New Tool to Help You
Calculate Your Cost of
Production
By: Katie Holzhause and Jeffrey Bewley, Ph.D.
Knowing your cost of production is an important aspect of running a dairy farm business. Estimating the
cost per cow or cost per CWT is way to help farmers become more aware of their overall costs, not just
their cash flow.
The University of Kentucky and Kentucky Dairy Development Council have created a tool that allows
farmers to calculate their cost of production based on real numbers from their farm. This tool will also
allow extension personnel to calculate an average cost of producing a CWT of milk in Kentucky using
data submitted by Kentucky dairy farmers. All data collected is anonymous. Data that is submitted will be
summarized for benchmarking against other farms data. Once data is available from enough farms, we
will summarize this information so farmers can compare themselves to others in the state. No names are
included in the Cost of Production program. Farmers across Kentucky are encouraged to participate in
the program to help calculate the total cost of producing milk on their own farm.
The cost of production calculator is available online and in a paper format for those participants without
internet access. The “lite” paper version may not include all costs to determine the fixed costs, but will
provide a starting point to calculate your variable cost of production. By determining the cost of production
on your farm, you can see opportunities for improving profitability on the farm and have information to
make additional financial decisions about your dairy farm operation. All anonymous data provided will
also help calculate numbers for dairy farm profitability across the state.
To begin to estimate your cost of production, you should collect your financial records for the farm for the
last year. If you participate in the KY Farm Business Management program, you can use your KFBM data
to put into the COP tool. You may also use your personal records from taxes, your on-farm record
keeping tool such as QuickBooks, DHIA, record books from the extension office, co-op records of milk
shipped, etc. It is important to gather your information so that it is simpler to input into the COP tool.
Once you have your records accessible, you can enter your data into the website or paper form. First, you
should input your average number of cows( milking and dry), milk yield, and annual variable costs. The
tabs at the top of the page allow you to choose a section to input your data:Variable Costs, Sales, Herd
Data, Inventory, Loans, Equipment, and Other Loans are the tabs you can select to enter your
information. Once you have entered all your information, you can enter a comment (if desired) and click
the submit button. The anonymous data will then be entered into a database for analysis with other
Kentucky dairy farms. Remember the more accurate your input information is, the more accurate your
cost of production analysis will be.
If you are interested in participating, please fill out the paper cost of production form with your farm
records for the last calendar year. You can mail the completed form to KDDC or UK (Katie Holzhause,
400 WP Garrigus Building, Lexington, KY 40546). If you choose to submit online data, the online cost of
production calculator is available at:
http://www.uky.edu/Ag/AnimalSciences/dairy/decisiontools/cop/cop.htm.
Educational programs of Kentucky Cooperative Extension serve all people regardless of race, color, age,
sex, religion, disability, or national origin.