Economics of dairy farming hinge around the following factors:

  1. Milk production per cow – in a TMR system the production per cow has a significant effect on the economics of dairy farming. Considering the law of diminishing returns = one must feed for optimum production, not maximum production. Therefore the secret is to feed the correct feed to the right cows!

  2. Milk volume sold per production point (dairy farm) – volume premium for more than 23 000 liters of milk per day, can be as high as 30 sent per liter compared to small producers not receiving volume premiums. Volume has the biggest effect on fixed cost as most of the infrastructure, management and equipment is already in place… it therefore makes economical sense to milk as much as possible at the same dairy. Making sure the cows calf regularly also shortens the “days in milk” (DIM) so cows can produce more milk.

  3. Fodder cost – self produced fodder can cost about 60% of purchased fodder… the quality can also be controlled better when self produced. Therefore one must rather lease more land to produce more fodder of your own… buying in cost 40% more!

  4. Concentrate costs – commercial rations can cost at least 10% to 15% more per ton. Compared to buying in bulk and mixing one’s own ration. The only important precondition is that the formulation of the ration has to be done professionally.

  5. Milk price per liter – a 10 cents per liter difference in milk price can result in one million rand per year difference in milk income for the dairy farmer who produces 10 million liters per year. Therefore one has to negotiate for the maximum possible milk price. Using the bargaining power of a big volume at one dairy can result in a premium being paid for the milk from large dairies!

  6. Sale of cull cows – the body condition of cull cows have a huge influence on the selling price and thus the income from cull cows.


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