Dairy profitability 101: milk quality and feed efficiency
In very simple terms, dairy profitability can be defined as the difference between milk prices and the cost of production, multiplied by the pounds of milk produced. Thus, milk prices, cost of production, and pounds of milk produced are the three critical components for dairy profitability. Therefore, it is very important for producers to have a firm grasp on the three components (price, cost, and volume) of this equation and attempt to modify them in their favor.
When milk prices are high and input costs low, producers should use all possible means to improve production and increase gross returns. When the milk price/input relationship is not that favorable, the approach is usually to cut costs, but this short-term, saving approach oftentimes affects medium- to long-term cow productivity and the milk, overall, shipped from the farm. It is critical for producers to identify those areas where they can reduce costs without having an impact on the cows both in the short and in the long term.
Garcia, A. D., "Dairy profitability 101: milk quality and feed efficiency" (2010). Dairy Science Publication Database. 998.