$20 Milk Doesn’t Cover All Costs

December 20, 2011 09:20 AM

Milk prices that exceed $20/cwt still are not enough to cover all economic costs on most western corn belt dairy farms, according to budgets calculated by Robert Tigner, a Nebraska Extension dairy specialist based in Imperial.

"Dairy farms that produce 20,000 lb. of milk per cow do not cover full economic costs," he says. "And tiestall operations do worse than freestall barns at that production level."
His November budget shows tiestall barns producing 20,000 lb. of milk per cow were losing $1.81/cwt when all costs were included, including labor at $13/hour. Freestall barns at this production lost 29¢/cwt.
The difference is the amount of labor. Tigner estimates tiestall barns require 70 hours of labor per cow per year. Freestall barns require 45 hours per cow per year, or about 35% less. At $13 per hour, that’s $325 less labor cost. "So as has been true for some time, economics lead dairy operators to higher milk per cow and to convert to freestall facilities," he says.
Those operations able to squeeze 24,000 lb. of milk per cow per year were able to have a net return over all costs. Tie stall barns showed a 46¢/cwt return; freestall barns, a $1.81/cwt return.
The estimates are based on a Central Order milk price of $20.36. Feed costs were pegged at $6.33/bu for corn, $258/ton for soybean meal, $190/ton for hay and $63/ton for corn silage.

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