Production Costs in 2009 on Selected Wisconsin Grazing
(Not Organic) Dairy Farms
By: Tom Kriegl 1
Introduction (Pages two to four contain the actual cost of production report.)
The number of grazing herds in this summary has declined substantially since 2005 because several of the grazing farms
that submitted data have become certified organic. Since 1995, each year at least one of the graziers, from which we were
collecting financial data, was in the process of transitioning to organic. This may have reduced the financial performance
of that herd in those years. Since 1999, the data included a few grazing farms that were receiving organic milk prices.
Until 2006 the presence of these organic farms had minimal impact on the grazing group’s Net Farm Income from
Operations (NFIFO) but a difference in financial structure began to show in 2006. Therefore, beginning in 2006 the
Wisconsin grazing cost of production report does not include any herds receiving organic milk prices.
Data Source
Fourteen Wisconsin grazing dairy farms providing useable data in 2009 were summarized by AgFA in the following cost
of production report. 2 3 These farms ranged in size from 25 to 155 cows with an average herd size of 66.39 cows
averaging 15,583 lbs of milk sold at an average of $14.00 milk income per cwt. sold.
Selected Financial Measures of Studied Farms
In 2009, income per cow averaged $2,736 with milk sales being $2,175 of that total. The average income per cow on the
454 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic was $3,938 with milk sales accounting for
$3,048 of that total. However, their allocated costs 4 per cow were $4,132 versus only $2,293 for the graziers in this study.
This leaves this group of graziers with a NFIFO/cow of $442 versus a NFIFO/cow of -$194 for the other 454 dairy farms,
although they had more cows - averaging 186 per farm. For graziers these values compare with $2,556 in allocated costs
and $1,098 in NFIFO in 2008.
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 -$180/cow for the Wisconsin grazing dairy herds in 2009.
On the 454 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic it was -$612 per cow.
In 2009 the grazier’s average cost per cow was $38 for breeding fees, $44 for insurance, $711 for purchased feed, $88 for
utilities, $129 for supplies, $36 for property taxes, $48 for veterinary fees and medicine, $131 for interest, $6 for livestock
depreciation and $280 for other depreciation.
In 2009, for every dollar of income the average grazier generated: 65.0 cents went to Basic Costs, 41.6 cents went to
Non-basic plus Opportunity Costs and -6.6 cents went to economic loss. Looking at it another way, 83.8 cents went to
Allocated Costs (Basic plus Non-basic Costs) and 16.2 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 and sustainability. Generally 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.
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.
2
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. non-livestock depreciation plus equity interest).
This benchmark report's
selection criteria
are on the last page.
Benchmark Report
Cost of Production
Report Basis: Whole Farm, per Head, per Hundredweight Equivalent, Depreciation Method: "Cost (tax)"
Income
2009
per Farm
Animal Product Sales
Raised Non-Breeding Livestock Sales
Crop Sales
Sale of Raised Breeding Livestock
Other Income
Total Income
Expenses
2009
per Head
2009
per CWT EQ
144,396.30
4,669.29
697.14
8,102.29
23,767.67
2,174.88
70.33
10.50
122.04
357.99
10.20
0.33
0.05
0.57
1.68
181,632.69
2,735.73
12.83
2009
per Farm
2009
per Head
2009
per CWT EQ
Basic Costs
Cost of Items for Resale
Depreciation on Purchased Breeding Livestock
0.00
2,545.86
1,652.75
1,093.93
0.00
214.29
9,853.07
47,179.27
4,165.47
2,084.93
5,197.72
2,934.29
366.64
2,618.36
4,075.17
993.27
196.14
4,678.29
49.29
8,553.35
2,414.60
190.71
5,822.54
3,210.33
2,076.03
1,781.84
692.43
1,009.51
2,007.12
0.00
426.36
0.00
38.35
24.89
16.48
0.00
3.23
148.41
710.61
62.74
31.40
78.29
44.20
5.52
39.44
61.38
14.96
2.95
70.46
0.74
128.83
36.37
2.87
87.70
48.35
31.27
26.84
10.43
15.21
30.23
0.00
6.42
0.00
0.18
0.12
0.08
0.00
0.02
0.70
3.33
0.29
0.15
0.37
0.21
0.03
0.18
0.29
0.07
0.01
0.33
0.00
0.60
0.17
0.01
0.41
0.23
0.15
0.13
0.05
0.07
0.14
0.00
0.03
Total Basic Costs
118,083.54
1,778.56
8.34
Breeding Fees
Car and Truck Expenses
Crop Chemicals
Conservation Expenses
Custom Heifer Raising Expenses
Custom Hire (Machine Work)
Feed Purchase
Fertilizer and Lime
Freight and Trucking
Gasoline, Fuel, and Oil
Farm Insurance
Rent/Lease Equipment
Rent/Lease Other
Repairs and Maintenance
Building and Fence Repairs
Machinery Repairs
Seeds and Plants Purchased
Storage and Warehousing
Supplies Purchased
Taxes - Other
Taxes - Payroll
Utilities
Veterinary Fees and Medicine
Other Farm Expenses
Marketing & Hedging
Other Crop Expenses
Other Livestock Expenses
- Change in Prepaid Expenses
Change in Accounts Payable
Printed: 11-01-2013
Page 1 of 3
AgFA
Center for Dairy Profitability
Non-Basic Costs
Interest Cost
Mortgage Interest
Other Interest
5,093.43
3,589.43
76.72
54.06
0.36
0.25
Total Interest Cost
8,682.86
130.78
0.61
Employee Benefits - Dependents
Value of Unpaid Labor & Management
329.57
903.14
0.00
5,639.81
0.00
32,891.57
4.96
13.60
0.00
84.95
0.00
495.41
0.02
0.06
0.00
0.40
0.00
2.32
Total Labor Cost
39,764.09
598.92
2.81
Machinery, Equipment, Building Depreciation
Interest on Equity Capital
18,618.04
8,425.05
280.42
126.90
1.32
0.60
Total Depreciation & Equity Cost
27,043.09
407.32
1.91
Total Non-Basic and Opportunity Costs
75,490.04
1,137.02
5.33
Total Expenses
193,573.58
2,915.58
13.67
(11,940.89)
(179.85)
(0.84)
152,256.96
29,375.73
2,293.27
10.75
Net Farm Income From Operations (NFIFO)
442.45
2.08
Gain (Loss) on Sale of All Farm Capital Assets
403.14
6.07
0.03
Net Farm Income (NFI)
29,778.87
448.53
2.10
Labor Cost
Employee Benefits - Non-Dependents
Labor Hired - Dependents
Labor Hired - Non-Dependents
Pension and Profit-Sharing Plans - Non-Dependents
Depreciation & Equity Cost
Total Income - Total Expenses
Net Farm Income from Operations (NFIFO) Summary
Total Allocated Costs
Printed: 11-01-2013
Page 2 of 3
Prepared by:
AgFA
Center for Dairy Profitability
2009
Benchmark Criteria
Number of Cows
Pounds of Milk Sold per Cow
Hundredweight Equivalent (CWT EQ) per Cow
Gross Milk Price
Total Crop Acres per Cow
Pasture Acres per Cow
Owner/Operator/Families
Primary Enterprise:
Report On:
2009 Data Sets:
Confidence Level Range:
States:
Pasture Management:
Organic Producer:
Printed: 11-01-2013
2009
66.39
15,583
213
$14.00
3.27
1.82
1.00
2009
66.39
15,583
213
$14.00
3.27
1.82
1.00
66.39
15,583
213
$14.00
3.27
1.82
1.00
Dairy
All Data Sets
14
14
14
82 to 100
Wisconsin
= Management Intensive Grazing
<> Yes
Page 3 of 3
Prepared by:
AgFA
Center for Dairy Profitability