Tricounty News

Farm management minute

What kind of production and returns have Minnesota dairy producers been realizing? To answer this question we can turn to the dairy tables found in the 2003 Farm Business Management annual report to look at items such as cow numbers, average production levels, price received, feed cost and net returns. Throughout the state 529 farms were analyzed. Average herd size continues to rise at 102.8 cows per herd for 2003. This compares to an average herd size of 80.5 just five years ago. Production per cow has been very stable with a five year average of 19,716 pounds per cow and 2003 production at 19,998 pounds. The average price received by the producers for the past five years is at 13.46 per cwt (hundredweight), with three of the past five years being less than desirable. That alone is reason enough to celebrate the current price levels while they last. The average price received on the farm by Minnesota producers in 2003 was 12.93 per cwt. What about the expense side? The average expense per cwt has continued to climb slightly, with feed making up the bulk of the difference. Total direct and overhead expense per cwt was 11.24 for the 2003 year as compared with 10.41 five years earlier. Included in those expenses is a feed cost of 5.44 per cwt, compared with 4.98 per cwt five years ago. What impact then has this had on net returns? Again, three of the past five years have seen lower than desirable returns primarily because of lower milk prices, as production and expenses have been fairly steady. The 2003 net return per cow was 369 dollars or 1.84 per cwt. When you include the added cost of raising the replacement heifers the net return dropped to 307 dollars per cow or 1.53 per cwt. With the average herd size of 102.8, you would be looking at a 31,560 dollar average net income from the dairy side of the farm business. In my opinion, this is a modest income from managing 102.8 dairy cows as this income must provide for family living expenses, income taxes, health and medical expenses, principle payments and any retirement account investments, if possible. With this in mind we should all thank our dairy producers for their hard work and dedication in producing our milk supply, and remember that they are not getting more than they deserve when we buy that gallon of milk at the local market. If you have questions regarding this or other farm management issues, contact a Farm Business Management instructor in your area toll-free at (800) 959-6282.