Understanding Your Break-Even Cost of Production

With earnings dropping from 2017, and this becoming the fourth year of low or negative earnings for many dairy farms, understanding different financial aspects of your business is critical. A key starting point is to understand different measures of cost of production and what a break-even milk price may be for your farm.

The costs that have to be covered by the milk price determine the break-even point, or price. The challenge becomes what to include, or not include, to determine what those costs may be. Several different measures of cost of production can be calculated for your farm, each with different implications.

Jason Karszes, Cornell CALS PRO-DAIRY, highlights Break-Even Cost of Production, using data from the Dairy Farm Business Summary and Analysis Program to show averages and ranges for both 2016 and 2017.