Title: Summary of costs and returns for wholesale dairies, Orange County, Florida
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Title: Summary of costs and returns for wholesale dairies, Orange County, Florida
Physical Description: Book
Creator: Spurlock, A. H.
Publisher: Florida Agricultural Experiment Station, Department of Agricultural Economics
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Agricultural Economics Series No. 50-5b
Preliminary -- Not for Publication








SUMiMARY OF COSTS AND RETURNS

FOR

WHOLESALE DAIRIES, ORANGE COUN T Y,


FLORIDA

Average for Calendar Year 1949



















by



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


Gainesville, Florida
May 1950








Summary of Costs and Returns for 19 wholesale Dairits, Orange County, Florida
Averages for Calendar Year 1949


Item

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 .
,f> i -/*ftvtCi9ei


Income: 4
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 . .
Rent ...... . . .
Miscellaneous expense . . .
Total expense before depreciation and i]
Depreciation:
Inventory change on herd ....
Dairy buildings, excluding operator's r
Dairy equipment . . .
Autos and trucks. ........
Tractors and miscellaneous equipment
Total depreciation .. . .
Interest on investment @ 5 percent .
Total production cost .. .
et gain per gallon . . .


:Volume Groups Gallons: All
: Under : 50,000 & : dairies
: 50,000 : over :

S. 12 :7 : 19
: 39 : 147 : 79
S. : 258,730 : 691,736 : 950,466
S. 21,561 : 98,819 : 50,025
552.8 : 672.2 : 633.2
: 1.51 : 1.84 : 1.73
: .? 7/ 1 /3? 7
: Cents Per Callon
: .5. 8 57.3 56.8
1.0 .7 .8
S. : 56. : 58.0 : 57.6

S. : 33.0 : 32.2 :32.5
S. 6.9 8.1 7.8
: 23 :2 .8
S. : 10.6 : .1 : 5.9
19.8 : 12. : 14.5
1.1 : 1.0 1.0
S. : 16 : 1.1 1.2
: .8 1.1 1.0
: 1.8 : 1.6 1.6
S : .6 : .6 .6
S : .6 .7 : .7
: 2 1.0 .8
S : .1 : .1 :
: : -
S. .1 .9 .6
S : .6 .5 .6
interest : 60.3 53.2 5 .2

. .2 : : .2
residence: : .3 : 3
S. .: .3 : .2 : .3
. : .5 .: .4 .4
. .2 :.2 : .2
S : 1.2 1.5 : 1.
S.. : 3.8 : 3.2 3.3
. 65.3 : 57.9 59.9
S. -8.5 .1 -2.3


return to operator for labor and supervision 2.1 : 4.2 3.6

-rcent return on investment . . : -6.4 : 5.1 : 1.6
*


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


Florida Agricultural


LB:fhw 5/19/50
xp.Sta.,Ag.Ec. 100.









Records of milk production costs and income were obtained from 19 whole-
sale producers in Orange County. The period covered was for the calendar year
1949. Data were taken from prepared income tax statements or accounting records.
Where complete cattle inventories were not available. estimates' were .obtained,.
fr6m the dairymen.

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 replace-
ments; (2) wage rates paid workers; (3) productivity-of cows; (4) efficiency
of labor; (5) volume or total production, iUith 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. 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
processor 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 no Class II milk.

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. 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 24.0 cents to 40.2
cents per gallon of milk sold for all sizes of dairies.

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 26.2 cents.
Not 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.
Six 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 2.5 to 22.9 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 0.6 cents to 4.1 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 3.1 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 0.5 to 4.0 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 2.6 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. Eight farms report-
ed this item of expense during 1949. On these farms it ranged from 0.1 to
2.8 cents per gallon.

Legal and professional expense. Only four 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 report-
ed by only two dairies.

Rent. Some dairymen rent pastures or the dairy barn and its facilities.
The cost of this item ranged from nothing to 1.7 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 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
and inventories shows the net change in value of the producing herd for the
year. It also capitalizes the increase in value of the heifers raised as re-
placements 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. If adjustment was
necessary, 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 cost, 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,
building, 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 52.0 to 78.5 cents.

Net gain per gallon represents the difference between total receipts
and total expenses. Net gain ranged from a minus 2h.7 cents to a plus 6.h
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 ot dairies. It is obtained by adding
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
12.0 cents to a plus 14.4 cents per gallon of milk sold,

Percent return on investment represents the rate of earnings produced
by the capital invested in he dairy business, after allowing the operator a
reasonable compensation. It was computed by dividing total profit plus inter-
est at 5 percent, (previously deducted), by the average capital invested.
Percent return ranged from a minus 26.7 percent to a plus 14.7 percent.




DLB:fhw 5/19/50
Exp.Sta., AgEc. 100




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