Explanation of Estimates of the Average Costs of Producing
Milk in 4 Areas in Florida, 1945. (Wholesale Only)
Costs of production of milk in Florida for the calendar year 1945 were
obtained by the Florida Agricultural Experiment Station in 4 areas; viz., Orlando,
Miami, Tampa and Jacksonville. Data were obtained by personal visits to 40
dairies having records of production and of expenses.
Costs were calculated only for wholesale production; that is, produced
and delivered to the milk distribution plant. Therefore, costs for bottling,
capping and delivery to the consumer are not included.
Dairying in Florida is a highly commercialized, and in many areas a highly
specialized, enterprise. A large part of the feed a cow gets is purchased from
shipped in feeds. Little feed is grown and pastures do not provide a large part
of the total feed required. Most dairymen have no other business and do not grow
crops. A large number of the more commercialized dairies buy their cows for re-
placements rather than raise them. In all except the smallest dairies, most of
the labor is hired.
Feed purchased represents the cash outlay for buying feed to produce milk.
The few dairymen raising heifers for replacements were eliminated in making this
calculation inasmuch as they have higher feed and labor costs. The feed cost per
gallon ranged from 24.39 cents to'45,47 cents per gallon, depending upon the
amount of feed obtained from pastures, and upon the productivity of the cows in'
the herd. However, costs for most producers grouped closely around the average
shown for the area. Prices reported were about uniform between areas except for
Labor hired. This cost is for paid labor for producing milk. Dairymen
raising many heifers for replacements were eliminated for this calculation. The
highest rates paid for labor were in the Miami area which was well above the
average for the other areas. Rates at Tampa, Jacksonville and Orlando follow in
the order named, but without so much difference between areas.
The total labor cost per gallon for an individual dairy is affected by
(a) Wage rate paid workers; (b) Productivity of cows; (c) Efficiency of labor.
This factor seems to vary rather widely between dairies, depending upon the
machinery and facilities used, and desirable arrangements of barns (floor plan)
and lots. The size of dairy operated also seems to affect labor efficiency.
Dairy sunnlies include such items as washing, cleaning and disinfecting
materials, insect sprays, and teat cups.
Power. lights. and fuel. This item is mainly for the electricity consumed
in operating the milking machines and the refrigeration units. Not all dairies
had fuel expense, some using fuel from their own properties.
Taxes and licenses include all real estate taxes and personal property
taxes on the herd and equipment, and licenses for operation of trucks.
Ag.Exp.Sta., Ag.Ec. 50
Insurance includes fire, and windstorm insurance on the buildings, public
liability and property damage on the trucks, workmen's compensation and group in-
surance paid on employees. Not all dairies were completely insured on all these
Rent additional facilities. This item is for rent of additional land
for pasture in most cases, and does not include rent paid for any large part of
the facilities. Some dairymen rent buildings, equipment and land, and a few
even rent the herd, but they were eliminated in computing this cost.
Depreciation. This cost for each item (herd, buildings, equipment, autos)
was taken when available from the figures as calculated by accountPnts for the
dairymen' s income tax return. The question may be raised whether this rate is
not excessive from the standpoint of the economic loss, or wear and tear of the
asset annually. It is believed that the amounts so computed are not excessive;
(in fact, they are usually very conservative for the herd). Furthermore, the
loss or gnin on sales of depreciable assets was considered and used to adjust
the annual depreciation figure when applicable.
Herd depreciation is the annual loss on the herd by dairymen buying most
of their cows. Since those who raise cows were eliminated in calculating feed
and labor costs per gallon, they were eliminated here also, inasmuch as their
individual costs show high feed and labor costs and low, or no depreciation costs.
Herd depreciation was taken as calculated by accountants when available.
This is done by taking the cost of each cow and applying a percentage depreciation
rate. The total annual depreciation on the herd so calculated was adjusted by
subtracting any gain on sales of over-depreciated cows and adding any loss on
snles of cows (under-depreciated) for each dairy.
The cost of the whole herd was obtained from each dairy and the total
depreciation for all the dairies, worked out as explained above, was checked by
applying 12; to 15 percent to the total cost of the herds. For dairies not
having depreciation calculated by accountants a percentage figure of 121 to 15
:ras applied to the cost of the cows.
For the purpose of determining the rate of depreciation applicable to
cows in purchased herds an attempt was made to determine the rapidity of turnover
in the herd by taking the number of cows on hand January 1, 1945, and comparing
with the number purchased and the number sold from the herd during 1945, In
addition each dairyman was asked to estimate how long a cow lasts in production
in his herd (average number of years).
Dairy cows purchased for Florida herds came from Tennessee, Wisconsin, and
other states, and cost for grade Jersey or Guernsey cows from $120 to $170 each.
Most sales ranged from $130 to $150 delivered. Holstein cows cost from $190 to
$250 each delivered. Dairymen say most of these cows have had from 1 to 3
lactation periods before purchase. In addition to having some usage before
purchase, dairymen universally state that the inexperienced help of recent years
has been a considerable factor in shortening the useful life of cows in the herd.
Leaving the milking machine on the cows udder too long, and applying it to cows
with unrecognized mastitis, then transferring the machine to another cow, thereby
infecting her, are given as reasons causing early disposals.
High feed and labor costs, and relatively high beef prices make it un-
economical to keep low-producers, cows that have lost a quarter, or other doubt-
Years of usefulness in the herd vary from an average per cow of li to 5
years for purchased cows in individual dairies. By areas the average life from
dairymen's estimates and from actual turnover figures in 1945 was from 2* years
in the Miami area to about 4 years in the other areas. The largest dairies in
the other areas had a turnover approaching that of Miami about 3 years. The
reason for this is not known. The average period of usefulness of a cow in all
dairies surveyed was 3.0 years, which indicates a depreciation rate of 16 or
Raised cows reportedly last longer than purchased cows.
When the cost, length of service-life, salvage value, and death rates of
cows are known, the depreciation rates may be calculated by the following formula:
Cost ( 1 deaths er 100) times meat value.
No. yrs. of use (No. yrs. of use 100
Death rates of 1.2 per 100 annually are taken as an average of all grades
of cattle in the whole country. Death rates found in the dairies surveyed in
Florida for 1945 were 3.9 per 100 cows. However, this figure was not used
because of the limited number of observations. Higher death rates would in-
crease the annual depreciation on cows.
Salvage values are an average of reported sales for 1945.
An illustration of the annual depreciation on cows, assuming varying years,
of usefulness is shown for grade cows in the table below. Rates are higher for
purebred cattle having higher cost values.
: :Annual: :Depreciation
Cost :Salvage deaths: Years: per year
of value per of use :
cow : 100 : Amount :Percent
: : Ccows : :
$150 : $ 75 : 1.2: : $31.90 : 21.3
130 : 70 : 1.2 2 : 27.84 : 21.4
150 : 75 : 1.2: 3 : 25.90: 17.3
130 : 70 : 1.2 : 3 : 20.90 : 16.1
150 : 75 : 1.2 : 4 : 19.65 : 13.1
130 : 70 1.2 : 4 : 15,90 : 12.2
200 I 100 :1.2 : 2 : 40.12 : 20.1
200 : 100 :1.2 : 3 34.54 : 17.3
200 : 100 :1.2 : 4 : 26.20 : 13.1
Depreciation on dairy buildings, equipment, autos, trucks and tractors was
taken as calculated by accountants unless such a figure was not available. In
cases where such figures were not available, annual rates of depreciation were
applied to the cost of the asset as follows: dairy buildings 4 to 5 percent;
dairy equipment 8 to 10 percent; autos,trucks and tractors 10 to 15 percent.
Exp.Sta., Ag.Ec. 50
,OQerator's labor and supervision. Most of the dairies surveyed had all
hired labor except for the operator as owner. His labor is reported here, valued
at his estimate of what it would cost to hire a man to replace him. This esti-
mate ranged in amounts from $1,820 to $5,200 per year for those estimating. Some
owners having a hired manager for the dairy placed no figure on their supervision.
Variations in the amount per gallon aro due mainly to differences in the average
size of dairies between areas. Dairies surveyed averaged much larger in size
in Miami, reducing the operator's labor per gallon.
Interest on investment. A successful economic enterprise should pay all
cash operating costs, bear the depreciation costs, and pay the owner or operator
a reasonable amount for his labor and supervision (see above), plus a reasonable
return on his invested capital.
Interest on the net invested capital required to operate a dairy is cal-
culated at 5 percent, and the interest paid on borrowed capital is omitted.
Many operators use some of their own capital and some borrowed capital (upon
which they pay interest). The cash expense of interest paid is shown for in-
formation, but the interest on all invested capital more correctly represents
the economic cost of capital use.
Total production cost. The itemized costs of production are based on the
assumption a dairyman owns practically all the capital he uses, including herd,
buildings, equipment, trucks, land and that he buys most, or all, of his cows.
However, as a final check the total costs as shown were compared with the average
total cost for all types of operation found whether owning, renting, raising
or buying cows.
Exp.Sta., Ag.Ec. 50.
lion Costs, Four Areas, 1945 (Wholesale)
Miami Tampa Jacksonvill1
Number of dairies . . . . . . . 9 : 15: 10: 6
Average number of cows per dairy ...... .: 164 : 436 : 181 : 162
Average production per dairy (gallons) . .: 92,060:206195:83,010: 80,403
Production Costs Per Gallon:
Feed purchased . . . . . . . .
Labor hired . . . . . . .... :
Dairy supplies . . . . . . .:
Power, lights and fuel . . . . . .
Repairs buildings, fences, equipment .. .:
Repairs autos, trucks, tractors . . .
Gas and oil autos, trucks, tractors . :
Taxes and licenses . . . . . . ..
Insurance . . . . . . . . :
Veterinary and medicines . . . .... .:
Rent additional facilities . . ... .:
Miscellaneous expense . . . .... ..
Total cash operating cost (excluding interest):
8.86 :10.51 :
Herd . . . . ... . . . .
Dairy buildings . . . . . . .
Dairy equipment . . . . . . .
Autos, trucks, tractors . . . . .
Total depreciation . . . . ... .
Total depreciation and cash operating cost .:
Operator's labor and supervision . . . ..
Interest on average investment (5 percent)
Herd . . . . . . . . . .
Dairy buildings . . . .. .
Dairy equipment.. . . . . . .
Autos, trucks, tractor . . . . ..
Land . . . . . . . . . .
Total interest.. . . . . .:
3.28 : 3.30 :
.49 : .43 :
.46 : .28 :
.25 : .31 :
3.96U: 4.484: 4.324:
3.48,: 1.24Q: 3.254:
1.02 : 1.40 : 1.39
.33 : .49 : .42
.18: .31 : .12
.08 : .08 : .09
1.41 : .94 : .73
3.024: 3.221: 2.754:
Total Production Cost . . . . . . 52.46-:55.55f:49.90A: 53.074
I/ Includes legal and auditing, telephone, postage, stationery, printing, sub-
scriptions, dues, donations, contract hauling, and seed and fertilizer for
2/ Interest paid on borrowed money . . . .42 .174 .184 .244
Exp.Sta., Ag.Ec. 30
Prepared by the Florida Agricultural Experiment Station
*. v --
m -, i
Estimated Milk Production Costs in Florida, March 1, 1946 (Wholesale)
:quantity : Weighted : Cost per :Cost per
rItem required average :100 pounds gallon
: per 100 :price
pounds or rate of milk : of milk
: of milk':
Grain and concentrates .. .. :74.07 lbs.:$3.44 cwt.: $2.55 : 21.930
Bulky feeds and pulp . . .. 21.40 lbs.: 2.47 cwt.: .53 : 4.56
Dry roughage . . . . .. : 5.33 bs.: 2.40 cwt.: .13 1.12
Silage and succulents ..... :14.52 lbs.: .39 cwt.: .06 : .51
Total feed cost : $3.27 : 28.12
Labor cost, including operator /: 2.31 hrs.: .645 : $1.49 12.82df
Total feed and labor cost . : $4.76 :40.94d
Percent of total cost represented by feed and labor 76.5
All other costs . . . . . . . . . . $1.46 : 12.556
Total production cost . . . . . . . . . $6.22 : 53.494
i/ Prepared by using current feed and labor costs as reported by 187 dairymen
in a questionnaire. Cost is computed on wholesale production basis, i.e.,
delivered to the milk distribution plant, but not bottled or delivered to
2/ Quantity of feed required to produce 100 pounds of milk is taken from Florida
Agri. Exp. Sta. Bul. 246, p. 116. (average of all areas). Prices paid for
feed on March 1, 1946 were reported by 187 dairymen in a questionnaire.
3/ Quantity of labor required to produce 100 pounds of milk, and labor rates were
obtained from questionnaires completed by 187 dairymen. The quantity of labor
found by multiplying the daily hours worked by each employee by 365 days was
reduced by 20 percent to allow for illness, vacations or time off.
4/ The proportion of total production cost represented by feed cost and labor
cost (including operator's labor) was obtained from a cost survey of 40
dairies made by the Florida Agricultural Experiment Station for the calendar
Txp.Sta., Ag.Ec. 30