KANSAS CITY, MO – If you’re going to play in dairy, you better plan to play big.
According to recent data from the Economic Research Service (ERS) at USDA, in 2016 62 percent of U.S. dairy farms with at least 2,000 head saw positive cash flow – whereby gross returns exceeded total costs.
Smaller operations with between 1,000 and 2,000 head were only 44 percent likely to see the same financial result.
Dairies with 500 to 1,000 cows, saw 43 percent finding some profitability and the data is clear for the smallest classes with less than 100 cows, 90 percent of every operation failed to see their income outpace their expenses.
Total costs include cash expenses like feed, fuel, and hired labor, but also include estimates of the costs of the farm’s capital and of the family labor provided to operate the dairy farm.
A farm that does not cover total costs can continue to operate and provide a living for the family operating the farm if it covers cash expenses and the costs of the family’s labor. SO for example, about 20 percent of farms with 100-199 cows earned positive net returns in 2016, 46 percent earned enough to cover all cash expenses and to provide a living for the farm family. However, these farms did not earn enough to cover the annual costs of capital recovery.
(SOURCE: All Ag News)