Profits and the Dairy

The basics seem pretty simple: Income minus expenses = net profit. However, with milk prices varying all the time, sometimes by large amounts, it is hard to keep this equation in positive balance! Maximising the Net Profit is an advisor’s main goal!

Income is made from milk SOLD. This is not the same as milk obtained from the parlour: some may be used by the producer and friends/family. Some may be in withhold from drug use and colostrum; so it is good to know what volume of MILK SHIPPED FROM THE FARM is. Other income may be from calf sales, beef sales, surplus feed and bedding etc.

Costs can be many! Most costs on a dairy are in feed. See if you can work this out on a kg Dry Matter basis or ask your nutritionist. It is important to note here that GRASS IS NOT FREE! You still have to maintain it, cut it, store it etc. Other costs are in labour, rent, energy, water etc. Know all of these and you can work out your Net Profit.

Profit can be maximised by 3 ways:

• Milk price can be influenced by milk quality (fat%, protein%, SCC)
• Cost of production can be influenced by reducing disease losses, increasing herd numbers and increasing labour efficiency
• Volume of milk can be influenced by reducing disease, increasing feed intake, improving reproduction and 3 X daily milking

Income Over Feed Costs

IOFC is a very popular way of working out how your feed costs work to produce one litre of milk. The principle of this lies in knowing the feed costs to maintain the cow (breathing, ruminating, movement, calf growth etc.). Every litre of milk produced on top of this requires a certain amount of kg of Dry Matter at your cost of feed for that time. Of course, the more litres of milk you get, the more “diluted” the maintenance cost becomes and the more efficient your IOFC is.

Summary

So IMPROVE YOUR PROFITS by choosing your advice wisely!

Managing People, Equipment, Procedures, Environment and Monitoring can all help to improve your Profits. Inspire Cattle Solutions are GREAT at this!

Where is the Evidence?

Bozic M., Newton J., Thraen C.S., Gould B.W.,. 2012. “Mean-reversion in income over feed cost margins: Evidence and implications for managing margin risk by US dairy producers.” Journal of Dairy Science 95: 7417-7428. doi:10.3168/jds.2012-5818.