New Tool to Help You Calculate Your Cost of Production

Knowing your cost of production is an important aspect of running a dairy farm business.  Estimating the cost per cow or cost per CWT is way to help farmers become more aware of their overall costs, not just their cash flow. 

The University of Kentucky and Kentucky Dairy Development Council have created a tool that allows farmers to calculate their cost of production based on real numbers from their farm.  This cost of production calculator is available online. By determining the cost of production on your farm, you can see opportunities for improving profitability on the farm and have information to make additional financial decisions about your dairy farm operation. 

To begin to estimate your cost of production, you should collect your financial records for the farm for the last year. If you participate in the KY Farm Business Management program, you can use your KFBM data to put into the COP tool. You may also use your personal records from taxes, your on-farm record keeping tool such as QuickBooks, DHI, record books from the extension office, co-op records of milk shipped, etc. It is important to gather your information so that it is simpler to input into the COP tool. 

Once you have your records accessible, you can enter your data into the website or paper form. First, you should input your average number of cows( milking and dry), milk yield, and annual variable costs.  The tabs at the top of the page allow you to choose a section to input your data:Variable Costs, Sales, Herd Data, Inventory, Loans, Equipment, and Other Loans are the tabs you can select to enter your information.  Once you have entered all your information, you can enter a comment (if desired) and click the submit button. The anonymous data will then be entered into a database for analysis with other Kentucky dairy farms. Remember the more accurate your input information is, the more accurate your cost of production analysis will be. 

The online cost of production calculator is available at: http://www.uky.edu/Ag/AnimalSciences/dairy/decisiontools/cop/cop.htm.

Authors: Katie Holzhause and Jeffrey Bewley