WISCONSIN DAIRY DATA
Fact sheet series from the Center for Dairy Profitability
2002-01
October 2002
Cost of Milk Production per Hundredweight Equivalent
In Milk Sold per Cow Ranges
by
Gary Frank
Usually a lively discussion occurs when the cost of milk production and milk sold per cow are mentioned in the same
sentence. Does it cost less to produce a unit of milk when you have a high herd average or does it cost more? In which
cost categories are there differences? Are lower values in some cost categories offset by higher values in others? To
try and shed some light on these questions, the cost of milk production per hundredweight equivalent (CWT EQ) was
calculated for the following milk sold per cow ranges: less than 17,500 pounds per cow, 17,500 to 20,000 pounds per
cow, 20,000 to 22,500 pounds per cow and greater than 22,500 pounds per cow.
Table 1
Less than
17,500
More than
22,500
194
77.3
14,912
185
95.8
18,851
174
123.7
21,241
132
169.5
24,782
Total Cash Income - Basis Adjustments
Total Non-Cash Income
15.00
14.95
14.34
14.75
(0.06)
(0.00)
0.60
0.19
Total Income
14.94
14.94
14.94
14.94
0.13
0.21
0.35
2.54
0.42
0.17
0.40
0.22
0.14
0.58
1.06
0.37
0.57
0.27
0.35
0.37
0.19
0.49
0.18
0.22
0.44
2.48
0.38
0.17
0.34
0.20
0.12
0.65
0.91
0.37
0.48
0.23
0.31
0.42
0.36
0.47
0.18
0.21
0.42
2.69
0.31
0.19
0.28
0.16
0.16
0.54
0.75
0.27
0.42
0.17
0.27
0.42
0.55
0.47
0.20
0.16
0.48
3.15
0.24
0.22
0.25
0.13
0.12
0.46
0.71
0.25
0.39
0.13
0.24
0.46
0.83
0.47
(0.07)
(0.02)
0.51
9.26
(0.08)
(0.02)
0.44
9.04
(0.13)
0.01
0.44
8.79
(0.11)
(0.03)
0.33
9.07
Number of Farms
Average Number of Dairy Cows per Farm
Pounds of Milk Sold per Cow
Table 2
Pounds of Milk Sold per Cow
17,500 to
20000 to
20,000
22,500
Basic Cost
Breeding Fees
Crop Protection Chemicals
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
Seeds and Plants Purchased
Supplies Purchased
Taxes
Utilities
Veterinary Fees and Medicine
Other Livestock Expenses
Other Farm Expenses
- Change in Prepaid Expenses
Change in Accounts Payable
Depreciation on Purchased Breeding Livestock
Total Basic Cost
Fs2002-02
Results
Table 1 shows the number of farms, cows per farm, milk sold per cow, and the breakdown of income in the various
milk sold per cow ranges. It shows there are 185 farms, 95.8 cows per farm, 18,851 milk sold per cow and basically no
non-cash income for the farms in the 17,500 to 20,000 pounds of milk sold per cow range. Also there appears to be a
positive correlation between herd size and milk sold per cow.
Table 2 shows that the “Basic Cost” of milk production decreases as milk sold per cow increases, until the highest milk
sold per cow range, and then it increases $0.28 to $9.07. Breeding Fees, Purchased Feed, Veterinary & Medicine and
Other Livestock Expenses (mostly BST) increase as milk sold per cow increases. Farm Insurance, Repairs &
Maintenance, Supplies, Taxes and Utilities decrease.
Table 3
Interest Cost
Debt per Cow
Mortgage Interest
Other Interest
Total Interest Cost
2,562
0.46
0.52
0.98
3,028
0.38
0.59
0.97
3,102
0.29
0.59
0.88
2,947
0.20
0.54
0.74
0.24
0.11
0.33
0.66
2.01
3.34
0.21
0.12
0.38
0.73
1.38
2.82
0.17
0.23
0.34
0.90
0.84
2.48
0.12
0.26
0.26
1.24
0.53
2.40
1.48
6,843
1.79
3.27
16.84
1.37
6,276
1.36
2.73
15.55
1.27
5,669
1.05
2.32
14.48
1.01
5,243
0.90
1.91
14.12
(1.90)
(0.61)
0.46
0.82
Labor Cost
Employee Benefits - Dependents
Employee Benefits - Non-Dependents
Labor Hired - Dependents
Labor Hired - Non-Dependents
Value of Unpaid Labor & Management
Total Labor Cost
Depreciation & Equity Cost
Machinery, Equipment, Building Depreciation
Equiy per Cow
Interest on Equity Capital
Total Depreciation & Equity Cost
Total Expenses
Total Income - Total Expenses
Table 3 shows that even as debt per cow increases, interest paid per CWT EQ decreases. Labor costs and depreciation
per CWT EQ decrease also as milk sold per cow increases. Equity per cow falls 30%, but the interest on equity capital
per CWT EQ falls 50%. Total Income – Total Expenses (profit) increases$2.72 per CWT EQ from the lowest milk
sold per cow range to the highest.
Table 4
Net Farm Income from Operations (NFIFO) Summary
Total Allocated Costs
Net Farm Income From Operations (NFIFO)
Gain (Loss) on Sale of All Farm Capital Assets
Net Farm Income (NFI)
13.04
1.90
0.25
2.15
12.82
2.12
0.11
2.24
12.58
2.36
0.06
2.41
12.70
2.24
0.04
2.28
Table 4 tells a somewhat different story. In the various milk sold per cow ranges, Net Farm Income per CWT EQ is
nearly identical, an increase of only $0.13. How can this be? The answer lies in two items. They are “Value of
Unpaid Labor & Management” and “Interest on Equity Capital.” The combination of these two account for
approximately $2.40 of the $2.72 decrease in costs. These two “expenses” are not included in Net Farm Income.
Conclusion
Cost of milk production decreases as milk sold per cow increases. The amount that it decreases depends on which
costs we are considering. If we are considering only Basic Costs, the cost of production does not change greatly. If we
are looking at all cost (including the opportunity costs of labor, management, and equity capital), increased milk sold
per cow has a large impact on cost per CWT EQ ($2.72). If we are looking at the return to the operator’s labor,
management and equity capital (Net Farm Income), that return does not increase a large amount.
The Center for Dairy Profitability is a unit of the University of Wisconsin-Extension.
Mail: 1675 Observatory Drive, Rm. 277 Animal Sciences, UW-Madison, Madison, Wisconsin 53706
Phone: 608.263.5665 Fax: 608.262.9017 Website: http://cdp.wisc.edu