Why is feed cost per hundredweight an important measure?
Many dairy extension agents from various leading agricultural universities
express their concerns about the small number of farm managers that understand what drives profits. Very few dairy producers are monitoring the right information on a routine basis in order to have a good handle on their profitability.
A very important variable to monitor and for which to set goals, in any business, is the gross margin. Very few dairy producers, maybe 15%, have a handle on their gross margin'. In the dairy business the best representation of the gross margin is simply the milk price minus the feed cost, since feed cost is such a large percentage of the total cost of production (40-50%). Therefore, it's very important to track the feed cost per cwt of milk. Knowing that variable can allow producers to calculate their gross margin. Feed cost (on a per hundred weight of milk basis) has to do not only with the cost of feed on a per ton or pound basis but with feed conversion.
Feed conversion, or the pounds of milk produced from a given amount of feed, depends on the quality of the feed, the ration formulation, and the way the cows and the facilities are managed. The dairy producer has little control over the milk price but does have control over feed purchasing, ration formulation, cow care and comfort, and inventory management. By better managing those areas, dairy producers can improve their gross margin. Feed companies and consultants should help their clients focus on feed conversion and the improvement of gross margin. The best way to improve that margin is by increasing milk output per cow, which in turn drops feed cost per hundredweight of milO. "Feed cost per 100 lb of milk is a common marker of economic
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