Projecting the Income from Milk Sales for a Dairy Enterprise

Abstract

Financial management is critically important for maintaining an efficient and profitable dairy farm enterprise. For good financial management, monthly cash flow planning is a necessity. The most important component in cash flow planning is projecting the income from milk sales. Projection factors were developed to predict for a cow the monthly milk yield for the next 6 mo. Predictions for individual cows then can be summed for the entire herd, and from the forecasted milk price the milk check can be estimated. The data consisted of 204,558 complete Holstein lactations from 1959 to 1969 in 2100 New York herds. Different sets of projection factors were developed for cows in milk at the time of prediction and for cows entering production during the predicted period. Factors were developed considering lactation number (1, 2, 3, and 4 or greater), season of calving (January to April, May to August, September to December) and, for the first three lactations, age at calving (younger and older). The accuracy of these predictions was measured by the correlation between the actual and predicted milk yield by month of prediction. This correlation was highest (.90) for the 1st mo of prediction and decreased as the predicted month was further away, being .52 for the 6th mo of prediction. To be effective in assisting dairy farmers with their cash flow planning activity, the procedure developed should be incorporated in the Dairy Herd Improvement system. Consequently, the farmer will receive a monthly report that includes the predicted milk checks for the next 6 mo.