The annual Economics of Milk Production publication provides information on the costs and returns of producing milk in Alberta.
“The total cost of producing a hectolitre – 100 litres – of milk in 2019 was $82.54, an increase of 3% from 2018,” explains Pauline Van Biert, research analyst with Alberta Agriculture and Forestry (AF). “This value may be easier to understand as just under $8,300 per cow per year.”
Feeding a cow for a year costs about $3,600 and is by far the highest contributor at 43.6% of total costs. Variable expenses contribute about 24.9%, 16.7% toward capital expenses and 14.8% to labour.
She says that the prices for forages, especially hay, and barley grain continued to be high through 2019. It was a challenging growing and harvest season with both wet and dry pockets across the province affecting both quality and availability.
“Many dairy farmers are able to grow their own feeds, however in 2019, the percentage of homegrown feeds dropped from the year before to only 60% of roughage – hay, silage – and 8% of their feed grains. Good quality feed is necessary to maintain the health and productivity of the dairy cows and mixed dairy rations along with vitamins and minerals supplement the roughages fed, bringing extra costs. Dairy farmers work closely with nutritionists to keep feed balances in check as cows need consistency.”
Additional study results include:
Total investment dollars per cow significantly jumped from 2018. Dairy farms are investing to expand production capacity, efficiencies and sustainability to meet quota requirements and address labour issues.
The average herd size in Alberta is 189 cows. Responding to market demands, total milk production increased 15% from the previous year. This reflects positive herd management in cow health, nutrition, and comfort to maintain productivity levels.
Return to equity - gross income less total production cost - was relatively unchanged from 2018. Milk price increased by about 3%, but these gains were enough to offset increased input costs and debt obligations.
“Demand for milk remained high throughout 2019 due to retail demand for cream, butter and cheese as well as an increase in consumer income and changes in food preferences,” she adds.
She notes that there is quite a variety of dairy farms in Alberta and that further analysis of the data collected from the Dairy Cost Study reveal a 22% range between the highest and lowest cost producers.
“The categories most affecting this difference are total feed costs and more significantly, the cost of labour.”
Further analysis of top, middle, and bottom third groups based on various production factors is included in the publication.
Dairy farmers in Alberta volunteer to participate in the
Dairy Cost Study and provide information on their dairy enterprise. In return they receive a business analysis to use in their daily farm management. From this dataset, weighted sample averages are calculated resulting in this Alberta benchmark report.