Dairy Focus: Know Your Feed Costs per Hundredweight
By J.W. Schroeder, Dairy Specialist NDSU Extension Service
Editors note: This is the fourth article in a series on the issues facing the region’s dairy farmers, particularly the impact of the growing ethanol industry.
Knowing your cost of producing milk is one of the most valuable pieces of financial information you can have.
While you may not like the price received for your product, knowing your cost means knowing if you’re making a profit or just wish you were.
The calculations can be broken down into purchased feed versus total feed costs. If you buy all your feed, the costs will be the same.
In terms of using a traffic light as an analogy to your feed costs, a green light for purchased feed, assuming forages are home-produced, would be $3.50 per hundredweight (cwt), a yellow light would be $3.50 to $4.50 and a red light more than $4.50.
In other words, if you can produce 100 pounds of milk for less than $3.50 in purchased feed, you have done well.
To calculate, take line 18 from Schedule F of your income tax return and divide it by the number of hundredweights of milk sold (not Dairy Herd Improvement average). Line 18 should be the purchased feed for replacements, dry cows and lactating cows. If beef cows are fed, any feed purchased for them should be subtracted.
For example: $100,000 in purchased feed per 26,250 cwt sold equals $3.81. For total feed costs, the green light is less than $6 per cwt, the yellow light is $6 to $8 and the red light is more than $8.
To do these calculations, add purchased feed and home-produced forage costs. Using the cost of production of your own feeds, plus an allowance for storage and feeding losses, is best. Using North Dakota Farm Management program budgets is a good way to get started if you haven’t done so already. Differences in yields will not really change these numbers.
For example: $188,000 total feed cost per 26,250 cwt of milk sold equals $690. If you fall into the red-light category in either the purchased or total feed cost, evaluate your situation and determine the cause.
NDSU Agriculture Communication
|Source:||J.W. Schroeder, (701) 231-7663, firstname.lastname@example.org|
|Editor:||Ellen Crawford, (701) 231-5391, email@example.com|