Introduction
"In the last two decades, well-run dairies learned to manage dollars. In the next, they will manage pennies (Laura Sands, Dairy Toa, Nov.-Dec 1999). In today's very competitive market, dairy producers must pay close attention to their financial management as well as their cow management. They must be able to do some planning and budgeting and following up on the result of their investments. In order to monitor profitability, the farm manager must understand what drives profits and track that information on a routine basis.
One of the most important variables to track is the feed cost per cwt of milk. Knowing that variable can allow you to calculate your gross margin, which in a dairy, translates to income over feed cost, since feed cost is such a large percentage of the total cost of production (40-50%). Feed costs (on a per hundred weight of milk basis) have to do not only with the cost of feed on a per ton or pound basis but with feed conversion. 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 producer can improve their gross margin. Feed companies and consultants should help their clients focus on feed conversion and to 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 hudredweight of milk.
The purpose of this project was to find the lactating feed cost per hudredweight of milk at participating dairies, to calculate their gross margin per cow ( milk revenue minus feed cost) and evaluate their cow care and comfort in relation to feed conversion. Thirty dairies were initially approached but only 20 provided the necessary information. I worked closely with dairy nutritionists, feeders, herdsmen and owners to obtain data on milk production, feed rations, cow numbers, feeding records, and feed ingredient prices. Due to the great variation in milk prices related to quota and quality bonuses, a milk price of $11.00 per cwt. was used for all dairies. This way the dairies could be compared on the variables in question alone ("on a level playing field").
The dairies included in the project are very diverse in size, management style, milk production, and feeding program.
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