Production Costs in 2008 on Selected Wisconsin Organic Dairy Farms
By: Tom Kriegl
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Introduction (Pages two and three contain the actual cost of production report.)
All of the organic farms in the summary met the organic grazing standards, but only twelve practiced management
intensive grazing in 2008.
Because sixteen farms is a very small group to make conclusions from, 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.
Data Source
Sixteen Wisconsin organic dairy farms were summarized by AgFA in the following cost of production report for
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2008. , These farms ranged in size from 32 to 139 cows with an average herd size of 70.84 cows averaging 13,989
lbs of milk sold at an average price of $26.85/CWT sold in 2008. The same six Wisconsin organic dairy farms
provided useable data from 1999 to 2006. Two of the original six farms dropped out after 2006, but fortunately data
from additional farms was added after 1999.
Selected Financial Measures of Studied Farms
In 2008, income per cow averaged $4,572 with milk sales being $3,756 of that total. The average income per cow on
the 465 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic was $5,132 with milk sales
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accounting for $4,249 of that total. However, their allocated costs per cow were $4,659 versus only $3,519 for the
organic farms in this study. This leaves this group of organic farms with a NFIFO/cow of $1,053 versus a NFIFO/cow
of $474 for the other 465 dairy farms, although they had more cows - averaging 172 per farm. For organic farms,
these values compare with $3,343 in allocated costs and $1,084 in NFIFO in 2007.
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 $391/cow for the Wisconsin organic dairy herds
in 2008. On the 465 Wisconsin dairy farms in AgFA that were NEITHER grazing nor organic it was $24 per cow.
In 2008 the organic farm’s average cost per cow was $45 for breeding fees, $77 for insurance, $587 for purchased
feed, $116 for utilities, $176 for supplies, $48 for property taxes, $54 for veterinary fees and medicine, $235 for
interest, $41 for livestock depreciation and $575 for other depreciation.
In 2008, for every dollar of income the average grazier generated: 52.8 cents went to Basic Costs, 24.2 cents went to
Non-basic Costs and 8.5 cents went to economic profit. Looking at it another way, 77.0 cents went to Allocated
Costs (Basic plus Non-basic Costs) and 23.0 cents went to NFIFO.
Wrapping Up
When comparing the relative performance of dairy systems, recognize that manager 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, and 2009, but low in 2004, 2007, and 2008.
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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
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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.
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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).
Benchmark Report
Cost of Production
Report Basis: Whole Farm, per Head, per Hundredweight Equivalent
Income
2008
2008
2008
Cost (tax)
Cost (tax)
Cost (tax)
Milk Income
266,057.65
3,755.89
15.05
Total Income
323,845.93
4,571.67
18.32
Expenses
2008
2008
2008
per Farm
per Head
per CWT EQ
Basic Cost
Cost of Items for Resale
255.06
3.60
0.01
Breeding Fees
3,180.81
44.90
0.18
Car and Truck Expenses
1,707.75
24.11
0.10
Chemicals
717.56
10.13
0.04
Conservation Expenses
0.00
0.00
0.00
Custom Heifer Raising Expenses
0.00
0.00
0.00
Custom Hire (Machine Work)
11,407.06
161.03
0.65
Feed Purchase
41,571.13
586.85
2.35
Fertilizer and Lime
7,287.94
102.88
0.41
Freight and Trucking
1,623.88
22.92
0.09
Gasoline, Fuel, and Oil
15,655.50
221.01
0.89
Farm Insurance
5,488.81
77.48
0.31
Rent/Lease Equipment
4,335.19
61.20
0.25
Rent/Lease Other
9,902.13
139.79
0.56
Repairs and Maintenance
7,461.38
105.33
0.42
Building and Fence Repairs
1,405.25
19.84
0.08
Machinery Repairs
9,586.88
135.34
0.54
Seeds and Plants Purchased
8,992.00
126.94
0.51
Storage and Warehousing
0.00
0.00
0.00
Supplies Purchased
12,440.06
175.61
0.70
Taxes - Other
3,393.38
47.90
0.19
Taxes - Payroll
0.00
0.00
0.00
Utilities
8,222.25
116.07
0.47
Veterinary Fees and Medicine
3,826.06
54.01
0.22
Other Farm Expenses
5,826.88
82.26
33.00
Marketing & Hedging
3,663.38
51.72
0.21
Other Crop Expenses
1,648.38
23.27
0.09
Other Livestock Expenses
2,622.94
37.03
0.15
- Change in Prepaid Expenses
(5,825.06)
(82.23)
(0.33)
Change in Accounts Payable
1,518.44
21.44
0.09
Depreciation on Purchased Breeding Livestock
2,937.31
41.47
0.17
170,852.31
2,411.89
9.67
Total Basic Cost
Interest Cost
Mortgage Interest
8,435.88
119.09
Other Interest
8,242.44
116.36
0.48
0.47
08
16,678.31
235.44
Employee Benefits - Dependents
1,179.94
16.66
0.07
Employee Benefits - Non-Dependents
4,609.31
65.07
0.26
Labor Hired - Dependents
774.94
10.94
0.04
Labor Hired - Non-Dependents
14,461.19
204.15
0.82
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
35,871.13
506.39
2.03
Total Labor Cost
56,896.50
803.20
3.22
Total Interest Cost
0.94
Labor Cost
Depreciation & Equity Cost
Machinery, Equipment, Building Depreciation
40,699.42
574.55
2.30
Interest on Equity Capital
11,022.11
155.60
0.62
Total Depreciation & Equity Cost
51,721.54
730.14
2.93
Total Non-Basic and Opportunity Costs
125,296.35
1,768.78
7.09
Total Expenses
296,148.66
4,180.68
16.75
Total Income - Total Expenses
27,697.27
391.00
1.57
Net Farm Income from Operations (NFIFO) Summary
Total Allocated Costs
249,255.42
3,518.69
14.10
Net Farm Income From Operations (NFIFO)
74,590.51
1,052.98
4.22
Gain (Loss) on Sale of All Farm Capital Assets
1,854.81
26.18
0.10
Net Farm Income (NFI)
76,445.32
1,079.16
4.32
Benchmark Criteria
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
2003 Data Sets: 16
Confidence Level Range: 82 to 100
States: Wisconsin
Organic Producer: Yes
2008
2008
2008
70.84
13,989
250
$26.85
3.72
0.62
1.12
70.84
13,989
250
$26.85
3.72
0.62
1.12
70.84
13,989
250
$26.85
3.72
0.62
1.12