November, 1950 Agricultural Economics Series No. 50-5d.
SUMMARY OF COSTS AND RETURNS
TWENTY FOUR WHOLESALE DAIRIES,
MIAMI AREA, FLORIDA
Average for Year Ending August 31, 1950
A. H. Spurlock
Donald L. Brooke
Associate Agricultural Economists
Department of Agricultural Economics
Florida Agricultural Experiment Stations
SUMMARY OF COSTS OF PRODUCING MILK,
TWENTY FOUR WHOLESALE DAIRIES, MIAMI AREA, FLORIDA
Average for Twelve Months Ending August 31, 1950
A survey of the cost of producing milk in wholesale dairies in the Miami
Area was made by the Department of Agricultural Economics, Florida Agricultural
Experiment,Station. Information was obtained on 24 dairy units, though two of
the records each covered 2 dairies. The operators were visited and the data
taken from their books when possible. One record was mailed in by the
operator, and four were supplied by public accountants who were keeping the
dairy records for the operators*
An effort was made to obtain data for a 12 month period ending August 31,
1950. Several of the records, however covered a slightly different period.
One 12 month record ended June 30, 3 ended July 31, and 5 on September 15 or
September 30. These differences in the fiscal year covered do not affect
average costs for all dairies to any significant extent. Costs were higher
on September 30, than on June 30, but the effect is offset by those dairies
with records ending in June or July.
Several of the records included covered somewhat less than 12 months*
All of the dairies included were specializing in dairying, and were
producing for wholesale delivery to plants for processing and distribution.
Several dairies included were partnerships, and several others were corporations.
About half were operated by individual owners.
Receipts from-the dairy enterprise were the only source of farm income.
All feed was purchased, except that obtained from pastures which varied widely
between dairies as to quality and amount. Practically all labor in the dairy
was hired. Family labor was a very small part of the total amount of labor
required. Except in the smaller dairies the operator's labor was mostly for
the management of the business.
Cows for replacements were purchased by most of the dairies. Several
dairies were raising all replacements required, and several additional dairies
were beginning to raise heifers. No attempt was made to separate the cost of
raising young stock from the cost of the milking herd.
The cost per gallon of producing milk was based on the number of gallons
sold, which was somewhat less than the actual number produced.
Size of Dairies Studied
The dairies included in this survey ranged from an average of 72 to 803
cows in the herd. (Table 1). The average amount of milk sold per day
throughout the year varied from 139 gallons to l,442 gallons, or 619 gallons
per day for the average of all dairies.
Table 1.--Gallons of Milk Sold Per Day, Average Number of Cows, and Gallons
of Milk Sold Per Cow Per Year and Per Day for 24h wholesale
Dairies, Miami Area, Florida, Year Ending August 31, 1950.
: : :Gallons sold per cow
Dairy Number : Gallons of milk : Average number : Per : Per
: sold per day : of cows : year : day
Small dairies less than 100,000 gallons per year
Medium dairies 100,000-199,999 gallons per year
Large dairies 200,000 or more gallons per year
Average all dairies 619
/I Part year record. On annual basis, should be in
72 Two units, divided equally.
N f _
It will be noted in Table 1 that 11 of the dairies included in the survey
are very large, selling over 200,000 gallons of milk per year, 6 are medium
in size for the area, vwth 100,000 to 199,999 gallons, and 7 are small, being
under 100,000 gallons per year. It is not known how nearly this size distri-
bution fits the distribution of all wholesale dairies in the area.
Annual Costs and Returns in Producing Milk
There are certain seasonal factors in the cost of producing milk. More
cows are usually fresh in the spring and milk production is highest then.
From August to December dairy milk production is usually lowest. Pastures
also are seasonal in the amount of feed produced. Thus an effort was made
to obtain costs on a 12 month basis to eliminate the effect of seasonal factors.
The annual cost of producing milk depends upon many factors, such as the
amount and price of various items used in production, and the volume of
production obtained. In Table 2 are shown the average production costs for
24 wholesale dairies, Averages are shown per dairy, per cow, and per gallon
of milk sold, with a percentage distribution of costs. In Table 3- the dairies
surveyed are arranged in three groups according to volume of production, and
costs per gallon of milk sold are shown separately for each group.
Costs and returns as shown in Tables 2 and 3 are weighted averages, that is,
the accumulated costs of all dairies in a group or in the total, are divided
by the aggregate milk sales in gallons to obtain the cost per gallon. This
method gives emphasis to large volume, and since the large dairies are also
represented in greater number, it tends to fix the cost of producing milk in
the area near the cost for the large dairies. There was considerable variation
in the cost of producing between the three groups. The largest dairies had
lower feed and total labor costs per gallon, as well as lower total costs.
Operators labor, while estimated at a higher figure for the larger dairies,
was still lower per gallon than in the smaller dairies.
The dairies surveyed did not have exactly the same classification of items
of expense. There may be some inconsistencies, therefore, as no complete
check was made to be sure that each item of expense was uniformly charged.
What one dairy charged to dairy supplies for example might have been charged
by another dairy to repairs. Some of the larger items were re-lassified if
necessary to obtain uniformity, and the resulting averages are believed to
have no great discrepancies. Regardless of the classification, total expense
would not be affected.
A brief explanation of certain items included in income and expenses is
Milk sales represents the amount received for all milk sold. This
amounted to $32 per cow or 60.0 cents per gallon.
Other income includes the sales of bags, manure sales, soil conservation
payments, and miscellaneous income from the dairy enterprise. No credit was
Table 2.-Summary of Costs and Returns for 24 Wholesale Dairies, Miami Area,
Florida. Year Ending August 31, 1950.
: : : Average Per Gallon
: Average : Average : of Milk Sold
Item : Per : Per : : Percent
:Dairy : Cow : Amount : of Total
Average number of cows 378
Milk sold per farm (gallons) 226,061
Milk sold per cow per year (gallons) 598
Milk sold per cow per day (gallons) 1.6u
Dollars Dollars Cents Percent
Milk sales 133,145 352 60.0 98.8
Other income (bags, manure, etc.) 1,656 5 0.8 1.2
Total income 134,801 357 60.8 100.0
Feed purchased 60,041 159 27.1 48.1
Hired labor 21,106 56 9.5 16.9
Unpaid family labor 62 /1 /2
Operator's labor and supervision 5,376 1" 2.4 4.3
Total labor expense 26,544 70 11.9 21.2
Dairy supplies 464- 4 0.7 1.2
Power, lights and fuel 1,584 4 0.7 1.3
Repairs buildings and equipment 4,370 12 2o0 3.5
Truck and automobile expense 2,104 6 1.0 1.7
Taxes, licenses and insurance 1,955 5 0.9 1.6
Veterinary and medicines 773 2 o.4 0.6
Seed, fertilizer and lime 1,928 5 0.9 1.5
Legal and professional expense 408 1 0o2 0.3
Telephone and office expense 552 1 Oc2 0.4
Rent 942 2 O04 0.8
Miscellaneous cash expense 2,158 6 1.0 1.7
Total expense before depreciation
and interest 104,823 277 47.4 83.9
Net depreciation on herd 9,132 24 4.1 7.3
Buildings excl. operator's dwelling 1,225 3 0.5 1.0
Dairy equipment 1,318 4, 0.6 1.0
Tus and automobiles 1,252 3 0.6 1.0
and miscellaneous equipment 205 1 0.1 0.2
Total depreciation 13,132 35 5.9 10.5
Interest on average investment
@ 5 percent 6,992 19 3.1 5.6
Total gross costs 124,947 331 56.4 100.0
Net returns 9,854 26 4.4
Returns to operator for labor and
supervision 15,230 40 6.8
Returns on average investment 16,846 45 7.5
Percent returns on average investment 11.5
L1 Less than p0.50. /2 Less than .05 percent.
Table 3.--Summary of Costs and Returns per Gallon of Milk Sold by Size of Dairy
for 24 Wholesale Dairies, Miami Area, Florida. Average for Year
Ending August 31, 1950.
: Volume Groups, Gallons of Milk Sold
Item : Under : 100,000 : 200,000:Average all
: 100,000 :to 199,999: and over: dairies
Number of dairies 7 6 11 2.
Average number of cows 148 265 587 378
Total production sold 84,627 164,323 349,740 226,061
Gallons sold per day 232 450 958 619
Gallons sold per cow per year 573 620 596 598
Gallons sold per cow per day 1.57 1.70 1.63 1.64
Cents Per Gallon
ilk sales 58.6 61.1 60.0 60.0
Other income (bags, manure, etc.) 1.2 0.9 0M6 0.8
Total income 59.8 62.0 60~6 60.8
Feed purchased 28.3 28.4 26.6 27.1
Hired labor 8.3 9.6 9.7 9.5
Unpaid family labor 0.3 /1
Operator's labor and supervision 5.8 4.2 15 2.T
Total labor expense 14 b 13A8 112 11.9
Dairy supplies 0.7 O07 0o6 0,7
Power, light and fuel 1.1 1.0 0.6 0.7
Repairs building and equipment 2.1 1.tl 2.1 2.0
Truck and automobile expense 1.4 1.1 0.9 1.0
Taxes, licenses and insurance 1.0 0.9 0.9 0.9
Veterinary and medicines 0.7 0.4. 0.3 0.4
Seed, fertilizer and lime 0.1 1.2 09 0.9
Legal and professional expense 0.3 Oo1 002 0.2
Telephone and office expense 0.2 Ool 0o3 0.2
Rent 1.5 0O2 0.3 04,
Miscellaneous cash expense 0.4 0o9 1.0 1.0
Total expense before depreciation
and interest 52*2 50,2 45.9 47.4
Net depreciation on herd 2.8 2.6 4.7 4.1
BBuildings excl. operator's dwelling 0.7 0.8 0.5 0.5
Dairy equipment 0.5 0.5 0.6 0,6
Trucks and automobiles 0.6 0.5 0.6 0.6
Tractors and miscellaneous equipment 0.2 0.3 /1 0.1
Total depreciation 4.8 4.7 6.4 5.9
Interest on average investment
@ 5 percent 4.0 4.7 2.6 3,1
Total gross costs 61.0 59.6 54.9 56.4
Net returns 1.2 2.4 5$7 4.4
Returns to operator for labor and
supervision 4.6 6.6 7,2 6.8
Returns on average capital 2.8 7.1 8.3 7.5
Percent returns on average investment 2,6% 7,4% 15o8% 11.5%
/1 Less than .05 cents.
given for milk used on the farm by the operator or hired labor. Other income
averaged 0.8 cents per gallon of milk sold.
Feed purchased is the cash cost of all kinds of feed bought during the
period. Since most dairies buy feed regularly, the amount purchased was not
adjusted by inventories of the amount on hand at the beginning and end of the
year. While such an adjustment might affect an individual dairy's cost some-
what, it would have no effect on the averages for all dairies. On dairies where
any replacements were raised the cost of feed was for raising heifers as well
as for milk production. However, any feed, or labor, or other expense incurred
to raise replacements lessened the depreciation cost on cows.
The cost of feed per cow was $159 per year or 27,1 cents per gallon of
milk sold. The feed cost per gallon in individual dairies varied from 220 to
360 per gallon, and was lowest in the larger dairies. This is perhaps due to
large quantity buying and quantity discounts on the price, since their production
per cow was no greater than in the smaller dairies.
The cost of feed was 48.1 percent of the total cost of producing milk.
Hired labor represents the cash payments for daily help. In addition,
the dairy employees were usually furnished a house to live in, milk from the
dairy and sometimes lights and water. The cost of these privileges is included
in other items of expense such as: power and lights, repairs to buildings,
taxes, insurance and depreciation on buildings The cost of hired labor.
amounted to $56 per cow per year or 9.$ cents per gallon of milk sold.
Unpaid family labor was little used in the Miami Area. Where found it was
charged at prevailing wage rates according to the amount of time.worked by
members of the operator's family*
Operator's labor is the value of the time spent by the operator in the
dairy barn and in the management of the business. The operator was asked to
estimate the value of his labor and management when the dairy was an individual
enterprise or partnership, On dairies operated by corporations all labor and
management were paid by the corporation.
Operator's labor averaged $5,376 per year or $14 per cow in the herd.
.This amounted to 5.8 cents per gallon of milk in the small dairies, 4.2 cents
in the medium and 1.5 cents in the large dairies.
Total labor expense is the amount of labor and management required to
operate the dairy, and amounted to 11.9 cents per gallon of milk sold or 21.2
percent of the total cost of producing milk. Feed and labor together represented
69.3 percent of the total production cost.
Dairy supplies include soap, and washing materials, disinfectants, spray,
boots and small replacements items.
Power, light and fuel include fuel for the boiler, electricity for lights,
milking'machines, refrigeration units, helpers house*
Repairs buildings and equipment represents the amount spent in repair
and upkeep of dairy buildings and dairy equipment during the year.
Truck and auto expense includes the cost of gasoline, oil, grease, and
repairs. Interest and depreciation are included in other items of expense, as
are licenses and insurance when they could be separated. When automobiles
were used personally as well as in the business, only the proportionate dairy
use was charged* Truck and auto expense amounted to 1.0 cents per gallon of
Taxes, licenses? and insurance. This item includes real estate and personal
property taxes on the business,' truck and auto licenses, and all forms of
business insurance paid.
Veterinary and medicines includes the cost of drugs and veterinary services.
Seed, fertilizer, and lime include the amounts paid for materials applied
to pastures during the year. Also included is some contract work, such as
mowing, chopping, and fertilizing. Labor and machine use if applied by the
regular dairy workers are not included as the cost of these is in other items.
Legal and professional expense is the amount spent for attorneys and
Telephone and office expense include the dairy telephone bill, postage,
Rent. Eleven dairies had some expense for rent. Only three operators
rente the dairy farm and its facilities, but eight others had some expense
for additional facilities and pasture.
Miscellaneous cash expense includes many small items, and unusual items.
Included are South Florida Milk Producers Association dues.
Depreciation of the capital items used in the dairy business was calculated
Herd depreciation was taken where possible as the net change in the
value, including all animals from the beginning to the ending inventory. Actual
calculation was: (value of beginning inventory plus purchases) minus (sales plus
ending inventory). This gives the net change in inventory for the year.
Purchased cattle were valued at cost at both beginning and ending inventory.
Raised stock were valued at their current value. Deaths during the year are
automatically accounted for, since they are not in the ending inventory. This
method allows for the increased value of heifers being raised during the year
and partly offsets the cost of feed, labor and other items for raising them.
On several herds information was not complete enough for the
calculation, and such herds were depreciated at 15 percent of their cost.
Depreciation on the herd amounted to $24 per cow or 4.1 cents per
gallon of milk sold. This was 7.3 percent of the cost of producing milk.
- 8 -
Depreciation of cattle was more per gallon in the large dairies than in the
Buildings. Depreciation was calculated on the cost of dairy barns,
tenant houses at percent of cost.
Dairy equipment. (Compressors, milking machines, milk room equipment,
refrigeration and power units.) Depreciation was calculated at 10 percent of
Trucks and automobiles. Depreciation was calculated at 20 percent of
cost, and the proportion used for the farm business only was charged.
Tractors and equipment. Depreciated at 20 percent.
Total depreciation amounted to $.9 cents per gallon or 10.5 percent of the
total cost of producing milk..
Interest on investment. A successful business should pay all cash costs
of operation, pay the owner or operator a return for his labor and management,
cover all depreciation, or wear and tear of capital items, and earn a reasonable
rate of interest on the capital investment in the business.
The amount of interest paid by dairymen on loans to purchase real estate,
equipment, or cows does not represent the total interest cost, since interest
was paid on only a part of the capital required to operate the business. In
this summary interest actually paid was omitted, and instead interest was
charged on the average capital invested at 5 percent. No interest was included
for working capital or cash required to operate the business.
Total production cost is the sum of all direct and indirect expenses as
explained above. The cost of keeping a cow averaged $331 per year. The total
cost of producing milk in the Miami Area for the twelve month period ended
August 31, 1950 was 56.h cents per gallon for 24 dairies. The average cost for
small dairies was 61.0 cents; for medium dairies, 59.6 cents; and for large
dairies 5$.9 cents. Costs per gallon on individual dairies ranged from 47 cents
to 69 cents.
Net return is the difference between total receipts and total production
cost or expense. Returns above all costs amounted to $26 per cow or 4.h cents
per gallon of milk sold for all dairies. Small dairies had a net loss of
1.2 cents per galln ofmilk sold; medium dairies a net profit of 2.4 cents per
gallon of milk sold and large dairies 5.7 cents.
Return to the operator for labor and supervision is the total amount
available to the operator after paying all expenses in the conduct of his
business, including a 5 percent charge for the use of capital required for the
enterprise. This figure was obtained by adding the value of the operator's labor
to the net return. Average return to the operator (net profit plus value of
his labor) amounted to $.O per cow or 6.8 cents per gallon of milk sold.
Returns to operators of small dairies were 4.6 cents per gallon; medium dairies,
6.6 cents; and largedairies 7.2 cents.
Return on investment represents the return or amount earned on the average
fixed capital invested, after paying all expenses including an allowance to the
operator for his labor, supervision and management. Percent return on invest-
ment is merely the dollar return on invested capital expressed as a percentage.
In this calculation net return or net profit was added to the interest charged
at 5 percent and this total divided by the average capital invested,
Only the capital owned by the operator was considered in this study. If
the dairy was rented, the rent was assumed to cover capital costs of the land-
Return on investment is not a return in addition to return to operator for
labor and supervision, but a different way of expressing net return or net
profit. For his efforts in the enterprise and for his capital invested the
operator receives (1) operator's labor and supervision, estimated as an expense
under labor; (2) interest on capital at 5 percent if he owns all the capital
used; (3) net'return on net profit for his risk.
.Distribution of Operator's Capital
Several operators rented the dairies they operated, and a few others
rented some facilities. Thus capital values of these facilities are 'not known.
The average capital invested by operators in cattle, dairy equipment, trucks,
building and land is shown in Table 4. The total capital invested amounted
to $146,111 per dairy or $387 per cow. Of this total 47 percent was in
livestock and 41 percent in land and buildings. In most cases the land was
considered to be very conservatively valued, especially when compared with
present real estate value. For a new operator going into business, well located
land would now cost much more than the estimates given in Table 4.
It will be noted that the average value per cow in the small and large
dairies are well below the market price of replacements, being shown at their
cost. The average value of the cows per head in the medium dairies perhaps
reflects a larger proportion of Holsteins and Guernseys which initially cost
more. Milk production per cow was slightly higher in this group also.
Comparison of Costs in the Miami Area with Other Areas in the State.
Summaries of the cost of producing milk for the calendar year 1949 have
been made for the production areas around Tampa, St. Petersburg, Lakeland,
Orlando, Palm Beach, and Jacksonville, /1 A comparison of the costs in each of
these areas vith Miami is shown in Table 5. The data for Miami cover the
period from September 1949 to August 1950 and are thus for a slightly later
period. Costs were higher in August 1950 than in the earlier months, but since
most of the twelve month period was in a period of lower costs, the increases
that occurred in July and August had little effect on the averages. The Miami
average is therefore believed to be on a basis almost comparable with 1949 costs.
/1 Agricultural Economics Series No. 50-5, 50-5a, 50-5b, 50-5c, by A. H. Spurlock,
Donald L, Brooke, F. i. Parvin and R. E. L. Greene.
- 10 -
Table 4.--Distribution of Operator's Capital, 24 Wholesale Dairies,
Florida, Year Ending August 31, 1950.
: Size of Dairy : All
Iter : Small : Medium : Large : Dairies
Average amount per dairy
Trucks and automobiles
Other machinery and equipment
Average amount per cow
Truck and automobiles
Other machinery and equipment
Percent of total investment in
Trucks and automobiles
Other machinery and equipment
/1 Less than $0.50.
/2 Less than ,5%.
- 11 -
Table 5,--Comparison of Costs and Returns on Wholesale Dairies in the Miami Area,
with Dairies in Other Areas of Florida.
Calendar Year 1949, Except for Miami, Year Ending August 31, 1950.
: Jack- : Palm ; : St. : :
Item :sonville:Beach :Tampa :Petersburg:Orlando: Miami
: Area : Area : Area : Area : Area : Area
Number of dairies 20 17 21 11 19 24
Number of cows per dairy 159 212 131 139 79 378
Milk sold per farm (gals.) 108,275 119,235 80,950 89,614 50,025 226,061
Milk sold per cow per year (gals.) 683 562 618 645 633, 598
Milk sold per cow per day (gals.) 1.87 1.5- 1.69 1,77 173a 1.64
Income Cents per gallon
Other income (bags, manure, etc.)
Production Costs Cents per gallon
Miscellaneous operating expense
Total expense before
depreciation and interest
Net depreciation on herd
Interest on investment @ 5 percent
Total gross cost
49.3 51,3 6489 47.8 55.2 474h
3.4 0c6 2,9 3.2 0.2 4.1
1.6 1.2 .14 lo2 1.2 1.8
Percent of total gross cost
Total labor 19*3.
Miscellaneous operating expense 11.6
Total expense before
depreciation and interest 87e0
Net depreciation on herd 6.0
Total depreciation 8.8 3.
Interest on investment @ 5 percent 16.2 Sc
Total gross cost
91*4 8607 87-14 92.2 83.9
1.1 51o 5,8 0o3 7.1
2cl 2,5 2,2 200 3.2
1000 1.00.0 100o0 1.00.0 100o0 100,0
Returns Cents per gallon
Returns to operator for labor
Returns on average investment
Percent returns on investment
- 12 -
The costs in the Miami, Jacksonville, Palm Beach, and Tampa Areas were about
the same, being 56.4, 56.7, 56.1, 56.4 cents per gallon of milk sold, respective-
ly. Costs in the St. Petersburg Area were slightly lower, 54.7 cents, and in
Orlando were somewhat higher, being 59.9 cents per gallon.
Feed and labor costs were highest in Orlando and lowest in Miami. The
dairies in Miami are much larger in size and perhaps make more efficient use of
labor. Part of the higher cost of feed and labor in the Orlando Area is for
raising replacements for the herd. Thus depreciation was offset by this
practice in Orlando, while Miami herds had the highest depreciation cost per
gallon of any of the areas.
The cost of producing milk was studied on 24 wholesale dairies in the
Miami Area for the twelve month period ending August 31, 1950. All were
specialized dairy farms, and delivered their milk to plants for processing and
distribution. The size of the dairies varied from 72 to 803 cows and averaged
378 cows per dairy. Milk sales per day ranged from 139 gallons per dairy to
1,442, averaging 619 gallons per day for all dairies. Seven of the dairies
had an annual production under 100,000 gallons, averaging 84,627; six had
100,000 to 199,999 gallons, averaging 164,323; and eleven produced over
200,000 and averaged 349,470 gallons. The average yearly production of the
24 dairies was 226,061 gallons.
The average price received per gallon of milk sold was 60.0 cents. Other
dairy income averaged 0.8 cents making the total income 60.8 cents. The cost
of production averaged 56.4 cents per gallon. Feed cost was 27.1 cents and
total labor cost was 11.9 cents. These two items made up 69.3 percent of the
total production cost. Miscellaneous operating expenses were 8.4 cents per
gallon and depreciation and interest on capital invested were 5.9 cents and
3.1 cents per gallon, respectively.
Income exceeded production cost in all dairies by 4.4 cents per gallon.
The smaller dairies had a net loss of 1.2 cents per gallon, medium dairies had
a net return of 2.4 cents per gallon and large dairies 5.7 cents per gallon.
Total production cost was more in small than in large dairies. The total
cost in small dairies was 61,0 cents, medium dairies, 59.6 cents, and large
dairies, 54.9 cents per gallon of milk sold.
The average capital investment of the operator was $146,1 per dairy.
This amounted to $387 per cow. Forty seven percent of the total investment was
in livestock, 16 percent in buildings, 8 percent in dairy equipment, 4 percent
in auto, trucks, tractors, and 25 percent in land.
In 13 dairies where records were complete as to turnover, herds were being
replaced at the rate of 26 percent per year, which makes the service life of a
cow in the herd 3.8 years.
Total production costs per gallon in the Miami Area, September 1949 to
August 1950 inclusive, were about the same as for Jacksonville, Palm Beach, and
Tampa, 1949. Costs for 1949 in the St. Petersburg Area averaged slightly lower,
or 54.7 cents, while Orlando was highest with an average of 59.9 cents per gallon.
A. H. S./bjb 11/21/50
Exp. Sta., Ag. Ec.- 200