Effect of Increased Production per Cow on Economic Returns

Abstract

A budgeting procedure using a micro computer-based electronic spreadsheet program was used to determine the effect of increased milk production on income over feed and variable costs, income over total costs, and marginal returns and marginal costs of large and small breeds. Feed costs were calculated from the nutrient requirements of cows using six feed cost scenarios. Variable and fixed costs were estimated using current Ohio Cooperative Extension Service budget data. Milk production per cow ranged from 6363 to 11,818 kg/cow per yr for large breeds and from 4546 to 10,000kg for small breeds. Milk price ranged from $9 to $15 per 45.4kg milk sold. Feed costs ranged from 20.1 to 43.4% of total cost at the extreme feed prices. Income over total costs was positive at either 1) high milk prices and all feed prices or 2) a combination of moderate milk prices and medium or low feed prices. Whenever the income over total costs was positive, the ratio of marginal returns over marginal costs was above 1, indicating it was profitable to feed and manage for higher milk production. The results applied to both small and large breeds.