Maryland Dairy Economics

Most dairy farmers watch milk checks to track milk price. But do you know what your profit per cow is or how much it costs you to produce a hundred pounds of milk? Dairy farming is complex, and determining your profit and costs of production is sometimes difficult. Yet, it is important to understand them.

I encourage dairy farmers to calculate income and expenses on a per cow basis and cwt basis. This will give you good perspective on your profit, enabling you to analyze your efficiency. Each year, the University of Maryland Extension conducts the Maryland Dairy Farm Business Summary. Through this summary, we work individually with dairy farmers to calculate their income and expenses per cow and per cwt. Data from all farms participating are then summarized to determine industry-wide average income, expense, and profit per cow or per cwt. This gives farmers benchmarks with which they can compare their farm.
 

“...calculate income and expenses on a per cow and per cwt basis. This will give you a good perspective on your profit, enabling you to analyze efficiency.”

The tables below summarizes income, expenses, and profit per cow and per cwt and for 18 conventional non-organic dairy farms and 7 organic dairy farms. It shows annual averages for 3 years, from 2018-2020. As you compare your farm to the averages, you may want to take a careful look at costs that are more than 20 percent higher than the average to see if you can improve your management of those areas of your business. If some of your costs are more than 20 percent lower than average, then these may be areas of strength in your business.

Over the years the annual average profit per cow increased to a high of $840 per cow per year over the three years from 2013-2015. But for 2018 to 2020, the annual average profit per cow has plummeted $425 per cow. There is a considerable range around this average as the most profitable nine farms made an average of $653 per cow per year and the least profitable farms made $140 per cow.

Profit per cow for organic milk production is considerably higher at $852 per cow. However, organic processors are limiting the number of new farms they are accepting milk from and in some cases put quotas on existing organic farms.

If you would like your farm to participate in this analysis to get a good financial summary for your farm, please contact Dale Johnson at or 301-432-2767x325 or dmj@umd.edu.