Counting the Costs That Count on Your Farm

By James G. Landis

Added July 1, 2009. I don’t know what drives you out of bed in the morning. Could it be a love for cows? A habit you’ve gotten into? A desire to see the sunrise and feel the crisp morning air? A fear of the coming heat later in the day? A vicious cycle of never-ending work that you dread? A way of life you love and a challenge you can’t resist!

Regardless of what your motives for dairying are, I suspect that somewhere, if it’s not obvious, lurks the desire to be financially rewarded for your efforts. Somewhere in the recesses of your subconscious mind you harbor the realization that the costs of producing milk on your farm must not exceed the income from the sale of the milk. Somewhere in the past or present prowls the fear that you may go broke or that the children will not want to be a part of this difficult venture.
Yet so often dairymen don’t know how to determine the business condition of their own farm. They look under the bed for a ghost. They study the sky and pray that it will rain or that it will stop raining. They look at the DHIA records and notice the pounds of milk produced per cow.

They talk about the number of cows they’re milking. They talk about the mailbox milk price. They wonder if the banker will give them a larger loan. Dairymen discuss what to do when the milk check does not cover the feed bill and make the monthly payment at the bank. None of these things have much to do with measuring the efficiency of your dairy operation. None of them give you a clue about changes you can make on your dairy to improve the productivity and profits.

You can do little to change the milk price or the rain clouds. But you can control your costs. Every dairymen can and should know what it costs to produce 100# of milk on his farm. If he knows this figure, he is also in a position to take action. He can then study the changes necessary to lower his cost of production and thus increase his profits.

Once a farmer knows how to compute what it costs him to produce a Cwt. (hundred weight) of milk, he will change his focus from things he can’t change to things he can control; the things he can do something about. The manager becomes the master of his dairy, the maker of his own fate.

Finding the cost to produce a Cwt. of milk on your farm is not that complicated. Here are the rules that guide us.

• Separate living expenses from farm expenses.
• Use figures from a full calendar year of operation.
• Use actual figures from records, not guesstimates.
• Do not use calculated or computed numbers such as DHIA figures.
• Separate Operating Costs from Capital Use Costs.
• Take inventory of crops, feed, and livestock.
• Adjust costs for inventory change.

At the field days, I will pass out work sheets so you can calculate the cost of producing a Cwt. of milk on your farm. In session, I will give a more detailed explanation of how Springwood Dairy computes their cost/Cwt. following the above rules.

Probably few of you will have enough of your own figures at the field days to calculate an accurate cost/Cwt. But if you will bring the following figures for your farm to the meeting, perhaps you can gain some quick insights into the efficiency of your dairy.

• The number of Cwt.s milk sold in the last year.
• The total dollars spent for purchased feed.
• The man-years used to operate dairy. This can be given in fractions for children or part-time workers.

See you at the field days on August 13,14 at Gap, PA. Bring your calculator along and we’ll count the costs that count on your dairy.

Posted: to Organic Production on Wed, Jul 1, 2009
Updated: Wed, Jul 1, 2009