Effect of Milk Pricing Systems on Income over Feed and Variable Costs of Dairy Cattle Breeds

Abstract

An electronic spreadsheet program using a budgeting procedure was used to compare the effect of protein pricing differentials and cheese yield pricing systems on income over feed and variable costs of the six major dairy breeds. Increasing the protein differentials from $ .03 to .22/45.4kg milk per .1 unit increase in protein percent above 3.2% decreased the difference in income over feed and variable costs between non-Holstein and Holstein breeds. With the prices and assumptions used, the income over feed and variable costs of non-Holstein breeds never equaled or surpassed that of Holsteins. With current milk, feed, and cheese prices, using a cheese pricing system caused a substantial decrease in income over feed costs for Holsteins and decreased the differences between Holsteins and non-Holsteins. Increased cheese prices, increased feed prices, and lowered milk prices also narrowed the differences in income over feed and variable costs between Holstein and non-Holstein breeds. Although changes in the milk pricing system make the non-Holstein breeds more competitive with Holsteins, non-Holstein breeds must produce between 224 and 1539kg more milk with the various milk and feed price scenarios used for the income over feed and variable costs to equal that of Holsteins.