Feed costs tend to be the largest expense on a dairy operation and managing those costs contributes to a dairy’s ability to be profitable.
Feed costs typically are the largest expense on a dairy operation and managing those costs contribute to a dairy’s ability to be profitable. These costs include purchased feed, but also the true costs to produce crops raised on the farm. Home-raised feeds vary in type, quality, and quantity, but more importantly, the cost to produce a given feedstuff is unique to each individual operation. Many farm businesses overlook planning and tracking the costs associated with home-raised feeds despite the integral relationship with profitability.
Variations in soil fertility, available acreage, equipment, storage, and labor are some of the larger factors contributing to quality and quantity of feeds produced on the farm. Finding the right balance between these two will differ for individual farms. Knowing the costs associated with the home raised feeds is an integral part of that cropping strategy. Specific steps in determining their costs is outlined in “ The Crop Costs Conversation ” (Beck, 2014). The main areas to examine are determining crop inventories, estimating direct and overhead costs, and comparing to market values. It recommended identifying crop expenses such as seed, fertilizer, and chemical for each specific crop. Keeping track of each expense as it applied to crop acres will increase the accuracy of calculating the direct costs and planning future costs based on the previous year.
Figure 1. Pennsylvania Corn Silage Costs and Yields for 2016-2019 (91 dairies).
Figure 2. Pennsylvania Corn Grain Costs and Yields for 2016-2019 (58 dairies).
Figure 3. Pennsylvania Small Grain Silage Costs and Yields for 2016-2019 (75 dairies).
Dairy farms have a unique combination of resources and limitations to ensure their farm is profitable. To buffer market volatility, controlling home-raised feed costs by estimating expenses, determining actual costs, and monitoring both feed quality and quantity are needed. Penn State Extension has tools and programs available to help producers and their advisors get started. The “Know Your Numbers” cash flow program is one method, and there is the newly revised CropCents mobile app . This application (available regardless of mobile or computer platform) allows producers to enter their direct crop expenses as well as partition operating expenses to all the crops produced on the farm, resulting in estimates of yields and costs per unit. Producers can determine the yields based on common units for each commodity.
- Beck, T. 2014. “The Crop Costs Conversation: Get the most out of your cropping plan”, the Dairy Digest, February, 2014. Accessed 8/15/2016.
- FINBIN (2020). Center for Farm Financial Management: University of Minnesota. (originally created 9/8/2020).
- Ishler, V. 2020. Penn State Feed Price List. email@example.com. Accessed 9/8/2020.