Production Costs in 2009 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 ten practiced management
intensive grazing in 2009.
Because fourteen 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
Thirteen Wisconsin organic dairy farms were summarized by AgFA in the following cost of production report for
2 3
2009. , These farms ranged in size from 31-133 cows with an average herd size of 67.46 cows averaging 14,277 lbs
of milk sold at an average price of $26.04/CWT sold in 2009. 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 Measure of Studied Farms
In 2009, income per cow averaged $4,450 with milk sales being $3,737 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
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accounting for $3,048 of that total. However, their allocated costs per cow were $4,132 versus only $3,530 for the
organic farms in this study. This leaves this group of organic farms with a NFIFO/cow of $920 versus a NFIFO/cow of
$(194) for the other 454 dairy farms, although they had more cows - averaging 186 per farm. For organic farms,
these values compare with $3,519 in allocated costs and $1,053 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 $354/cow for the Wisconsin organic 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 organic farm’s average cost per cow was $44 for breeding fees, $85 for insurance, $578 for purchased
feed, $119 for utilities, $191 for supplies, $59 for property taxes, $48 for veterinary fees and medicine, $192 for
interest, $51 for livestock depreciation and $497 for other depreciation.
In 2009, for every dollar of income the average grazier generated: 57.4 cents went to Basic Costs, 21.9 cents went to
Non-basic Costs and (7.9) cents went to economic profit. Looking at it another way, 79.3 cents went to Allocated
Costs (Basic plus Non-basic Costs) and 20.7 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. nonlivestock depreciation plus equity interest).
2
Cost of Production
Report Basis: Whole Farm, per Head, per Hundredweight Equivalent
Income
2009
2009
2009
Cost (tax)
Cost (tax)
Cost (tax)
Milk Income
267,473.71
3,737.16
10.77
Total Income
318,488.36
4,449.94
12.83
Expenses
2009
2009
2009
Cost (tax)
per Head
per CWT EQ
Basic Cost
Cost of Items for Resale
0.00
0.00
0.00
Breeding Fees
3,116.53
43.54
0.13
Car and Truck Expenses
2,056.14
28.73
0.08
Chemicals
807.36
11.28
0.03
Conservation Expenses
0.00
0.00
0.00
Custom Heifer Raising Expenses
397.66
5.56
0.02
Custom Hire (Machine Work)
11,466.00
160.20
0.46
Feed Purchase
41,372.93
578.06
1.67
Fertilizer and Lime
10,231.29
142.95
0.41
Freight and Trucking
3,277.57
45.79
0.13
Gasoline, Fuel, and Oil
8,944.21
124.97
0.36
Farm Insurance
6,087.00
85.05
0.25
Rent/Lease Equipment
3,019.64
42.19
0.12
Rent/Lease Other
10,767.71
150.45
0.43
Repairs and Maintenance
5,657.29
79.04
0.23
Building and Fence Repairs
1,863.21
26.03
0.08
Machinery Repairs
14,534.36
203.07
0.59
Seeds and Plants Purchased
8,686.64
121.37
0.35
Storage and Warehousing
107.14
1.50
0.00
Supplies Purchased
13,691.86
191.30
0.55
Taxes - Other
4,234.36
59.16
0.17
Taxes - Payroll
0.00
0.00
0.00
Utilities
8,512.14
118.93
0.34
Veterinary Fees and Medicine
3,461.64
48.37
0.14
Other Farm Expenses
3,829.71
53.51
0.15
Marketing & Hedging
6,242.14
87.22
0.25
Other Crop Expenses
2,728.57
38.12
0.11
Other Livestock Expenses
2,589.86
36.19
0.10
- Change in Prepaid Expenses
1,429.79
19.98
0.06
Change in Accounts Payable
0.00
0.00
0.00
Depreciation on Purchased Breeding Livestock
3,647.26
50.96
0.15
182,760.01
2,553.53
7.36
Total Basic Cost
Interest Cost
Mortgage Interest
8,037.36
112.30
Other Interest
5,705.07
79.71
13,742.43
Total Interest Cost
192.01
0.32
0.23
08
0.55
Labor Cost
Employee Benefits - Dependents
0.00
0.00
0.00
Employee Benefits - Non-Dependents
4,044.57
56.51
0.16
Labor Hired - Dependents
0.00
0.00
0.00
Labor Hired - Non-Dependents
16,537.64
231.06
0.67
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
30,032.07
419.61
1.21
Total Labor Cost
50,614.29
707.19
2.04
Depreciation & Equity Cost
Machinery, Equipment, Building Depreciation
35,564.15
496.90
1.43
Interest on Equity Capital
10,456.29
146.10
0.42
Total Depreciation & Equity Cost
46,020.43
643.00
1.85
Total Non-Basic and Opportunity Costs
110,377.15
1,542.20
4.44
Total Expenses
293,137.16
4,095.73
11.81
Total Income - Total Expenses
25,351.20
354.21
1.02
Net Farm Income from Operations (NFIFO) Summary
Total Allocated Costs
252,648.80
3,530.02
10.18
Net Farm Income From Operations (NFIFO)
65,839.55
919.91
2.65
Gain (Loss) on Sale of All Farm Capital Assets
1,711.14
23.91
0.07
Net Farm Income (NFI)
67,550.70
943.82
2.72
2009
2009
Benchmark Criteria
2009
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: 14
Confidence Level Range: 82 to 100
States: Wisconsin
Organic Producer: Yes
71.57
14,063
347
$26.44
3.55
0.74
1.07
71.57
14,063
347
$26.44
3.55
0.74
1.07
71.57
14,063
347
$26.44
3.55
0.74
1.07