Title: Summary of costs and returns for wholesale dairies, Palm Beach County, Florida
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Title: Summary of costs and returns for wholesale dairies, Palm Beach County, Florida
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Creator: Spurlock, A. H.
Publisher: Dept. of Agricultural Economics, Florida Agricultural Experiment Station
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Agricultural Economics Series No. 50-5a
preliminary -- Not for Publication


SUMMARY OF


COSTS


AND RETURNS


FOR


WHOLESALE DAIRIES, PALM BEA CH COUNTY,

FLOOR IDA

Average for Calendar Year 1949

















by



A. H. Spurlock
Donald L. Brooke
Associate Agricultural Economist.
Florida Agricultural Experiment Stations yo


Gainesville, Florida
April 1950







Summary of Costs and Returns for 17 Wholesale Dairies, Palm Beach County, Florida
Averages for Calendar Year 1949

:Volume Groups Gallons : All
Item : Uider :75,000-: 150,000 :dairies
: 7$,000:149,999: & over :

Number of dairies. . ..... .... : 6 : 6 : 17
Average number of cows per dairy . 106 : 181 : 343 : 212
Total production sold (gallons) . . :319,611:550,246:1,157,148:2,027,005
Average production sold per dairy (gallons). : 53,268:110,049: 192,858: 119,235
Gallons sold per year per cow. . 502.5 : 608.0 : 562.3 : 562.4
Gallons sold per day per cow . . 1.38 : 1.67 : 1.54 : 1.54


Income:
Milk sales . . .
Other income (bags, manure, etc.)......
Total income . . . .
Production costs:
Feed purchased . . . .
Labor hired. . . : . .
Unpaid family labor. . . .
Operator's labor and supervision (unpaid), ,.
Total labor expense............. :
Dairy supplies. . . ..
Power, lights, fuel. ....... ...
Repairs buildings, equipment . :
Truck expense. . . .
Taxes, licenses, insurance . . .
Veterinary and medicines . .
Seed, fertilizer, lime ........... .
Legal and professional expense . .
Telephone, office expense. . . a
Rent . . . . :
Miscellaneous expense. .... .....
Total expense before depreciation and interest:
Depreciation:
Inventory change on herd . . .
Dairy buildings, excl. operator's residence :
Dairy equipment. .. . .. :
Autos and trucks . . .
Tractors and miscellaneous equipment .
Total depreciation . .. :
Interest on investment @ 5 percent . :
Total production cost .... .
Net gain per gallon.*. ... ,. .. .
t


Cents Per Gallon
61.0 : 60.6 : 58.8 a 59.6
.7 : .8 : .7 .7
61.7 : 61.4 : 59.5 : 60.3

36.7 : 31.6 : 30.2 : 31.6
8. : 9.7 : 9.8 9.6
.5 : .6 : .2
5.8 : 3.4 : 2.2 3.1
14.7 : 13.7 : 12.0 : 12.9
1.0 : .7 : .8 : .8
1.3 : .8 .: 8 : ,9
.8: 1.2: .9 : 1.0
1.2: 1.0 : .9 : 1.0
.8 : 1,2 1.0 : 1.0
: .2: .2 : .2
.5 : 1.0 .8 .8
: : 2 .1

.6 .: 3 : 3 .3
.8 : .7 : .6 .7
58.8 : 52,4 : 468. : 51.3

.3 : .7 : .8 : ,6
.6 : .5 : .5 .5
.3 : .l : .3 .2
: .3 : ,3 .:
: .1 : .1 .1
1.6 : 1.7 : 2.0 : 1.8
3.0 : 2 : 3.0 3.0
63.4 : 56.9 : 53.7 :56.1
-1.7: 4.5 5.8 4.2


Ran., -* n


e urn o o
operator for labor and supervision *


4.1 :


7.9 :


8.0


Percent return on investment .. . : 2.2 12.9 : 4.6 12.2

SOURCE: Prepared by the Department of Agricultural Economics, Florida Agricultural
Experiment Station, Gainesville, Florida.
DLB:fhw 5/3/50
ExpSta., Ag.Ec. 100



*









Records of milk production costs and income were obtained from 17 whole-
sale producers in Palm Beach County. The period covered was for the calendar
year 1949. Data were taken from prepared income tax statements or accounting
records.

The cost of producing a gallon of milk is the result of many factors.
Among these are: (1) Prices of feed, supplies, equipment and cows for re-
placements; (2) wage rates paid workers; (3) productivity of cows; (4) effic-
iency of labor; (5) volume or total production. With prices and wage rates
constant, costs per gallon may change by a change in productivity of cows or
by total volume output. Assuming that no other factors change, then price
changes will be reflected in production costs to the same degree.

The average costs and returns per gallon of milk sold are shown as weight-
ed averages of the costs of each producer. Simple averages were calculated
but are not shown. The results were not significantly different by either
method.

The records were summarized by volume groups to show the variation in
cost and returns between different sizes of dairies. Costs and returns are
significantly different on large and small dairies and therefore bear con-
sideration.

A brief explanation of certain items included in income and expense is
given in the following paragraphs. The classification of expense items was
not uniform between producers, and thus made some difficulty in summarizing.
For example, an item like dairy supplies might be carried in a miscellaneous
account by some producer where it could not be accurately segregated. There-
fore some items of expense shown which are of relatively small size may not
in all cases be completely representative. However, the total expense, and
such items as feed purchased, labor hired, repairs and auto and truck expense
are believed to correctly represent the cost of these items.

Milk sales represent the amount received per gallon of milk sold to the
processor or distributor and includes receipts from all classes of milk dur-
ing the year. The volume of Class II milk was considerable for some dairies
during the summer months while others had no Class II milk. No Class III
milk was noted.

Other income includes the sale of bags, when recorded, manure sales,
soil conservation payments and miscellaneous income.

Feed purchased represents the cash outlay for all kinds of feed during
the year and was, for the most part, taken without inventories. Some of the
larger dairies having accounting records showed beginning and ending feed
inventories. Most dairies maintain a fairly constant feed supply and lack of
inventories where several dairies are included in a summary is a minor item.
Many dairies were raising part or all of their replacements, and feed purchased
was for raising heifers as well as milk production. Feed purchased ranged
from 26.8 cents to 53.0 cents per gallon of milk sold for all sizes of dairies.
A greater percentage of dairies in the small volume group were raising replace-
ments than in the large volume group. Regardless of volume, feed costs for
dairies raising replacements averaged 3.0 cents per gallon higher than for
dairies purchasing all replacements.









Labor hired represents the cash payment to dairy help. Other allowances
or privileges, such as a house to live in, or milk furnished are not included
inasmuch as the cost of these allowances is in the various other expense items,
The hired labor cost per gallon of milk sold ranged from 3.5 to 17.4 cents.
All dairies used hired labor.

Unpaid family labor was charged at prevailing wage rates according to
the amount of time spent in dairy work by unpaid members of the operators
family. Only five dairies reported unpaid family labor.

Operator's labor. The operator worked either full or part time in the
dairy barn, and in addition, performed the function of management for the
dairy business. The operator was asked to estimate the value of his service
and this was added as a labor cost.. It was usually estimated at the rate
received by the highest paid worker in the barn plus a few dollars per week.
Some estimated a flat yearly salary which averaged higher than the weekly
estimate method. This, of course, makes the amount per gallon for the
operator's labor and supervision fluctuate with the size or output of the
dairy. It ranged from 2.0 to 9.0 cents per gallon of milk sold.

Dairy supplies include such items as soap, washing soda, disinfectants,
sprays, boots and small replacement items, and was taken without adjustment
by inventories.

Power, lights, fuel. This item is mainly for electricity in operating
milking machines, refrigeration units, lights for the dairy barn and helpers
houses, where paid by the operator, and fuel for the boiler. The amounbper
gallon of milk sold ranged from 0.5 cents to 2., cents.

Repairs buildings, equipment. This item represents the amount spent
for repair of dairy buildings and dairy or farm equipment during the year.
It ranged from nothing to 1.8 cents per gallon.

Truck expense includes gasoline, oil, grease and repairs, but excludes
interest and depreciation which are in other items of expense. When autos
were used personally as well as in the dairy, an estimated percentage was
eliminated for personal use. Truck expense ranged from 0.1 to 2.6 cents per
gallon of milk sold.

Taxes, licenses, insurance represent the cost of taxes on real estate,
truck licenses and insurance on buildings, equipment and vehicles.

Veterinary and medicines ranged from nothing to 1.1 cents per gallon.

Seed, fertilizer, lime. This item represents the amount paid for
materials applied to pastures. It does not include labor or machine work
hired as the cost of these is in other classifications. Eleven farms report-
ed this item of expense during 1949. On these farms it ranged from 0.1 to
3.4 cents per gallon.

Legal and professional expense. Only the larger farms reported this
item. It includes attorneys or accountants fees and other legal expense.

Telephone, office expense includes cost of telephone when charged to










the dairy and cost of office supplies such as ledgers and postage. It was
reported by only two dairies*

Rent. Some dairymen' rent pastures or the dairy barn and its facilities.
The ost of this item ranged from nothing to 2.7 cents per gallon of milk
sold.

Miscellaneous expense includes many small items hard to classify, and
such things as dues and freight.

Depreciation was calculated on dairy buildings, barns and tenant houses
at 5 percent, and on dairy equipment (such as compressors, milk machines and
coolers) at 10 percent. Autos, trucks and tractors wre depreciated at 20
percent of cost. Autos used personally, as well as in the dairy business,
had a portion of their depreciation eliminated for personal use. Other farm
equipment, when it could be separated from tractors, was depreciated at 10
percent of its cost.

Inventory change on the herd is the net change in the value of the herd
from the beginning to the ending inventory. Actual calculations were as
follows: (Beginning inventory plus purchases) minus (sales plus ending
inventory) equals net change in inventory for the year. Cattle deaths during
the year are automatically accounted for since they are not present in the
ending inventory. Their value is thus present in the net change computation.

This method of combining purchases, sales and deaths, or losses of
cattle and inventories shows the net change in value of the producing herd for
the year. It aslo capitalizes the increase in value of the heifers raised
as replacements during the year and offsets the cost of feed, labor and other
items for raising them, by their increase in value.

Some adjustments in herd inventory were necessary because the average
price received for cows sold as beef during the year was as much as twice
the average value per head of cows in the beginning inventory. In making the
adjustment the value per head of cows in the beginning inventory was set at
near the average of the value of purchases as replacements and sales as beef.

Too, heifers raised as replacements were occasionally valued at more
than the average value of cows purchased as replacements. Heifer values were
adjusted to $100.00 each upon entering the herd. The cost of raising them
may be less than this amount but their cost would be much more if purchased
as replacements.

Interest on investment was charged at 5 percent for the year. A suc-
cessful economic enterprise should pay all cash costs, bear depreciation
cost, pay the owner or operator a reasonable amount for his labor and
supervision and earn a reasonable rate of interest on the investment in herd,
land, buildings, equipment, autos and trucks.

Some dairymen were paying interest on some of their equipment, or cows
purchased, or on real estate mortgages. However, this interest paid did not
represent the total capital required to operate a dairy nor was it entered
as a cost.









Total production cost is the sum of all direct and indirect items of
cost as explained above. Per gallon cost ranged from 48.6 to 72.6 cents.

Net gain per gallon represents the difference between total receipts
and total expenses. Net gain ranged from a minus 11.2 cents to a plus 12.8
cents per gallon of milk sold.

Return to operator for labor and supervision. This is one of the factors
for comparing the efficiency and success of dairies. It is obtained by add-
ing the net gain and the amount of the operator's labor, previously deducted.
It represents the total return to the operator for his labor, supervision
and conduct of the enterprise, after allowing 5 percent for the use of capital
required in the business. This return to the operator ranged from a minus
5.9 cents to a plus 16.1 cents per gallon of milk sold.

Percent return on investment represents the rate of earnings produced
by the capital invested in the dairy business, after allowing the operator
a reasonable compensation. It was computed by dividing total profit plus
interest at 5 percent, (previously deducted), by the average capital invested.
Percent return ranged from a minus 19.2 percent to a plus 36.4 percent.


DLB:fhw 5/h/50
Exp.Sta., Ag.Ec. 100






Agricultural Economics Series No. 50-5a
preliminary -- Not for Publication


/





SUMMARY OF COSTS AND RETURNS

FOR

WHOLESALE DAIRIES, PALM BEACH COUNTY,


FLORIDA

Average for Calendar Year 1949


















by



A. H. Spurlock
Donald L. Brooke
Associate Agricultural Economists
Florida Agricultural Experiment Stations


Gainesville, Florida
April 1950






Summary of Costs and Returns for 17 Wholesale Dairies, Palm Beach County, Florida
Averages for Calendar Year 1949

:Volume Groups Gallons : All
Item : Uider :75,000-: 150,000 :dairies
: 75,000::14,999: & over

Number of dairies.. . .. 6 5 6 : 17
Average number of cows per dairy . : 106 : 181 : 343 :212
Total production sold (gallons). . :319,611:550,2t6:1,157,148:2,027,005
Average production sold per dairy (gallons) : 53,268:110,049: 192,858: 119,235
Gallons sold per year per cow. . . : 502.5 : 608.0 : 562,3 : 562.4
Gallons sold per day per cow . . 1.38 : 1.67 : 1.54 : 1.54

Income: : Cents Per Gallon
Milk sales . : 61.0 : 60.6 : 58.8 : 59.6
Other income (bags, manure, etc.). .7 : .8 : .7 : .7
Total income .. .. . . 61.7 : 61.4 : 59.5 : 60.3
Production costs:: : :
Feed purchased . . . 36.7 : 31.6 : 30.2 : 31.6
Labor hired. . : 8.4 : 9.7 : 9.8 : 9.6
Unpaid family labor ......... : .5: .6: .2
Operator's labor and supervision (unpaid). 5.8 : 3.4 : 2.2 : 3.1
Total labor expense. . . : .7 : 13.7 : 12.0 : 12.9
Dairy supplies . . . : 1.0 : .7 : .8 : .8
Power, lights, fuel. . . . : 1.3 : .8 : .8 : ,9
Repairs buildings, equipment . 8 : 12 : ,9 : 1.0
Truck expense.. . . . : 1.2 : 1.0 : .9 : 1.0
Taxes, licenses, insurance . .8 : 1.2 : 1,0 1.0
Veterinary and medicines . . .4 2 : 2 ,2
Seed, fertilizer, lime . . . .5 : : 8 : 8
Legal and professional expense . : : .2 : .1
Telephone, office expense. ..... : : : : -
Rent . . . . : ,6 .3 .3 .3
Miscellaneous expense. . . 8 7 : .6 : .7
Total expense before depreciation and interest: 58.6 : 52.4 : 148. : 51.3
Depreciation:
Inventory change on herd . . ,3 : ,7 : .8 : ,6
Dairy buildings, excl. operator's residence : 6 : .5: 5 : 5
Dairy equipment. . . .. : .3 : ,1: .3 : 2
Autos and trucks . : .4 : .3 : .3 : 4
Tractors and miscellaneous equipment . : -. : .1 .1 1
Total depreciation . . : 6 : 1.7 : 2.0 : 1.
Interest on investment @ 5 percent : 3.0 : 2.8 : 3.0 : 3.0
Total production cost .. : 63.4 : 56.9 : 53.7 56.1
Net gain per gallon. . .. ...... -17 4.5 58 4.2

Return to operator for labor and supervision 4.1 7.9 80 73
S a a


Percent return on investment ... .


SOURCE;


2.2 : 12.9


* i


14.6 :


12.2


Prepared by the Department of Agricultural Economics, Florida Agricultural
Experiment Station, Gainesville, Florida.


DLB:fhw 5/3/50
ExpSta., Ag.Ec. 100








Records of milk production costs and income were obtained from 17 whole-
sale producers in Palm Beach County. The period covered was for the calendar
year 1949. Data were taken from prepared income tax statements or accounting
records.

The cost of producing a gallon of milk is the result of many factors.
Among these are: (1) Prices of feed, supplies, equipment and cows for re-
placements; (2) wage rates paid workers; (3) productivity of cows; (4) effic-
iency of labor; (5) volume or total production. With prices and wage rates
constant, costs per gallon may change by a change in productivity of cows or
by total volume output. Assuming that no other factors change, then price
changes will be reflected in production costs to the same degree.

The average costs and returns per gallon of milk sold are shown as weight-
ed averages of the costs of each producer. Simple averages were calculated
but are not shown. The results were not significantly different by either
method.

The records were summarized by volume groups to show the variation in
costs and returns between different sizes of dairies. Costs and returns are
significantly different on large and small dairies and therefore bear con-
sideration.

A brief explanation of certain items included in income and expense is
given in the following paragraphs. The classification of expense items was
not uniform between producers, and thus made some difficulty in summarizing.
For example, an item like dairy supplies might be carried in a miscellaneous
account by some producer where it could not be accurately segregated. There-
fore some items of expense shown which are of relatively small size may not
in all cases be completely representative. However, the total expense, and
such items as feed purchased, labor hired, repairs and auto and truck expense
are believed to correctly represent the cost of these items.

Milk sales represent the amount received per gallon of milk sold to the
processor or distributor and includes receipts from all classes of milk dur-
ing the year. The volume of Class II milk was considerable for some dairies
during the summer months while others had no Class II milk. No Class III
milk was noted.

Other income includes the sale of bags, when recorded, manure sales,
soil conservation payments and miscellaneous income,

Feed purchased represents the cash outlay for all kinds of feed during
the year and was, for the most part, taken without inventories. Some of the
larger dairies having accounting records showed beginning and ending feed
inventories. Most dairies maintain a fairly constant feed supply and lack of
inventories where several dairies are included in a summary is a minor item.
Many dairies were raising part or all of their replacements, and feed purchased
was for raising heifers as well as milk production. Feed purchased ranged
from 26.8 cents to 53.0 cents per gallon of milk sold for all sizes of dairies.
A greater percentage of dairies in the small volume group were raising replace-
ments than in the large volume group. Regardless of volume, feed costs for
dairies raising replacements averaged 3.0 cents per gallon higher than for
dairies purchasing all replacements.








Labor hired represents the cash payment to dairy help. Other allowances
or privileges, such as a house to live in, or milk furnished are not included
inasmuch as the cost of these allowances is in the various other expense items.
The hired labor cost per gallon of milk sold ranged from 3.5 to 17.4 cents.
All dairies used hired labor.

Unpaid family labor was charged at prevailing wage rates according to
the amount of time spent in dairy work by unpaid members of the operator's
family. Only five dairies reported unpaid family labor.

Operator's labor. The operator worked either full or part time in the
dairy barn, and in addition, performed the function of management for the
dairy business. The operator was asked to estimate the value of his service
and this was added as a labor cost. It was usually estimated at the rate
received by the highest paid worker in the barn plus a few dollars per week.
Some estimated a flat yearly salary which averaged higher than the weekly
estimate method. This, of course, makes the amount per gallon for the
operator's labor and supervision fluctuate with the size or output of the
dairy. It ranged from 2.0 to 9.0 cents per gallon of milk sold.

Dairy supplies include such items as soap, washing soda, disinfectants,
sprays, boots and small replacement items, and was taken without adjustment
by inventories.

Power, lights, fuel. This item is mainly for electricity in operating
milking machines, refrigeration units, lights for the dairy barn and helpers
houses, where paid by the operator, and fuel for the boiler. The amount per
gallon of milk sold ranged from 0.5 cents to 2.4 cents.

Repairs buildings, equipment. This item represents the amount spent
for repair of dairy buildings and dairy or farm equipment during the year.
It ranged from nothing to 1.8 cents per gallon.

Truck expense includes gasoline, oil, grease and repairs, but excludes
interest and depreciation which are in other items of expense. When autos
were used personally as well as in the dairy, an estimated percentage was
eliminated for personal use. Truck expense ranged from 0.1 to 2.6 cents per
gallon of milk sold.

Taxes, licenses, insurance represent the cost of taxes on real estate,
truck licenses and insurance on buildings, equipment and vehicles.

Veterinary and medicines ranged from nothing to 1.1 cents per gallon.

Seed, fertilizer, lime. This item represents the amount paid for
materials applied to pastures. It does not include labor or machine work
hired as the cost of these is in other classifications. Eleven farms report-
ed this item of expense during 1949. On these farms it ranged from 0.1 to
3.h cents per gallon.

Legal and professional expense. Only the larger farms reported this
item. It includes attorneys or accountants fees and other legal expense.

Telephone, office expense includes cost of telephone when charged to









the dairy and cost of office supplies such as ledgers and postage. It was
reported by only two dairies.

Rent, Some dairymen' rent pastures or the dairy barn and its facilities.
The costof this item ranged from nothing to 2.7 cents per gallon of milk
sold.

Miscellaneous expense includes many small items hard to classify, and
such things as dues and freight.

Depreciation was calculated on dairy buildings, barns and tenant houses
at 5 percent, and on dairy equipment (such as compressors, milk machines and
coolers) at 10 percent. Autos, trucks and tracts wvre depreciated at 20
percent of cost. Autos used personally, as well as in the dairy business,
had a portion of their depreciation eliminated for personal use. Other farm
equipment, when it could be separated from tractors, was depreciated at 10
percent of its cost.

Inventory change on the herd is the net change in the value of the herd
from the beginning to the ending inventory. Actual calculations were as
follows: (Beginning inventory plus purchases) minus (sales plus ending
inventory) equals net change in inventory for the year. Cattle deaths during
the year are automatically accounted for since they are not present in the
ending inventory. Their value is thus present in the net change computation.

This method of combining purchases, sales and deaths, or losses of
cattle and inventories shows the net change in value of the producing herd for
the year. It aslo capitalizes the increase in value of the heifers raised
as replacements -during the year and offsets the cost of feed, labor and other
items for raising them, by their increase in value.

Some adjustments in herd inventory were necessary because the average
price received for cows sold as beef during the year was as much as twice
the average value per head of cows in the beginning inventory. In making the
adjustment the value per head of cows in the beginning inventory was set at
near the average of the value of purchases as replacements and sales as beef.

Too, heifers raised as replacements were occasionally valued at more
than the average value of cows purchased as replacements. Heifer values were
adjusted to $100.00 each upon entering the herd. The cost of raising them
may be less than this amount but their cost would be much more if purchased
as replacements.

Interest on investment was charged at 5 percent for the year. A suc-
cessful economic enterprise should pay all cash costs, bear depreciation
cost, pay the owner or operator a reasonable amount for his labor and
supervision and earn a reasonable rate of interest on the investment in herd,
land, buildings, equipment, autos and trucks.

Some dairymen were paying interest on some of their equipment, or cows
purchased, or on real estate mortgages. However, this interest paid did not
represent the total capital required to operate a dairy nor was it entered
as a cost.








Total production cost is the sum of all direct and indirect items of
cost as explained above. Per gallon cost ranged from 48.6 to 72.6 cents.

Net gain per gallon represents the difference between total receipts
and total expenses. Net gain ranged from a minus 11.2 cents to a plus 12.8
cents per gallon of milk sold,

Return to operator for labor and supervision. This is one of the factors
for comparing the efficiency and success of dairies. It is obtained by add-
ing the net gain and the amount of the operator's labor, previously deducted.
It represents the total return to the operator for his labor, supervision
and conduct of the enterprise, after allowing 5 percent for the use of capital
required in the business. This return to the operator ranged from a minus
5.9 cents to a plus 16.1 cents per gallon of milk sold.

Percent return on investment represents the rate of earnings produced
by the capital invested in the dairy business, after allowing the operator
a reasonable compensation. It was computed by dividing total profit plus
int.crest at 5 percent, (previously deducted), by the average capital invested.
Percent return ranged from a minus 19.2 percent to a plus 36.4 percent.



DLB:fhw 5/4/50
ExpoSta., Ag.Ec. 100




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