Differences among high, medium, and low profit dairy operations: an analysis of 2004-2008 Kansas Farm Management Association Dairy Enterprises

Abstract

The financial bottom line, or net income, is a key factor in determining how successful a dairy has been historically as well as an indicator of the financial ease or struggles the dairy might have in the future. What causes net income to vary from one operation to another is a key question for dairy farmers. For example, does milk price received, feed cost, total cost, or milk production have the greatest impact on net return variability? In this study, we evaluated Kansas Farm Management Dairy Enterprise data from the past 5 years to determine correlation of revenue, production, and cost factors among groups of high, medium, and low profit dairy operations. High-profit producers had larger operations, had slightly greater total costs ($62.63 per cow), and received slightly lower milk prices ($0.56/100 lb of milk) compared with low-profit producers. In contrast, the high profit group produced significantly more milk per cow. Milk price received and cost per cow did not affect profit nearly as much as total milk produced per cow. This study was conducted with data reported by small to midsize dairy herds. Further research should examine whether these results hold true for large herds.