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Group Title: Virgin Islands of the United States. Agricultural Experiment Station. Virgin Islands Agricultural Experiment Station report
Title: Profitability of dairy farming in St. Croix, U.S. Virgin Islands
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 Material Information
Title: Profitability of dairy farming in St. Croix, U.S. Virgin Islands
Series Title: Virgin Islands of the United States. Agricultural Experiment Station. Virgin Islands Agricultural Experiment Station report
Physical Description: vi, 13 p. : ;
Language: English
Creator: Dhillon, Pitnam S
Park, Robert L., 1932-
Donor: unknown ( endowment )
Publisher: Virgin Islands Agricultural Experiment Station
Place of Publication: St. Croix
St. Croix
Publication Date: 1974
Copyright Date: 1974
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non-fiction   ( marcgt )
Spatial Coverage: United States Virgin Islands
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Bibliographic ID: UF00096188
Volume ID: VID00001
Source Institution: University of Florida
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Table of Contents
    Front Cover
        Front Cover
    Title Page
        Page i
    Table of Contents
        Page ii
    Foreword
        Page iii
    Section
        Page iv
    Main
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
    Appendix
        Page 13
Full Text















































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bog











Virgin Islands
Agricultural Experiment Station
Report No. 4
August 1974











Profitability of

DAIRY FARMING

In St. Croix, U.S. Virgin Islands



















College of the Virgin Islands
Virgin Islands Agricultural Experiment Station
Fenton B. Sands, Director
St. Croix, U.S. Virgin Islands

























Forew ord .........................
Summary and Conclusions .......... ..
Resource Base .......................
C lim ate .......... .. ...........
Labor and Other Factors ............
Benchmark Ranches ..................
Herd Unit Concept ................
Pasture-Carrying Capacity ..........
Costs and Returns ....................
Gross Returns .....................
Sales Estimates ......................
Breakeven Costs and Returns ........
Internal Rate of Return .............
Land Use Strategy ....................
Appendix ..........................


COVER PHOTO: Senepol beef cattle on Pangola grass pasture, St. Croix, U.S. Virgin Islands


CONTENTS


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FOREWORD


This report, "Profitability of Dairy Farming in St. Croix, U.S. Virgin Islands," is one of a
series of feasibility studies sponsored by the newly created Virgin Islands Agricultural Experiment
Station, College of the Virgin Islands. These investigations were financed totally with Federal
funds made available to the Station under the provisions of the Hatch Act, Amended.
Preparation of this report was accomplished by contracting for the services of the following
team of specialists: Dr. Pritam S. Dhillon, Professor of Agricultural Economics and Marketing,
Rutgers University, New Brunswick, N.J., and Dr. Robert L. Park, Professor of Animal Science,
Brigham Young University, Provo, Utah. This team conducted the study and wrote the man-
uscript for this report.
The objective of these studies was to try to determine the agricultural enterprises, both
plant and animal, that have economic potential on the Virgin Islands. It is my belief that the
agricultural industry must be economically sound in order to be viable.
On the Virgin Islands, agriculture has been on the decline since the early part of the 1960's.
The average number of farms, farmers, and production of agricultural commodities (with the ex-
ception of fluid milk) have all declined at a consistent rate. Among the questions which are
uppermost in the minds of many people are: What factors have been responsible for these de-
clines? Can these downward trends be stopped and perhaps reversed? What is the future of
the agricultural industry, particularly on St. Croix where 85 percent of the farmland is lo-
cated? This report on dairy farming, along with the others, sheds some light on these questions.
These feasibility reports have also revealed the areas where lack of training and education
on the part of farmers has adversely affected production. These subjects have now become part
of the new program of the V.I. Extension Service. At the same time, the lack of information
about the response of crops and livestock in this environment, which also limits production,
has been recognized. These gaps in our knowledge have become the basis for the planned research
program of the V.I. Agricultural Experiment Station. Thus, these studies have given more direc-
tion to the efforts of the Extension and research programs of this land-grant institution. More
importantly, the results of these studies are expected to be beneficial to full- and part-time
farmers, as well as to potential investors.
This series of reports rests squarely on the belief that a revival of agriculture would contrib-
ute substantially to the 'general welfare through increased output of goods and services and by
providing additional employment. Moreover, expanded production and marketing of farm prod-
ucts could provide greater, and in some cases, cheaper sources of nutritious foods for consumers.
A more fully developed agriculture would complement the major industry-tourism-in
two ways. First, visitors would be pleased to be served local products, especially tropical fruits
and vegetables, by hotels and restaurants where such products are often not now available. Sec-
ond-and perhaps more important-an expanded agriculture would tend to preserve the envi-
ronment of exotic tropical islands. Most visitors and some permanent and semi-permanent resi-
dents come to the Virgin Islands to seek this environment. If this attraction is destroyed,
the basis of the major industry of the Islands will be undermined.
The Virgin Islands Agricultural Experiment Station gratefully acknowledges the cooperative
assistance and contributions from many St. Croix farmers; Rudolph Shulterbrandt, Commis-
sioner, V.I. Department of Agriculture, and his staff; and Bennett S. White, Jr., project consult-
ant and former USDA agricultural economist, now retired.
Fenton B. Sands, Director
March 1974








SUMMARY AND CONCLUSIONS


Under normal conditions, dairy farming in St.
Croix and the Virgin Islands as a group is a viable
enterprise. The distance between the Islands and
other dairy-producing regions along with the suit-
ability of land for pasture grazing favors this type
of farming. Virtually the entire domestic market
for fluid milk is available to the local producers.
According to the 1969 census, the seven com-
mercial dairy farms in the Islands held over one-
quarter of the total land in farms and accounted
for 69 percent of the value of all farm products
sold. Furthermore, dairying, unlike other sectors
of the agricultural economy, has been growing;
rising population and incomes indicate a potential
for further growth.
On a 75-cow benchmark farm, assuming milk
production of 11,500 lbs. per cow, returns to
operator's labor and management were estimated
at $18,754. Rate of return on non-land investment
was estimated at 12.7 percent. The net profit, re-
presenting excess of receipts above all production
costs, amounted to $6,754.
There were significant economies of size in mov-
ing from the 50-cow operation to the 75-cow herd.
On the 50-cow farm, returns to operator's labor
and management were less than one-half of the
returns on the 75-cow farm. Rate of return on non-
land investment was estimated at 3.4 percent only.
When all costs of production were considered, the
50-cow farm showed a loss of $4,106.
Prices of milk and feed were the major factors
influencing returns and profit. On the 75-cow
farm, an increase of one cent in milk price in-
creased the net profit by $3,345.45, while an in-
crease of $1 in feed price decreased the net pro-
fit by $3,722. Changes in land cost and wage rate
were relatively less significant.
Cost of producing a quart of milk was estimated
at 21 cents for the 75-cow farm and 24.8 cents
for the 50-cow herd, assuming a feed price of $7.50
per hundredweight. Again, feed price was the most
important variable affecting this cost. On the 75-
cow farm an increase of $1 in feed price increased
the per quart cost by 1.11 cents. Effect of changes
in land cost and wage rate were less significant.
Depending upon the productive ability of a cow,


feeding at a higher level could increase profit.
Underfeeding of cows saved the feed bill but re-
sulted in severe reduction of returns and profit.
On the 75-cow farm, with 50 acres of sorghum,
the per-pound cost of total digestible nutrients
(TDN) from silage was estimated at 4.4 cents.
This was based on a land cost of $20 and silage
yield of 15 tons per acre. In contrast, the cost of
a pound of TDN from pasture was estimated at
2.8 cents. Thus, silage feeding under these cir-
cumstances pointed toward reduced profit. How-
ever, if land costs were above $55.42 per acre or
if silage yields were above 23 tons, silage became a
cheaper source of forage compared to pasture.
Production of 50 acres of sorghum silage on the
75-cow farm required an additional fixed invest-
ment of $15,250.
Finally, it should be emphasized that the appar-
ent vitality of the dairy industry should not lead
public agencies to take an attitude of complacency
toward dairying. As noted in other publications
in this series, tourism and expenditures of full and
part-time residents who find the climate, vegeta-
tion, beaches and other characteristics of tropical
islands attractive are the backbone of the Virgin
Islands economy. It must also be recognized, how-
ever, that the development of the agricultural
potential is important. It is important to the gener-
tion of income and employment, to provide food
production for a growing population, both per-
manent and transient, to reduce costs of holding
land, and perhaps most importantly, as a means of
preserving island aesthetics. Without this last, the
primary industry itself will be undermined.
The dairy industry, a key factor in the livestock
feed economy, must be given every opportunity for
profit and expansion. Since feed costs are an im-
portant determinant of profit, every alternative to
importing expensive feed must be explored,
especially the economic feasibility of local produc-
tion of grain and high nutrient silage. Consequent-
ly, all of the research recommendations in the
report on grain sorghum and forage production-
in both their technological and economic aspects
-have profound implications for the dairy in.-
dustry.
















PROFITABILITY OF DAIRY FARMING

in St. Croix, U.S. Virgin Islands

by


PRITAM S. DHILLON and ROBERT L. PARK


As a result of adjustment from a one-crop sugar
economy to diversified farming, dairying has emer-
ged as the most important agricultural enterprise
on St. Croix. According to the 1969 Census of
Agriculture, sales of milk and livestock from dairy
farms accounted for about one-half of the total
value of farm products sold on the island In the
U. S. Virgin Islands as a group, the relative
importance of dairying is even greater. In 1969
there were only seven dairy farms, but they held
over a quarter of the total land in commercial
farms and accounted for 69 percent of the value
of agricultural products sold (Table 1).
Besides relative growth due to the demise of
the sugar industry, dairying in St. Croix experien-
ced a sizeable expansion in the 1960's. As shown
in Table 2, the number of cows milked doubled
between 1960 and 1970; milk sales increased over
four-fold; and milk sold per milking cow more


than tripled. The number of farms decreased but
herd size increased, resulting in larger and pre-
sumably more efficient operations.
The location of St. Croix in relation to other
dairy producing regions of the U.S. and the suit-
ability of much of its farmland for pasture favor
dairy production. Under the existing technology
use of farmland is primarily restricted to pasture,
and dairying is well-suited for its utilization. Due
to the perishable and bulky nature of milk, coupled
with the great distance between St. Croix and
other producing centers, the domestic market for
fluid milk is strongly insulated from foreign com-
petition. In short, the entire fluid market of the
Virgin Islands is available to the local dairy
producers, barring any dumping of milk by the
other producing regions. Production of selected
manufactured milk products might also be feasible.
The domestic market for fluid milk in the Vir-


Table 1.-Relative importance of dairying in the commercial agriculture of the U.S. Virgin Islands

All Commercial Dairy farms
Item commercial dairy as percent
farms farms of all farms

Number of farms ------------------------------------ 58 7 12


Total land in farms (acres) -----------------
Cropland (acres) --------------------
Pasture (acres) -------------------------------
Other land (acres) ------------------------------

Value of farm products sold ------------- ---
Milk sold ----------------------------------------
Livestock sold -----------------------------------
Poultry and eggs sold ------------------------------------
Vegetables and fruit sold _- -----------------


16,877
8,995
6,401
1,481


4,796
1,588
3,144
64


---------Dollars.......----
1,301,977 894,588
808,758 803,718
273,466 90,870
119,753
100,000


Source: 1969 U. S. Census of Agriculture, Bureau of the Census, U. S. Department of Commerce.
Estimated from the Census data.








Table 2.-Trends in the St. Croix dairy industry, U.S. Virgin Islands

Item 1960 1964 1970 1973

Number of dairy farms ----------------- --------- 13 11 7 6*
Dairy cows ---- ---- ---- -- 409 580 N.A. 612 *
Cows milked daily --------- ------ ----- 262 277 5301 438 *
Milk sold (1,000 qts.)* ------------------------- 399 880 1,895 2,007*
Milk sold per milking cow (qts.) ---_ ----- 1,523 3,177 3,574 4,582

Source: Most of the figures in this table were obtained from the U. S. Census of Agriculture, Bureau of the Census,
U. S. Department of Commerce.
SBased on a Census by the V. I. Department of Agriculture cited by Harold V. Clum, "Agriculture and Food Pro-
duction", Agriculture and Food Fair of St. Croix, 1971, V. I. Department of Agriculture.
'Based on a survey conducted by P. S. Dhillon in June, 1973.
*Milk received by the Island Dairies from the producers.
'Sales relate to calendar 1972.


gin Islands has great potential for expansion. The
current level of per-capita consumption is about
one half of the U. S. mainland level, and as in-
comes of the islanders increase the domestic fluid
market should expand. Any increase in the popula-
tion, of course, will be an additional force in
market expansion. Finally, the continued growth
of tourism is likely to enlarge the market still fur-
ther. Thus, dairying in St. Croix could be poised
for a significant growth in the coming years.
The purposes of this study were to evaluate the
profitability of dairying under the prevailing eco-
nomic conditions in St. Croix, and to investigate
the impact of changes in herd size, feeding levels,
forage systems and other related variables on the
profits and costs of dairy farming. Such informa-
tion is expected to benefit the farmers in making
profitable adjustments on their farms.
Specific objectives of this study were: (1) to
identify the typical benchmark dairy farms under
St. Croix conditions and to determine costs and
returns on such farms, (2) to determine the effect
of changes in herd size and prices of inputs and
outputs on returns and costs, (3) to determine the
effect of alternate feeding levels of cows on profits,
and (4) to assess the feasibility of producing
sorghum silage.
Information on herd size, farm resources, input-
output coefficients and related data was obtained
through personal interviews with dairy farmers.
On the basis of this information, two benchmark
farms were constructed, and, by budgeting proce-
dures, returns and costs were estimated. By leaving


some of the costs and prices as variables in the
budgets, their effects on returns and costs were
analyzed.
BENCHMARK FARMS
According to information provided by the far-
mers, St. Croix dairy farms fall into three size
categories. The more plentiful, middle-sized farms
were chosen for intensive analysis, and a 75-cow
dairy farm was constructed to serve as a bench-
mark for these farms. Also, to give guidance to
new entrants to dairying who might prefer to
start a smaller operation, a 50-cow benchmark
dairy farm was analyzed. On the basis of the
survey of dairy farmers, the following resources
were assumed on the benchmark farms.
Land
The 75-cow dairy farm was assumed to operate
225 acres of land. On the average, dairymen were
actually using 3 acres of pasture for every cow.
The 50-cow model was assumed to operate 150
acres of pasture land. An acre of pasture was as-
sumed to yield 1,475 pounds of injested total
digestible nutrients(TDN).
Livestock
The composition of the two herds is shown in
Table 3. The 50-cow farm had 85 animals with
an approximate value of $51,800. The 75-cow
farm had 127 animals representing an average
investment of $77,600.
Culling rate of cows was assumed to be 25
percent of the herd.















Table 3.-Livestock and average investment in livestock on benchmark farms

Average
Item Beginning End of Average value Average
of year year per head investment

50-cow herd Number --_-- ------ Dollars....----
Dairy cows ----------------------- 50 50 50 800 40,000
Heifers over 1 year ------------ 18 14 16 500 8,000
Heifers under I year -------------20 18 19 200 3,800
Total ---------------- 85 51,800
75-cow herd
Dairy cows --------------------------- 75 75 75 800 60,000
Heifers over 1 year' -------------------- 27 21 24 500 12,000
Heifers under 1 year _------------------- 30 27 28 200 5,600
Total ------------ 127 77,600

' Changes in the number of animals during the year are due to deaths and culling.


Annual death rate for cows was assumed to be
2 percent, resulting in 1 death on the smaller farm
and 2 deaths on the larger farm.
Milk production of a cow was assumed to be
11,500 pounds during a 365-day lactation period.
The breeding cycle of a cow was assumed to be
14 months, which included a dry period of 2
months.
Bred cows were assumed to produce 95 percent
live calves-one-half of which were males and
one-half females. Males were sold for veal soon
after their birth and all females were raised as
heifers. Mortality rate for heifers was assumed to
be 10 percent during the first year and 3 percent
during the second year. After breeding the requir-
ed number of heifers to meet replacement needs,
the remaining heifers were sold as culls at about
18 months of age. In applying the percentage
rates, the resulting animal numbers were rounded
to whole numbers.

Buildings and Structures
Initial investment in buildings and structures is
shown in Table 4. Buildings were modelled after
the system being recently adopted in the island.
In this system, milk room, compressor room and
milking parlor are located on the ground floor, the
feed room is constructed above the parlor. Before
every milking, feed is dumped into the two large
receptacles located along the walls of the feed room
and by pulling cords from the parlor, feed is de-


livered to the cows. There are four milking units
in the double-four herring bone milking parlor,
The perimeter of the farm was assumed to be
fenced by a 4-strand barbed wire fence, quatering
the farm into four sections. Further sub-division
into smaller fields was done with an electric fence.
The average investment in buildings and struc-
tures was estimated at $28,730 on the 50-cow
farm, $32,592 on the 75-cow farm (Table 4).

Machinery and Equipment
The complement of machinery and equipment
for operating the two farms is shown in Table 5.
The same equipment and machines were assumed
for both farms. Any error on this account should
be negligible because the same chores need to be
performed on both farms and machines are sel-
dom completely divisible. The average investment
in machinery and equipment was estimated at
$19,825.

Labor
On the basis of information supplied by the
farmers, the 75-cow dairy needed 1 full-time
operator and 2 hired workers. The 50-cow farm
was assumed to need 1 full-time operator and 1Y/
hired workers.

Feed
The entire concentrates were purchased from
outside the farms. This also included small quanti-










Table 4.-Initial and average investment in buildings and other structures on benchmark farms

Item Initial Annual Annual
Units investment depreciations1 repairs*

50-cow herd ------ Dollars.------.......
Buildings and pens --------------- ------30,000 1,500 600
Fence ---------------------------- -- 7,800 390 156
Well -------------------------------------- 1 1,660 83 -
Ponds -----......-------------------------------- 3 9,000 -
Total ----------------------------- 48,460 1,973 756
Average investment ------------------------ 28,730
75-cow herd
Buildings and pens ----------------------- 30,000 1,500 600
Fence' ---- -------------------------------- 9,525 476 190
Well ----. ------------------------------ 1 1,660 83 -
Ponds __------------------------------------- 4 12,000 -
Total ------------------------------- 53,185 2,059 790
Average investment -------------------- 32,592

'Buildings, well and fence were assumed to last 20 years.
'Repairs were assumed at 2 percent of initial investment.
' Based on the system found on Nelthropp farm.
'* See Appendix table 2 for initial investment.
Average investment was assumed to equal one half of initial investment in the case of depreciable items plus initial
investment in ponds which did not depreciate-


Table 5.-Initial and average investment in equipment and machinery on benchmark farms'

Unit Initial Annual Annual
Item or type investment' depreciation repairs'

-------- Dollars --------......----

Bulk tank ------------------------------ 400-500 gal. 5,000 500 150
Parlor equipment ----------------------- 4 milking units 15,000 1,500 450
Troughs ....------------------------------- 3 900 90 27
Generator ------------------------ 1 PTO 500 42 15
Tick control equipment __ -------- 3,000 300 90
Front-end loader ---------------- 1,000 100 30
Tractor ....--------------------------- 1 6,500 542 195
Subsoiler .--------------------------- --1 500 42 15
Brush cutter ---------------------------- 1 1,400 140 42
Pick-up truck ---------------------- 1 4,500 450 135
Water pump ------------------ 1 350 35 10
Tools --------------------------------- 1,000 200 -
Total ---------- 39,650 3,941 1,159
Average investment ----------- 19,825 -

SBasically the same equipment and its usage were assumed for the 50-cow and 75-cow dairies.
Investment in parlor and equipment was based on the most recently developed dairy farm. Investment in all other
items was based on the survey of dairy farmers and the approximate current prices.
'Based on straight line depreciation of assets assuming 10 to 12 year life for the various items. Tools were assumed
to last 15 years.
'Repairs were assumed at 3 percent of initial investment.
I Average investment was assumed to equal one half of initial investment.














ties of specially formulated feed for the calves.
The entire forage needs of the herds were supplied
by pasture.


ANALYSIS AND RESULTS

Receipts, Expenses and Profits

The benchmark farms were budgeted to deter-
mine returns to the operator, management and in-
vestment. Prices used in the basic budgets are
given in Appendix Table 1.
Sale of milk was the main source of revenue on
benchmark farms. Annual milk production of the
smaller herd was estimated at 224,773 quarts and
that of the larger herd was estimated at 334,545
quarts. These amounts are based on the daily
milking of 43 cows and 64 cows for the 50-cow
and 75-cow farms respectively. The f.o.b. price of
milk was assumed to be 23 cents per quart. In
addition to milk sales, income also came from the
sale of cull cows, cull heifers and male calves. To-
tal receipts amounted to $58,025 on the 50-cow
farm and $86,390 on the 75-cow farm (Table 6).
Annual production costs on the farms consisted
of current production expenses, land and labor
costs, depreciation and interest on capital. Current
production expenses were estimated at $23,755 for
the 50-cow farm and $34,139 for the 75-cow farm


(Table 7). (Expenses corresponding to different
levels of milk production have been included in
Table 7 for a later analysis. For this section, the
relevant expenses correspond to the production
level of 11,500 pounds of milk.) Included in cur-
rent production expenses are such items as pur-
chased feed, fuel, chemicals, veterinary services,
insurance, repairs and other miscellaneous recur-
ring expenses. Most of these items vary with the
number of cows in the herd. These expenses con-
stituted the most important category in the costs
of the two farms. Within the group, feed was the
largest single expense. The quantity of purchased
concentrates was derived by substracting pasture
TDN from the total feed needs of the herds (Ta-
ble 8.) In order to simplify analysis, purchased
feed for the young stock and cows was handled as
a single item. Feed allowances for death losses
were included in the feed budgets. Price of deliv-
ered feed was assumed at $7.50 per hundred-
weight.
Labor costs for hired workers were based on the
number of workers employed on each farm. In the
basic analysis, a wage of $92 per week was used.
In addition to the cash wage, farmers provided
unemployment insurance at the rate of 1.5 per-
cent of the cash wage, workmen's compensation
at the rate of 2.5 percent, social security at the
rate of 5.85 percent, a rent free house with a


Table 6.-Estimated annual receipts on benchmark farms

50-cow herd 75-cow herd
Quantity Amount Quantity Amount
Dollars Dollars

Milk' ..---......------------------------------------ 224,773 qt. 51,698 334,545 qt. 76,945
Cull cows @ 1200 lbs. ----------------------- 15,600 lbs. 4,680 22,800 lbs. 6,840
Cull heifers @ 800 lbs. ---------------------- 2,400 lbs. 912 4,000 lbs. 1,520
Calves ......------------------------------------- 21 head 735 31 head 1,085
Total ------ ----- ---------------- 58,025 86,390

xA cow was assumed to yield 11,500 pounds of milk during a lactation period of 365 days. Following lactation, a dry
period of 60 days was allowed. (A quart equals 2.2 pounds of milk)
'Culling rate was assumed at 25 percent.
Breeding cycle of cows was assumed to be 14 months long, and 95 percent of the pregnant cows were assumed
to produce live calves. Out of the resulting calves, the males were sold within the week of their birth and the females
were raised as heifers. After allowing 10 percent mortality rate during the first year and three percent mortality
rate during the second year, the remaining heifers were assumed to reach maturity. Fourteen of these heifers were
bred to replace the culled and dead cows on the 50-cow farm. Similarly, 21 of these heifers were bred to meet the
death and culling losses on the 75-cow farm. The remaining heifers were sold for beef.









Table 7-Current production expenses on benchmark farms '


50-cow herd

Rate Quantity
per cow of feed Amount


75-cow herd

Quantity
of feed Amount


Purchased feed ------- ------ -----
Prod. @ 9,200 lbs. milk ----
Prod. @) 11,500 lbs. milk ---------
Prod. f 13,800 lbs. milk -------------
Fuel ----------------------- ---
Chemicals for tick control
Miscellaneous supplies
Veterinary & medicines
Semen and breeding -
Utilities ------------------------------
Dues of association- ---------------
License fees ------------------ ----
Office supplies-----------------
Insurance --- ------ -----
Repairs' __ .
Total expenses
Prod. @ 9,200 lbs. milk ----------
Prod. @ 11,500 lbs. milk -- ----
Prod. @ 13,800 lbs. milk -------


' Most of the expenses in this table were based on the survey
' See table 8.
' Obtained from tables 4 and 5.


rental value of $100 per month and two quarts
of milk per day. The annual labor cost of a hired
worker amounted to $6,623. Total labor cost was
estimated at $9,935 for the 50-cow farm and
$13,246 for the 75-cow dairy operation (Table 9).
Annual land cost on each farm was determined
by using a rental value of $20 per acre (Table 9).
The usual procedure of charging interest on the
market value of land was not followed. Current
market values of land in St. Croix are completely
separated from the agricultural productivity of
land. On the basis of market value, perhaps, pro--
duction of no agricultural product could be justi-
fied in St. Croix. On the other hand, rentals of
land for agricultural use seem to reflect the agri-
cultural value of land. Current rents varied from
$10 to $30 an acre.
Interest cost was measured by applying an in-
terest rate of 7.5 percent to the average invest-


y of dairy farmers and farm data manuals.




ment in livestock, buildings, structures, machinery,
and equipment. The average investment in non-
land assets was estimated at $100,355 for the 50-
cow farm and $130,017 for the 75-cow farm. De-
preciation on the two farms amounted to $5,914
and $6,000 respectively (Table 9).
Total costs add up to $50,131 on the 50-cow
farm and $67,636 on the 75-cow farm (Table 9).
These costs include all expenses except a charge
for operator's labor and managing effort. Conse-
quently, by subtracting these costs from the gross
receipts, returns to operator's labor and manage-
inent were estimated. On the smaller farm, these
returns amounted to $7,894 as compared with
$18,754 on the larger farm. Net profits were ar-
rived at by charging an opportunity cost of
$12,000 for operator's labor and management.
The smaller farm showed a net loss of $4,106
while the 75-cow farm produced a net profit of


Dollars


2,094
2,492
2,890


Dollars

15,705
18,690
21,675


Cwt.

3,129
3,722
4,313


Dollars

23,468
27,915
32,348


1,915


20,770
23,755
26,740


1,949


29,692
34,139
38,572


















Table 8.-Annual TDN requirements on benchmark farms1

50-cow herd 75-cow herd
Class of livestock Number TDN Number TDN
lbs. lbs.

Lactating cows
Prod. (@ 9,200 lbs. milk --------------------- 43 257,398 64 383,104
Prod. @ 11,500 lbs. milk ----------------------- 43 287,240 64 427,520
Prod. (i 13,800 lbs. milk __ ------- 43 317,039 64 471,872
Dry cows -------------------------------------- 7 29,127 11 45,771
Heifer calves 0-12 mo. ------------------------- 18 36,000 27 54,000
Death allowance for heifer calves 0-6 mo -------------- 2 1,000 3 1,500
Heifers 12-24 mo. __________-------------------- ----------- 14 49,000 21 73,500
Death and culling allowance for heifers 12-18 mo,' 4 5,800 6 8,700
Total requirements for herd
Prod. (fl 9,200 lbs. milk ------------------ 378,325 566,575
Prod. Co 11,500 lbs. milk ________ ------ 408,167 610,991
Prod. @ 13,800 lbs. milk --------------- 437,966 655,343
TDN obtained from pasture (4 1,475 lbs. per acre' 221,250 331,875
TDN obtained from concentrates'
Prod. ( f 9,200 lbs. milk ------------------------ 157,075 234,700
Prod. @ 11,500 lbs. milk --------------------- 186,917 279,116
Prod. (iP 13,800 lbs. milk ----------------------- 216,716 323,468
Concentrates purchased '
Prod. (a 9,200 lbs. milk ------------------------ 209,433 312,933
Prod. 4j: 11,500 lbs. milk ----------------------- 249,222 372,155
Prod. (@ 13,800 lbs. milk __ 288,955 431,290


'This table is based on Appendix table 3.
- Carried for six months only.
' Based on estimates provided by William L. Park.
* Obtained by subtracting TDN from pasture from the total
' Obtained by assuming 75 percent TDN in concentrates.



$6,754. The rate of return on non-land investment
was estimated at 3.4 percent for the 50-cow farm
and 12.7 percent for the 75-cow farm (Table 9).
All of the above measures indicate significant
economies of size in dairy production. These
economies mainly stemmed from the indivisibili-
ties' of equipment and structures. Varying num-
bers of cows could be handled with the milk han-
dling and feeding facilities considered in the
benchmark models. In fencing and pen construc-
tion, there were obvious economies of size. Labor
economies were also realized by expansion of size.
The larger farm handled 33 percent more cows
with only 20 percent additional labor force.


herd requirements.




Effects of Price Changes on Returns

In the foregoing analysis, fixed prices for in-
puts and outputs were used. However, because of
rapid increases in input prices in recent years, one
might be interested in knowing the effect of price
changes on the returns and profits of the farms.
To conserve space, this analysis was carried
out in the form of simple equations. Also, the
analysis was restricted to the study of changes in
milk price, land cost, wage rate and feed price in
relation to the net profit on the 75-cow dairy
farm.
The equations for total revenue (gross receipts),









Table 9.-Summary of income and expenses
of benchmark farms'

50-cow 75-cow
Item herd herd

--- Dollars -
Gross income ------------------- 58,025 86,390
Interest on aver. invest. Or 7.5% -- 7,527 9,751
Depreciation __------------------- 5,914 6,000
Land cost ---- ------ 3,000 4,500
Cost of hired labor 9,935 13,246
Current production expenses ------ 23,755 34,139
Total expenses -------------- 50,131 67,636
Returns to operator's labor
and to management ----------- 7,894 18,754
Rate of return on aver. investment'
(excluding land investment) __- 3.4% 12.7%
Net profit -- ____ -- -$4,106 $6,754

'For cows yielding 11,500 pounds of milk.
Assembled from Tables 4 and 5.
Cost of land for agricultural use, including taxes,
was assumed at $20 per acre,
'* Capital is considered to be the residual claimant. The
reward of capital was estimated by subtracting depre-
ciation, land cost, cost of hired labor, current production
expenses and operator's opportunity cost from the gross
income. The opportunity cost of operator's labor and
management was assumed to be $12,000 per year.
SNet profit is the reward of the entrepreneur. It was
estimated by subtracting interest, depreciation, land cost,
cost of hired labor, current production expenses and
operator's opportunity cost from the gross income.


total cost and net profit are as follows:
(1) TR =3,345.45Pm + 9,445
(2) TC= 225R+ 114.244W + 3,722Pf+ 36,711
(3) N=3,345.45Pm,-225R-114.244W
3,722Pf- 27,266
Where TR= Total revenue or gross receipts in
dollars
Pm= f.o.b. price of milk in cents per quart
TC=-Total cost in dollars including sal-
ary of the operator-manager
R=-Rent of land in dollars per acre
W= Wage rate in dollars per worker
per week
Pf = Price of feed in dollars per hundred-
weight


N-Net profit in dollars representing
excess of receipts above all costs of
production
Equation (3) shows the effect of the variables
on net profit. Every one-cent change in milk price
changes the profit by $3,345.45 in the same direc-
tion. Every one-dollar change in rent per acre,
wage rate per week and feed price changes the
profit by $225, $114.244 and $3,722, respectively,
in the opposite direction. The effect of prices of
feed and milk on the net profit is illustrated in
figure 1. Obviously, changes in the prices of feed
and milk have an enormous influence on the
profit. The break-even price of feed was estimated
at $6.60 and $9.30 corresponding to the milk price
of 20 cents and 23 cents, respectively.

Production Costs Per Quart of Milk

Farmers and policymakers are often interested
in knowing the average cost of producing a quart
of milk. At this stage of the analysis, such an es-
timate can be readily derived from the total costs
listed in Table 9. As shown in Table 10, per-quart
cost amounted to 21 cents on the 75-cow farm. A
similar estimate for the 50-cow dairy showed this
cost to be 24.8 cents.
The effect of changes in input prices on the
per quart cost was analyzed for the 75-cow farm.
By leaving input prices as variables, the following
equation for the average cost was derived from
the total cost equation of the last section:


Table 10.-Cost of producing milk
on benchmark rfarms, per quart'


50-cow 75-cow
Item herd herd

Expenses (excluding operator's labor
and management) -----------$50,131 $67,636
Plus cost of operator's labor and
management ___--__ $12,000 $12,000
Less non-milk receipts ---------- $ 6,327 $ 9,445
Equals total cost imputed to milk $55,804 $70,191
Milk produced, qts. ------------ 224,773 334,545
Cost per quart ----------------_ 24.8 21.0

'For cows producing 11,500 pounds of milk.



























a 1





1 2 / 4 4 i o
Figure 1.-Relationship between net profiP23t, price of
8















of milk in cents per quart.
020




AC= 6 7 07R+03W .11P+8.15
\ Price of Feed. Dollo wt


Figure 1.-Relationship between net profit, price of
feed and price of milk, where P equals f.o.b. price
of milk in cents per quart.
AC==.07R+.03W+ .l11P+ 8.15
Where AC-Average cost of milk in cents per
quart
R=Rent of land in dollars per acre
W=Wage rate in dollars per worker
per week
Pr- Price of feed in dollars per hun-
dredweight


According to this equation, every one dollar
change in rent per acre, wage rate per week and
feed price changes the per quart cost by 0.07
cents, 0.03 cents and 1.11 cents, respectively. The
effect of these variables on the per quart cost is
illustrated in figure 2. It is evident that the pro-
duction cost is highly sensitive to the changes in
feed price.



Effect of Level of Feeding on Returns

The preceding analysis has been based on the
average level of feeding cows as now practiced
in St. Croix. It should be of interest to see the
effect of increased or decreased feeding on the
returns and profits of the farm. Accordingly, re-
turns to operator's labor and management were
computed for two additional feeding levels-one
corresponding to the yield of 9,200 lbs. of milk
and the other to 13,800 lbs. This, of course, as-
sumes that the average cow considered in the
model was capable of producing higher milk
yields when challenged with additional feed. The
results showed that, on the 75-cow farm, returns
to operator's labor and management increased by
58 percent by moving from 11,500 lbs. per cow
to the higher level of feeding (Table 11).
On the other hand, these returns decreased by
58 percent by going from cows producing 11,500
lbs. to the lower level of feeding where the cows
yield only 9,200 lbs. of milk. Rate of return on
investment increased by 66 percent in the first
case, but it decreased 66 percent in the second
case. Without precise information about the pro-


Table 11.-Effect of level of feeding on milk production and returns (75-cow herd)

Milk production per cow
Item 9,200 lbs. 11,500 lbs. 13,800 lbs.

Milk produced, qts. ---------------------------------- 267,636 334,545 401,455
Receipts
Milk --....-- --.---------..-.. _--.. .____ $61,556 $76,945 $ 92,335
Other --------------------------------------------- $ 9,445 $ 9,445 $ 9,445
Total ------------------------------------------- $71,001 $86,390 $101,780
Total cost excluding operator's labor and management ---- $63,189 $67,636 $ 72,069
Return to operator's labor and management ------------- $ 7,812 $18,754 $ 29,711
Rate of return on average investment -------------------- 4.3% 12.7% 21.1%







ductive ability of St. Croix cows, it would be
presumptuous to say that farmers can increase
their returns simply by heavier feeding. The anal-
ysis, however, does point out the dangers of under-
feeding.

Feasibility of Silage Feeding

So far, pasture has been considered the only
source of forage which is quite typical of the con-
ditions prevailing in St. Croix. However, because
of rising land values and rents, farmers are ex-
pressing interest in an alternate forage source such
as sorghum silage. Apparently, switching over to
silage can economize land, but at the same time
it would require substantial outlays in forage
handling equipment and increase the production
expenses and labor requirements. Therefore, the
farmers and research planners are interested in
learning the overall effect of silage feeding on
the profitability of dairying.
Instead of measuring the impact of silage feed-
ing on returns, cost of producing silage per pound
of TDN was estimated. Such a cost figure when
compared to the cost of TDN from pasture can
enable one to draw inferences about the profit-
ability of silage feeding. However, since cost of
producing silage could vary with the acreage
handled, the analysis was based on the forage
needs of the 75-cow benchmark dairy operation.
According to reasonable estimates of silage feed-
ing, about 50 acres of sorghum silage and 86 acres
of pasture could produce enough forage for the
75-cow herd. This assumes the sorghum yield at
15 tons of silage or 4,110 pounds of TDN (fed
out) per acre.
The additional machinery required to handle
50 acres of sorghum silage is listed in Table 12.
One-third of the dairy tractor was charged to the
silage activity. The initial investment in additional
machinery and silo was estimated at $15,250. The
total annual cost of the silage activity was estimated
at $9,017 (Table 13). These costs include land cost;
production expense on seed, fertilizer and chem-
icals; variable machine operating costs including
custom hire; fixed costs and labor costs. It was
assumed that introduction of 50 acres of silage
in the forage system would increase the labor re-
quirements by half a worker. The resulting per-acre


18

44~t-


8 9 10


Pri* of F"d, Dollan/cwt.

Figure 2.-Relationship between cost of milk produc-
tion and price of feed and other variables, where
R equals rent of land, $/acre and W equals wage
rate, $ per worker per week.


cost was $180; the per-ton silage ccst was $12.
Cost per pound of TDN from silage was estimated
at 4.4 cents (Table 13).
On the other hand, total costs incurred on an
acre of pasture were estimated at $42 (Table 14).
Included in these costs were land cost; pro-rated
depreciation, interest and repairs on fence and
brush control equipment; and labor cost for brush
control. Cost per pound of TDN from pasture was
estimated at 2.8 cents.
Thus, on the basis of this analysis, TDN from
pasture proved to be considerably cheaper than
the TDN from silage. However, at higher land
costs and silage yields, sorghum silage could be-
come an economical source of forage. Further
analysis showed that when land costs increased
above $55.42, sorghum silage with 15-ton yield
became cheaper compared with pasture. Similarly,
with silage yields above 23 tons and land cost re-
maining at $20 per acre, silage feeding was cheap-
er than pasture grazing.














Table 12.--Machinery and equipment for sorghum silage

Initial Annual Annual
Item cost depreciation' Repairs'

----------------- Dollars-------------
Tractor (/3s of dairy tractor) ------------------------- 2,167 217 65
Small tractor ..----------------------------------------- 4,000 400 120
Plow .----------------------------------------- ------- 800 53 16
Disc harrow .-------------------------------------------- 1,000 67 20
Fertilizer spreader ----------------------------------- -- 850 57 17
Planter .....--- -------------------------------------- 900 60 18
Forage harvestor ---------------------------------- ----- 4,500 300 90
Wagons (2) ------------------------------------------- 2,000 200 60
Trench silo, 800 tons ------------------------------- 1,200 60 --
Total ..--------------------------------------------- 17,417 1,414 406
Additional investment ------------------------------- 15,250 -- --
Average investment ---------------------------------- 8,708

'Tractor and wagons were assumed to last 10 years; because of small acreage of silage other machinery was assumed
to last 15 years and silo was depreciated over 20 years.
'Repair costs of tractor and wagons were estimated at 3 percent of initial costs; on other machinery at 2 percent.



Table 13.-Cost of making and feeding silage from a 50-acre field of sorghum

Item Rate per acre Cost per acre Total cost
Land cost -------- ---------- $20.00 $1,000
Seed ------------------------- -------- 9 lbs. ( $.23 2.07 104
Fertilizer ----------------------------- 400 lbs. @, $6.50/bag 26.00 1,300
Herbicide ------------------------------------- 3.5 lbs. @) $1.80 6.30 315
Insecticide -- --------------------- 1 pint @ $2.25 2.25 113
Variable machinery costs ------------- 8.24 400
Fixed costs ---------------' 2,473
Labor, '/ man @) $6,623 -------------- 3,312
Total ----------------------- $9,017
Total silage produced ----......------------------------------------------------------------- 750 tons
Cost per ton --....----------------------------------------------------------------------- $12.00
Cost per acre -------------------------------------------------------------------------------- $180.00
Total TDN produced ---------------------------------------------------------------- 205,500 lbs.
Cost of TDN, per pound ---------------------------------------------- 4.4f
'This includes cost of hiring a tractor
'Fixed costs include interest on average investment in machinery and silo, depreciation and machinery repair costs.





11








Table 14.-Cost of maintaining pasture,
per acre basis

Item Cost

Land cost ----------------- --- $ 20.00
Fencing cost' --------------- 4.50
Fuel and machinery cost for brush control 2.50
Labor for brush control __ ----- 15.00
Total ---------------------------- 42.00
TDN, amount produced per acre --------.... 1475 lbs.
Cost per lb. of TDN ------------------ 2.80

'Fencing cost based on the 225 acre dairy farm.


REFERENCES


1. Winn F. Finner and Troy Mullins, Appraisal of Virgin
Islands Agricultural Production and Marketing, ARS
24-1, Agricultural Research Service U.S.D.A., 1954.
2. George A. Stevens, Farm Data Manual, Info. Series
No. 6, revised, Department of Agricultural and Re-
source Economics, University of Maryland, 1970.
3. Agricultural and Food Fair of St. Croix, 1971, V. I:
Department of Agriculture.
4. National Requirements of Dairy Cattle, fourth re-
vised edition, 1971 National Academy of Sciences,
N.R.C., Washington, D.C.
5. U.S. Census of Agriculture, Bureau of the Census,
U.S. Department of Commerce.
















APPENDIX


Table 1.-Prices received and paid by St. Croix
dairy farmers, 19731

Unit Price
Item Dollars


Social Security @ 5.85%, unemployment insurance
@ 1.5%, workmen compensation @ 2.5%, free
house with a rental value of $100 per month, and
two quarts of milk per day valued at $168.
Obtained from Mervin Building Centers, St. Croix,
and adjusted for 10% discount on bulk purchases.


Prices received
Milk ,-------------------
Cull cows ---------------
Cull heifers --- ------
New born calves ----

Prices paid
Dairy feed --------------
Semen -----------------
Wage ---
Seven foot pole ------
Wooden post -------
Barbed wire -------
Staples for fence _


quart
lb.
lb.
head


cwt,
Ampule
. year
1
1
480 ft.
lb.


0.23
0.30
0.38
35.00


7.50
5.00
6,623.00
1.89
5.40
11.25
0.35


1 These prices are primarily based on the survey of
dairy farmers.
'Based on cash wage of $92 per week and the follow-
ing fringe benefits:


Table 2.-Cost of erecting four-strand barbed wire
fence, per .nile

Total
Item Quantity Cost

Barbed wire --....----- 44 rolls; each 480 ft $ 495.
Steel posts __--------- 500; 8 ft apart 1,134.
Wooden posts ..---- 60; 88 ft. apart 324.
Staples ---- 27.
Labor 240.
Machinery ________ 80.
Total ______ $ 2,300.


Table 3.-TDN Requirements Per Dairy Animal


Milk TDN Requirements

Production Maintenance Production


1200 lb. dairy cow

Lactating cow
Producing 9,200
Producing 11,500
Producing 13,800
Dry cow


Lactating cow
Producing 9,200
Producing 11,500
Producing 13,800
Dry cow


- Pounds per day ------------


lb.-----------------------
lb.-------------------
lb.-----------------------


..------- Pounds per year -------------


lb. ---------------
lb.
lb.------------------------


9,200
11,500
13,800


3176
3176
3176
4161


2810
3504
4197


Dairy heifer
0 thru 6 mo. age (300 lb) -----------------
0 thru 12 mo. age (500 Ib) ---------------
0 thru 18 mo. age (500 Ib) ----------------
0 thru 24 mo. age (1000 Ib) ------------


Source: National Requirements of Dairy Cattle, Fourth revised edition, 1971,
National Academy of Sciences, NRC, Washington, D.C.
1 Fourteen month breeding cycle and 365 day lactation were assumed.


Item


Total


5986
6680
7373
4161


500
2000
3450
5500




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