Dairy budgets prepared by Robert Tigner, a Nebraska dairy Extension specialist, shows that $20 milk is not enough to overcome the effects of $6/bu corn, $295/ton soybean meal and $250/ton hay.
Tigner estimates, based on December 2011 prices, show tie stall herds covering variable costs by 2.61/cwt for 20,000 lb. herds and $4.33/cwt for 24,000 lb. herds. But when all costs are included, the return to management goes into the red quickly. Tigner estimates the 20K herds are losing $4/cwt and the 24K herds, $1.44/cwt. (His estimates include a labor estimate of 70 hours/cow/year at $13/hour.)
Things aren’t a whole lot better for average producing freestall herds. Tigner estimates 20K freestall herds are losing $2.78/cwt when all costs are included. The 24K herds are at breakeven. (Here, he estimates 45 hours/cow/year at $13/hour is required.)
In both cases, higher production spreads fixed costs over more hundredweights. Even feed costs per hundredweight of milk is lower because maintenance costs are diluted out. Tigner estimates feed costs per hundredweight of milk sold is $13.63 for 24K herds compared to $15.20 for 20K herds.