram x 1.03 = 16.4 pence / liter

However, this is the price with a composition of 3.7% fat and 3.0% true protein. To obtain an estimate of the component price of the European farmer, apply the relative proportion of total milk solids:

16.4 pence / liter x (4.2 + 3.25) / (3.7 + 3.0) = 18.2 pence per liter.

On the European continent they think in euros / 100 kg of milk. Here we will take a shortcut and convert from pennies per liter to euros / 100kg assuming the same milk composition as the UK farmer. With an exchange rate of 1.00 euro = 92 English pence:

18.2 pence per liter = 19.8 euros / 100 liters

19.8 euros / 100 liters / 1.03 = 19.2 euros / 100 kg