Income per Cow
To determine the highest annual gross income per cow, two factors have to be considered: milk production per cow and gross milk price. As Figure 1 depicts for 2015, 20% of the U.S. milk production came from California. However, California had the second highest milk production per cow and the lowest milk income per cow. Idaho had the highest production per cow, averaging over 66 lbs per cow per day statewide. Pennsylvania had the highest all-milk price at $18.46/cwt in 2015, and every year for the past nine years. New York achieved the top milk income per cow in 2015—$11.34 per cow per day. New York also led the top dairy states in milk income per cow the last nine years.
Figure 1. 2015 Top 5 dairy states ranked by milk production, milk price, feed cost, and income over feed cost (IOFC).
Determining Feed Costs
Feed costs typically account for 40 to 60% of the cost of milk production, but vary greatly among individual operations. To determine the annual feed cost for these five states, three feed prices were analyzed: corn grain, alfalfa hay, and 48% soybean meal. Corn grain and alfalfa hay prices were available for each state from annual National Ag Statistic Service rankings (www.nass.usda.gov). For soybean meal, the market summary (provided by USDA Agricultural Marketing Service) closest to the state was used to calculate annual price per ton averages. Soybean meal prices for New York and Pennsylvania were provided by the monthly Feed Price List (Ishler, 2016). Finally, feed costs were estimated based on an as-fed ration outlined in “Tracking Milk Prices and Feed Costs” by Bailey & Ishler (2008) and adjusted according to the average milk per milk cow for a state.
As depicted in Figure 1 for 2015, Wisconsin ranked the highest for the cheapest feed cost ($2.74 per cow per day). Pennsylvania was second, at just under $4.00 per cow per day, while the remaining three states all had feed costs in the $4.05 to $4.20 range. Wisconsin had the lowest feed cost for these five states in eight of the last nine years. This can be attributed to their low corn grain and alfalfa hay prices.
Income over Feed Cost (IOFC)
Taking the difference between milk income per cow and feed cost per cow results in the IOFC. This is how much money is left per cow per day to cover all expenses other than feed (labor, supplies, facility maintenance, debt service, etc.). In 2015, Wisconsin led the top dairy states in IOFC ($8.28). The next closest state was New York at $7.15. As seen in Figure 2, Pennsylvania was second to last for IOFC at $6.34. Over the last nine years, Pennsylvania ranked first in IOFC only once and ranked second twice.
Figure 2. Annual income over feed cost (IOFC) for the top 5 dairy states.
It is interesting to note that in 2015 the states with the highest production, production per cow, and even highest milk income per cow did not have the highest IOFC. For example, despite being in the top one or two for milk per milk cow for the last nine years, California has averaged the lowest IOFC of any of the top dairy states (Figure 2). Likewise, Pennsylvania was second in feed costs but next to last in IOFC due to low production per cow. The Penn State Extension Dairy team has a great online collection of information and tools to help producers track their individual IOFC.
Summary
Though there are other expenses contributing to the cost of milk production, IOFC is a good starting point to assess how market and production fluctuations are impacting a dairy operation. Achieving good IOFC for an individual herd means maintaining the right balance of strong milk production and reasonable feed cost. Determining the breakeven cost of production allows the herd to then use the IOFC information to make more informed management decisions. Individual herds should examine their own IOFC and calculate it routinely to help assess how their operations are performing and reacting to market (milk and feed) volatility and continuous changes in production.
Source: Penn State Extension
