Title: Summary of costs and returns for wholesale dairies, Tampa, St. Petersburg and Lakeland areas, Florida
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Title: Summary of costs and returns for wholesale dairies, Tampa, St. Petersburg and Lakeland areas, Florida
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Creator: Spurlock, A. H.
Publisher: University of Florida, Department of Agricultural Economics, Florida Agricultural Experiment Station
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Agricultural Economics Series No. 50-5
Preliminary -- Not for Publication







SUMMARY OF COSTS AND RETURNS

FOR

WHOLE S ALE DAIRIES, TAMP A, ST. PE T E RS B URG


AND LAKELAND AREAS, FLORIDA

Average for Calendar Year 1949












by



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


F. W. Parvin
Associate Economist,
.Marketing and Farm Management
Florida Agricultural Extension Service









Gainesville, Florida
April 1950





Table 1
Summary of Costs and Returns for 21 Wholesale Dairies, Tampa Area, Florida
Averages for Calendar Year 1949

:Volume Groups Gallons:
Item : Under :50,000-:100,000: dai
dairies
: 50,000:99,999 :& over :

Number of dairies . .. .. : 11: 5 : 21
Average number of cows per dairy . 63 : 124 : 213 :131
Total production sold (gallons) . . :175,361:849,585:674,999:1,699,945
Average production sold per dairy (gallons) 35,072: 77,235:135,000: 80,950
Gallons sold per year per cow . : 556.7 : 622.9 : 633.8 : 617.9
Gallons sold per day per cow . . 1.53 : 1.71 : 1.74 : 1.69


Income: :
Milk sales . . . 55.5
Other income (bags, manure, etc.) .. : .3
Total income . . . : 55.8
Production costs:
Feed purchased . . . 27.5
Labor hired . . 7.1
Unpaid family labor . . . : 1.9
Operator's labor and supervision (unpaid) 8.2
Total labor expense . . . 17.2
Dairy supplies . . . .8:
Power, lights, fuel . . . 1.4
Repairs buildings, equipment . 2.6
Truck expense . . . . 2.0
Taxes, licenses, insurance . .9
Veterinary and medicines . .. .4:
Seed, fertilizer, lime . . .
Legal and professional expense . .5
Telephone, office expense . .. .2
Rent . . . . . .
Miscellaneous expense . . .4:
Total expense before depreciation and interest : 53.9 :
Depreciation:
Inventory change on herd . . .. : 2.6
Dairy buildings, excluding operator's residence: .6 :
Dairy equipment . . . .2:
Autos and trucks. . . ... .8:
Tractors and miscellaneous equipment : -
Total depreciation . . .. 4.2:
Interest on investment @ 5 percent . : 3.7
Total production cost . . .. 61.8
Net gain per gallon . . . -6.0


Cents Per Gallon
56.5 : 56.2 : 56.3
.6 : .5 : .5
57.1 : 56.7 : 56.8

29.4 : 28.9 : 29.0
8.4 : 7.2 : 7.9
.5 : .6 : .7
4.2 : 2.9 : 4.1
13.1 : 10.7 : 12.7
.9 : .8 : .9
.8 : .7 .8
1.6 : 1.4 : 1.6
1.6 : 1.1 : 1.4
.8 : 1.0 : .9
.2 : .2 : .2
.1 : .1
.3 : .2 : .3
.1 .1 : .1
.6 .4 .4
.5 : .6 : .5
50.0 : 46.1 : 48.9


1.2
.3
.2
.7
.1
2.5
2.6
55.1
2.0


5.1 :
.8
.2 :
.4 :


2.9
.5
.2
.6


.2 : .1
6.7 : 4.3
3.9 : 3.2
56.7 : 56.4
I.


O.0


0.4


Return to operator for labor and supervision 2.2 6.2 2.9 4.5

Percent return on investment . . -3.0 8.8 5.1 : .6

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

DLB:IMcA 4/17/50
Exp.Sta., Ag.Ec. 75.






Table 2
Summary of Costs and Returns for 11 iifholesale'Dairies,
St. Petersburg Area, Florida
Averages for Calendar Year 1949


:Volume Groups Gallons: All
S Under : 80,000 : dairies
: 80,000 : & over :

Number of dairies . . . .. : 6 : 5 : 11
Average number of cows per dairy . : 77 214 : 139
Total production sold (gallons) . : 293,803 691,947 :985,750
Average production sold per dairy (gallons) : 8,967 : 138,389 : 89,614
Gallons sold per year per cow .... : 635.9 : 646.7 : 644.7
Gallons sold per day per cow . 1.7 : 1.77 : 1.77


Income:
ivilk 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 . .
Rent . . . . :
Miscellaneous expense . . ...
Total expense before depreciation and interest
Depreciation:
Inventory change on herd . . .
Dairy buildings, excluding 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 ....... ... :


Cents


Per Gallon


57.1 : 4.8 : 5.5
.5 .6 .5
57.6 : 5, : 56.0

29.4 : 27.3 27.9
7.7 : 7.6 : 7.6
2.0 : 9 : 1.2
5.8 3.7 : 4.
15.5 : 12.2 :13,2
.8 : .6 : .7
.9 : .7 : .8
1.6 : .8 : 1.0
2.1 : 1.0 : 1.3
.8 : .6 : .7
.4 : .3 .3
.4 : : .1
.1 : .1 : .1
.1 : .1 : .1
8 : .9 .9
.8 : .7 .7
53.7 : 45.3 47.8


5.6
.5
.5
.8
.1
7.5
3.4
64.6
-7.0


2.2
.3
.2
.3
.1 :
3,l
2.1 :
50.5 :
4.9


3.2
.4
,3
.4
,b
.1
4.4
2.5
54.7
1.3


Return to operator for labor and supervision -1,2 8.6 : .7
Percent return on investment .... -5.U 4 16.5 7.7


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

DLB:fhw 4/17/50
Exp.Sta., Ag.Ec. 75


Florida Agricultural


"







Table 3
Summary of Costs and Returns for 4 Ifholesale Dairies, Lakeland Area, Florida
Averages for Calendar Year 1949


Number of dairies . .
Average number of cows per dairy . .
Total production sold (gallons) . . ..
Average production sold per dairy (gallons) .
Gallons sold per year per cow . . .
Gallons sold per day per cow .. ..


Income:
hiilk sales . . . .
Other income (bags, manure) . .
Total income ......
Production costs
VaFr A h1 AcA


ee %c ase 0 * 0 6 0 4, f
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 . . .
Rent . . . . .
Miscellaneous expense . . .
Total expense before depreciation and interest
Depreciation:
Inventory change on herd . .
Dairy buildings, excluding operator's residence
Dairy equipment . . . .
Autos and trucks . .....
Tractors and miscellaneous equipment .
Total depreciation . .
Interest on investment Q 5 percent . ..
Total production cost . . .

Net gain per gallon .. ...... .. .


:
: 56
: 115,663
28,916
516.4
: l.b1
:ents 'Per
Gallon
: 58.7
: .9
S 59.6

S 29,.4
S 3.7
6.2
: 0,7
20.6
S 2.5
1.5
S 1.0
2.2
.6
.4
1,0
: .5
: 1
: 1.5
S.8
62.1

2.0
: .3
.2
: 1.1

3.6
4.6
S 70.3

S -10.7


Return to operator for labor and supervision 0.0

Percent return on investment .. ... -6.6

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

DLB:fhw 4/17/50
Exp. St., Ag. Ec. 75.






Records of milk production costs and income were obtained from 21 w'nLealS
producers in the Tampa area, 11 wholesale producers in the St, Petersburg area and
four wholesale producers in the Lakeland area. The period covered was for the
calendar year 1949 except for a variation of two months for one record in the Tampa
area and three variations of one to two months in the St. Petersburg area. 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 aret (1) Prices of feed, supplies, equipment and cows for replacements; (2)
wage rates paid workers; (3) productivity of cows; (4) efficiency 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 weighted
averages of the costs for each producer. Simple averages were calculated but are
not shown. The results were not significantly different by either method.
Records in the Tampa and St. Petersburg area were summarized by volume groups
to show the variation in costs and returns between different sizes of dairies. In
the Tampa area three groups of small, medium and large dairies were summarized
while in St. Petersburg only small and large dairies were separated. Costs and
returns are significantly different on large and small dairies and therefore bear
consideration, Tables 1 and 2.
In the Lakeland area records could be obtained from only a few small wholesale
dairies. Their number is not sufficient to constitute a representative sample of
the area. They are included-only at the request of the dairyman's organization to
show that there may be a variation in cost between Lakeland and other areas, Table 3.
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
producers where it could not be accurately segregated. Therefore 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 proces-
sor or distributor and includes receipts from all classes of milk during the year.
The volume of Class II milk was considerable for some dairies during the summer
months while others had very little of this class. Class III milk sales were
negligible in most cases.
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. Some dairies were raising part of heir
replacements, and feed purchased was for raising heifers as well as milk production.
Feed purchased ranged from 23.4 cents to 38,6 cents per gallon of milk sold for
all types of operation in the Tampa area; from 23.6 cents to 34.5 cents per gallon
in the St. Petersburg area; and from 25.8 cents to 32.2 cents per gallon in the
Lakeland area.
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 nothing to 13.3 cents
in the Tampa area; from 4.0 cents to 9.7 cents in the St. Petersburg area; and from
nothing to 8.5 cents per gallon in the Lakeland area. One dairy in the Tampa area
and another in the Lakeland area used only unpaid family labor in the dairy.





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.
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 paid the highest paid worker in
the barn plus ten dollars per week. 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 1.6 cents to 13.0 cents per gallon in the Tampa area; from
2.5 cents to 9.6 cents in the St. Petersburg area and 7.5 cents to 16.2 cents in
the Lakeland area.
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 0.3 cents to 1.8 cents in the Tampa area; from 0.l cents to 1,7 cents
in the St. Petersburg area and from 0.7 cents to 2.5 cents in the Lakeland area.
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 for one dairy in the St. Petersburg area to 3.5 cents per gallon for
one dairy in the Hillsborough area.
Truck expense includes gasoline, oil, grease and repairs, but excludes interest
and depreciation which are in other items of expense. When autos were used person-
ally as well as in the dairy, an estimated percentage was eliminated for personal
use.
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 0.8 cents per gallon in the
Tampa area; from 0.1 cents to 0.7 cents in the St. Petersburg area, and from nothing
to 1.3 cents per gallon in the Lakeland area,
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.
Legal and professional expense. This item includes any attorneys or accountants
fees and other legal expense.
Telephone, office expense includes cost of telephone when charged to the dairy
business and cost of office supplies such as ledgers and postage.
Rent. Some dairymen rent pastures or the dairy barn and its facilities. The
cost o this item ranged from nothing to 1.9 and 2.1 cents per gallon respectively
in the Tampa and St. Petersburg areas and from 0.1 to 3.0 cents per gallon in the
Lakeland area.
Miscellaneous expense includes many small items hard to classify, and such
things as Association 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 were 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, with
changes in inventories shows the net cost of maintaining the producing herd for the
year. It also capitalizes the increase in value of tne relatively few heifers






raised for replacements during the year and offsets the cost of feed, labor and
other items for raising them, by their increase in value.
Interest on investment was charged at 5 percent for the year. A successful
economic enterprise should pay all cash operating costs, bear depreciation costs,
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.
Most dairymen were paying interest on some of their equipment, or cows purchas-
ed, or on real estate mortgages. However, this interest paid did not represent the
total capital required to operate a dairy.
Total production cost is the sum of all direct and indirect items of cost as
explained above. Per gallon cost varied from L4.3 cents to 74.5 cents in the Tampa
area; from L3.8 cents to 75.1 cents in the St. Petersburg area and from 57.9 to
91.5 cents per gallon in the Lakeland area.
Net gain per gallon represents the difference between total receipts and total
expenses. In the Tampa area net profits ranged from a minus 27.6 cents to a plus
11,8 cents per gallon. In the St. Petersburg area they ranged from a minus 15.3
cents to a plus 8.6 cents per gallon. The small sample in the Lakeland area showed
a minus net income for each dairy.
Return to operator for labor and supervision. This is one of the factors for
comparing the efficiency and success of dairies and is obtained by adding the net
gain shovn 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 the capital required in the
business.
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 34.5 percent to a plus 30.5 percent in the Tampa area; from a minus 16.1
percent to a plus 35.7 percent in the St. Petersburg area. Producers in the Lake-
land area showed a minus 20.8 to a minus 1.6 percent return on investment.


DLB:fhw V/17/50
Exp.Sta., Ag.Ec. 75




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