Abstract
The financial bottom line, or net income, is a key factor in determining how successful a dairy has been historically as well as an indicator of the financial ease or struggles the dairy might have in the future. What causes net income to vary from one operation to another is a key question for dairy farmers. For example, does milk price received, feed cost, total cost, or milk production have the greatest impact on net return variability? In this study, we evaluated Kansas Farm Management Dairy Enterprise data from the past 5 years to determine correlation of revenue, production, and cost factors among groups of high, medium, and low profit dairy operations. High-profit producers had larger operations, had slightly greater total costs ($62.63 per cow), and received slightly lower milk prices ($0.56/100 lb of milk) compared with low-profit producers. In contrast, the high profit group produced significantly more milk per cow. Milk price received and cost per cow did not affect profit nearly as much as total milk produced per cow. This study was conducted with data reported by small to midsize dairy herds. Further research should examine whether these results hold true for large herds.; Dairy Day, 2009, Kansas State University, Manhattan, KS, 2009; Dairy Research, 2009 is known as Dairy Day, 2009
Highlights
Profitability within the dairy industry has been in the spotlight during the past 5 years as a result of extreme volatility in the commodity markets that greatly affects income from milk sales and feed costs, which represent a large percentage of total expenses
The financial bottom line, or net income, is a key factor in determining how successful a dairy has been historically as well as an indicator of the financial ease or struggles the dairy might have in the future
What causes net income to vary from one operation to another is a key question for dairy farmers
Summary
Profitability within the dairy industry has been in the spotlight during the past 5 years as a result of extreme volatility in the commodity markets that greatly affects income from milk sales and feed costs, which represent a large percentage of total expenses. Many producers have focused on marketing milk and feed to create set prices received and paid. Because of the decline in the milk price during 2009, some producers cut feed costs to make up for loss in milk income and others focused on improving production to generate more revenue. Small to midsize producers have felt a major crunch in their cash flow and net income in the past few years. Producers who have capital saved from previous profitable years can survive longer during times of low milk prices and increased costs
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