Production Costs in 2013 on Selected Wisconsin Organic Dairy Farms
By: Tom Kriegl 1
Introduction (Pages two to three contain the actual cost of production report.)
Effective June 17th, 2010, the USDA made the pasture rule for organic certification more rigorous to require a
minimum of 120 days of grazing a year and that at least 30% of dry matter intake comes from pasture during the
grazing season. Consequently, all summarized herds in the 2010 summary and later meet that grazing definition.
However, based on communication with participants, about four of the organic herds were less rigorous in their
grazing than the typical farm in the non-organic grazing summary in 2013.
Data Source
Twelve Wisconsin organic dairy farms were summarized by AgFA in the following cost of production report for
2013. 2, 3 These farms ranged in size from 31-133 cows with an average herd size of 71.9 cows averaging 14,825 lbs
of milk sold at an average price of $30.24/CWT sold in 2013. The same six Wisconsin organic dairy farms provided
useable data from 1999-2006. Two of the original six farms dropped out after 2006, but fortunately data from
additional farms was added after 1999. Because the original sample size was small, this data was not released in the
single year format until several years of data was judged to be reasonably consistent from year to year.
Selected Financial Measures of Studied Farms
In 2013, income per cow averaged $5,568 with milk sales being $4,486 of that total. The average income per cow on
the 342 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic was $6,044 with milk sales
accounting for $4,931 of that total. However, their allocated costs 4 per cow were $5,531 versus only $4,613 for the
organic farms in this study. This leaves this group of organic farms with a NFIFO/cow of $955 versus a NFIFO/cow of
$504 for the other 342 dairy farms, although they had more cows - averaging 196.7 per farm. For organic farms
these values compare with $4,051 in allocated costs and $1,041 in NFIFO in 2012. The 2013 non-milk farm income
per cow of $1,082 for organic and $1,104 for confinement were both about 25% higher than average. Sales of dairy
livestock, government payments and increases in inventories typically account for most of this income. Beginning in
about 2011, crop sales have become over three times as high per cow as had been normal for both groups.
NFIFO is not economic profit. Economic profit requires farm income to exceed all costs, including the opportunity
costs of unpaid labor, management, and equity. Economic profit was $292/cow for the Wisconsin organic dairy herds
in 2013. On the 342 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic it was $71 per cow.
In 2013, the organic farm’s average cost per cow was $45 for breeding fees, $93 for insurance, $862 for purchased
feed, $124 for utilities, $192 for supplies, $44 for property taxes, $46 for veterinary fees and medicine, $221 for
interest, $33 for livestock depreciation and $1,022 for other depreciation.
In 2013, for every dollar of income the average organic farm generated: 55.4 cents went to Basic Costs, 39.4 cents
went to Non-basic plus Opportunity Costs and 5.2 cents went to economic profit. Looking at it another way, 82.8
cents went to Allocated Costs (Basic plus Non-basic Costs) and 17.2 cents went to NFIFO.
Wrapping Up
When comparing the relative performance of dairy systems, recognize that managers of each system tended to have
a different focus in their pursuit of profitability. The organic system focuses more on obtaining a higher and more
consistent milk price. Graziers focus more on reducing all costs and confinement systems focus more on increasing
income via high production levels. Yet, costs (in terms of face value dollars) continue to increase over time for all
dairy systems.
When comparing organic financial performance relative to other systems, recognize that it is at its relative best in
years in which the organic price premium is highest relative to non-organic prices. This price premium was high in
2000, 2002, 2003, 2006, 2009, 2012 and 2013 but low in 2004, 2007, and 2008.
1
Farm Financial Analyst Emeritus, Center for Dairy Profitability, University of Wisconsin-Madison/Extension. The author thanks
coworker Arlin Brannstrom and emeritus coworker Gary Frank for reviewing the document and making helpful suggestions.
AgFA @(Agriculture Financial Advisor) – http://cdp.wisc.edu
3
The Center for Dairy Profitability uses an active/real time database AgFA@) for collecting and analyzing data. The number of
records may increase throughout the year. Casual users of AgFA may not be able to exactly duplicate this report.
4
All costs except the opportunity cost of unpaid labor, management and equity are called “allocated costs.” Total income minus
“allocated costs” equals Net Farm Income from Operations (NFIFO). “Total costs” are divided into two other categories: basic costs
and non-basic and opportunity costs, with it having 3 sub-categories (1. paid interest, 2. all labor and management, and 3. nonlivestock depreciation plus equity interest).
2
Cost of Production
Report Basis: Whole Farm, per Head, per Hundredweight Equivalent
Income
2013
2013
2013
Cost (tax)
Cost (tax)
Cost (tax)
Milk Income
322,473.52
4,486.07
16.06
Total Income
400,278.04
5,568.44
19.93
Expenses
2013
2013
2013
Cost (tax)
per Head
per CWT EQ
Basic Cost
Cost of Items for Resale
0.00
0.00
0.00
Breeding Fees
3,246.64
45.17
0.16
Car and Truck Expenses
1,647.58
22.92
0.08
Chemicals
1.25
0.02
0.00
Conservation Expenses
0.00
0.00
0.00
Custom Heifer Raising Expenses
0.00
0.00
0.00
Custom Hire (Machine Work)
12,277.24
170.79
0.61
Feed Purchase
61,993.20
862.41
3.09
Fertilizer and Lime
13,965.37
194.28
0.70
Freight and Trucking
5,425.00
75.47
0.27
Gasoline, Fuel, and Oil
16,702.49
232.36
0.83
Farm Insurance
6,652.83
92.55
0.33
Rent/Lease Equipment
884.42
12.30
0.04
Rent/Lease Other
13,163.54
183.12
0.66
Repairs and Maintenance
6,562.25
91.29
0.33
Building and Fence Repairs
2,035.92
28.32
0.10
Machinery Repairs
13,817.50
192.22
0.69
Seeds and Plants Purchased
15,479.50
215.34
0.77
0.00
Storage and Warehousing
0.00
0.00
Supplies Purchased
13,774.60
191.62
0.69
Taxes - Other
3,178.08
44.21
0.16
Taxes - Payroll
0.00
0.00
0.00
Utilities
8,925.07
124.16
0.44
Veterinary Fees and Medicine
3,283.12
45.67
0.16
Other Farm Expenses
4,361.35
60.67
0.22
Marketing & Hedging
3,846.57
53.51
0.19
Other Crop Expenses
3,618.25
50.34
0.18
Other Livestock Expenses
4,113.25
57.22
0.20
- Change in Prepaid Expenses
397.33
5.53
0.02
Change in Accounts Payable
(13.42)
(0.19)
0.00
Depreciation on Purchased Breeding Livestock
2,391.29
33.27
0.12
221,730.23
3,084.58
11.04
Total Basic Cost
Interest Cost
Mortgage Interest
12,377.33
172.19
Other Interest
3,506.58
48.78
15,883.92
Total Interest Cost
220.97
0.62
0.17
08
0.79
Labor Cost
Employee Benefits - Dependents
0.00
0.00
0.00
Employee Benefits - Non-Dependents
2,489.35
34.63
0.12
Labor Hired - Dependents
0.00
0.00
0.00
Labor Hired - Non-Dependents
18,039.34
250.95
0.90
Pension and Profit-Sharing Plans - Non-Dependents
0.00
0.00
0.00
Pension and Profit-Sharing Plans - Dependents
0.00
0.00
0.00
Value of Unpaid Labor & Management
32,507.42
452.22
1.62
Total Labor Cost
53,036.11
737.81
2.64
Depreciation & Equity Cost
Machinery, Equipment, Building Depreciation
73,484.76
1,022.28
3.66
Interest on Equity Capital
15,123.18
210.39
0.75
Total Depreciation & Equity Cost
88,607.94
1,232.66
4.41
Total Non-Basic and Opportunity Costs
157,527.96
2,191.44
7.84
Total Expenses
379,258.18
5,276.02
18.88
Total Income - Total Expenses
21,019.86
292.42
1.05
Net Farm Income from Operations (NFIFO) Summary
Total Allocated Costs
331,627.59
4,613.41
16.51
Net Farm Income From Operations (NFIFO)
68,650.45
955.03
3.42
Gain (Loss) on Sale of All Farm Capital Assets
471.17
6.55
0.02
Net Farm Income (NFI)
69,121.62
961.58
3.44
Benchmark Criteria
2013
Number of Cows
Pounds of Milk Sold per Cow
Hundredw eight Equivalent (CWT EQ) per Cow
Gross Milk Price
Total Crop Acres per Cow
Pasture Acres per Cow
Owner/Operator/Families
Primary Enterprise: Dairy
Report On: All Data Sets
2013 Data Sets: 12
Confidence Level Range: 78 to 100
States: Wisconsin
Organic Producer: Yes
2013
71.88
14,825
279
$30.24
4.31
1.59
1.00
2013
71.88
14,825
279
$30.24
4.31
1.59
1.00
71.88
14,825
279
$30.24
4.31
1.59
1.00