University of California College of Agriculture Agricultural Extension Service A SURVEY 0? THE COST OF PRODUCING MARKET MILK IN THE FRESNO MILKSHED by Arthur Shultis August, 1933 Contribution from the Giannini Foundation of Agricultural Economics Mimeographed Report No. 28 A SURVEY OF THE COST OF PRODUCING MARKET MILK IN THE FRESNO MILKSHED 1 Arthur Shultis This report is the result of a survey requested by the market milk producers of Fresno County. The purpose of the survey was to discover as nearly as possible, actual costs of producing market milk for the city of Fresno, this cost to be used as a guide in setting up a marketing code or agreement with the distributors in this milkshed. The author expresses his appreciation of the cooperation of the city of Fresno through its health officer and veterinarian, the Dairy Department of the Fresno County Farm Bureau, the Fresno County Milk Producers Association, and those of the milk producers, distributors, and Fresno dealers in feed, dairy, and farm equipment from whom information was solicited. The cost figures for 1932 contained in this report were obtained by the sur- vey method rather than by the cost study method. The survey method consisted of spending about two hours with each dairyman interviewed, during which time available records, accounts, and vouchers were investigated and sufficient information obtain- ed either from records or from estimates to enable the calculation of the cost of milk production for the year 1932. In four cases most of the information was taken directly from the dairyman's account books. In three additional cases annual sum- maries of records kept for income tax returns were used, while in the remaining four cases data obtained was largely a matter of estimates made by the dairyman, partial- ly checked or substantiated by vouchers, and also checked to an average or repre- sentative of feed inputs and crop yields for similar dairy farms. Beginning and closing inventories were made up largely from memory but with the number of cows checked to cow testing association records. The validity or accuracy of costs so obtained is not so great as where a systematic set of records is kept throughout the year. It may safely be assumed, however, that if actual records had been kept on these 11 dairy enterprises they would probably show an average cost fairly close to that obtained in this survey. The final costs shown by this report are presented as probable rather than actual. The author believes figures and estimates given by these 11 dairymen were free from any attempt to make costs appear higher than they actually were. The method of arriving at certain estimates, item by item, would be more apt to result in these estimates being too low because of omissions rather than too high. Certain costs and prices were also checked over with dealers from vjhom items were purchased. These 11 herds may also be considered as a fair representative of all herds supplying milk to the city of Fresno. An effort was made to select herds of repre- sentative sizes and under different representative farming practices in about the same pr6portion as they occur among the 66 herds supplying market milk to Fresno. In size, the 11 herds varied from a low of 14 cows to a high of 130, with an average of 49,6, The average size for all 66 herds is about 40 cows. The herds covered in this study are therefore a little larger than the average and would probably have slightly lower costs per pound. As to farming and feeding practices, the 11 herds include variations from almost all pasture to drylot feeding of hay and grain. One serious limitation in the selection of dairymen to interview was the availability of records which could be used. Several dairy enterprises could not be included due to lack of available records or because of some complication such as the moving of herds during the year, share rentals, or the overshadowing of the dairy enterprise by other enterprises on the same farm. The 11 dairymen from whom costs have been obtained are said to be above the average in managerial ability, which should result in their costs being lower than the average for the milkshed. The average butt erf at 1 Extension Specialist in Farm Management, Agricultural Extension Service and Associate on the Giannini Foundation -2- production per cow for all cows in the Fresno County Cow Testing Association for approximately the same period of time, was about 311 pounds per year. The seven herds used in this study upon which cow testing records were available, had a pro- duction of 345 pounds per cow and a sale of 300 pounds per cov/* Applying the same ratio between butterfat sold and that produced to the other four herds, indications are that all 11 herds had a production of 328 pounds of butterfat per cow with a sale of 285 pounds. This is above the average production and would also have a tendency to cause the costs shown by these 11 herds to be lower than average. The following dairymen furnished information required for a complete compu- tation of costs over the 1932 calendar year: L, J. Hammond Jacob Hansen W. W. Hansen Gordon L, Harlan T. P. Koller Charles B, McNiel Roy Russel G, L. Spangler John Suglian R. M. Turner D. Uridge General Information About Dairies Included in 1932 Survey of Costs Total All 11 Herds Average per Herd Average per Cow Average number of cov/s for the year Average number of dairy cattle animal units in herd 545.8 808.9 49.6 73.5 1.0 1.5 Cows died Cows sold - culls and T.B, cows 14 116 1.3 10.5 .03 .21 Total cows needed for replacement 130 11.8 .24 Cows bought or acquired from outside of herd Heifers freshened for first time in herd 108 76 9.8 6.9 .20 .14 Total cows added 184 16.7 .34 Increase in number cows during 1932 54 4.9 .10 Butterfat produced (Cow Testing Association) Butterfat sold and used in home 179.022 155,886 16,269 14,171 328 285 Pounds of hay fed, average cost |7,85 per ton Pounds of concentrates fed, average cost $.94 per cwt. Pounds of silage fed, average cost of |3,00 per ton 7,227,800 948,250 3,320,000 657,072 86, 204 301,817 13,244 1,738 6,083 Hours of hired labor, average cost $.26 per hour Hours of operator's and family labor ^.35 per hour 32,122 28,290 2,920 2,572 59 52 Total labor input for year, hours Labor input per day, hours 60,412 165 5,492 15 111 0.3 Fresno It n n » (Clovis District) (Carruthers District) Easton TABLE 1 Digitized by the Internet Archive in 2014 https://archive.org/details/surveyofcostofpr28shul -3- Explanation of Terms Used In compiling these cost estimates the same methods of computation and the same classifications of expenses were used as have been used by the Agricultural Extension Service in conducting enterprise efficiency or cost studies with dairies for the last eight years. The average number of cows in the herd is obtained from the total cow months for both dry and milking cows for the year. Heifers are counted as cows as soon as the first calf has been dropped. The average number of animal units in the herd is the average number of dairy stock in the herd on a mature stock basis. Cows and bulls are one animal unit each while calves under three months are 0.25, calves three months to one year .40, heifers one to two ysars .70, and heifers two to three years .75 animal units each. The average number of animal units per herd was 74,2 making 1.5 animal units in the dairy herd for each producing cow. This means that the bulls, calves, and heifers raised for sale or for replacing animals culled or lost are about equiva- lent to a half a cow in feed requirements (for one praducing cow). The quantity of butterfat sold was obtained from distributors and creamery statements plus an estimate of that consumed for human food in the home and plus any miscellaneous sales. Costs per pound of butterfat were based upon this figure, although hauling cost was figured only on the market milk sold since manufacturing milk was paid for at the ranch. Ten of the dairies in this study sold most of their butterfat as market milk while one dairy, during the year covered, sold most of its product as manufacturing milk, although it was producing milk eligible for Grade A classification. TABLE 2 Net Stock Income as Computed for 11 Dairies in 1932 Total All 11 Herds Average per Herd Average per Cow Income from 116 cows sold at $28.00 apiece Income from 236 calves and other stock Increase in inventory value of dairy stock Less cost of 108 cows bought at |69.60 Less cost of other dairy stock bought $3,254.14 1,881.97 7,737.00 7,520.00 351.00 $295.83 171,09 703.36 683.64 31.91 $ 5.96 3,45 14.18 13.78 .64 Net stock income Miscellaneous income 5,002.11 183.00 454.73 16.64 9.17 .34 Total income not milk 5.185.11 471.37 9.51 Net stock income is the difference between stock sales plus closing stock inventory and stock purchases plus opening stock inventory. If the latter is great- er, a net stock cost results. In a dairy where the herd replacements are being raised as part of the herd cost, there will usually be a net stock income because the sale of cull cows and calves will exceed the cost of stock purchased. If, how- ever, losses are heavy, as when many T.B. cows must be sold, or when replacement cows must b© purchased, a net stock loss will occur. If there is a net stock in- come, the cost of butterfat is reduced by the subtraction of this amount. When there is a net stock cost it must be added to the other herd costs, thus increas- ing the cost of the milk produced. Three out of the 11 herds had a net stock cost -4- and eight had a net stock income. In several cases, heavier net stock costs for 1933 were mentioned because of heavier culling and T.B. losses. Hay cost is composed of "both purchased and farm grown hay. Purchased hay was put in at cost while farm hay was charged at the going value in the stack or chopped as the case might be. The cost of producing the hay was calculated in some cases and was found to be more than the value at which it was charged to the dairy. The average use of hay was about 6.5 tons per cow at an average cost of $7.85 a ton. This includes all hay fed in the herd. Estimates of farm hay used were based upon both production of fields and probable consumption of stock. Concentrates were purchased in all cases and quantities and costs were reconciled to prices and consumption in the herd as well as taken from actual records where possible. Silage was valued at $3.00 a ton and the quantity estimated from the yield of fields and the capacity of silos. The $3.00 a ton is well below the cost of $4.20 a ton shown by a cost study on silage, conducted by the Agricultural Extension Service throughout the San Joaquin Valley in 1930. Pasture cost was composed of actual rented pasture plus the estimated cost of farm pasture. This farm pasture cost was estimated by special methods to suit each pasture used. In cases of permanent year-around pasture it was based upon the cost of seed, v;ater, labor, taxes, and interest on investment in land. In cases of temporary pasture it was estimated at cost or at a head-month rate of from $1,00 to $2.00 a cow. Hired labor is included at cost. Where dairy labor also performs farm work the charge to the dairy was based upon an estimated division of the time spent. Operator's and adult family labor was estimated on hours per day or per year and charged to the dairy at 35 cents an hour. There was no charge included for management. The cost of the operator's labor must be met the same as any other cash expense because it is from this "wage" that the dairyman must maintain himself. This is one item of expense probably not identical with actual expenditures of the dairyman for his maintenance, since it was figured on a uniform rate and actual living costs were ignored. In fact, dairymen selling milk below cost of production do so by drawing less than a fair wage, drawing no interest for their investment, and setting aside no money to cover depreciation. TABLE 3 Costs Obtained by Survey of 11 Dairies Covering Calendar Year 1932 Per cent Total Average Average Cost per of Plant 11 Herds per Herd per Cow Lb. B.F. Cost B.F. Hay, purchased and raised $28,390.43 2,580.95 52.02 18,2 33.0 Concentrates, purchased 8,986.62 816.96 16,47 5,8 10.5 Silage, raised 5,022.00 456.54 9.20 3,2 5.8 Pasture, farm and rented 8,168.52 742.59 14.97 5.2 9.4 Total feed costs 50,567,57 4, 597.04 92.66 32.4 58.7 Hired labor, dairy only 8,000.59 727.33 14.66 5,1 9.3 Operator's labor, dairy only 9,901.75 900.16 18,14 6,4 11.6 Miscellaneous 6,428.06 584.37 11.78 4.1 7.4 Depreciation 2,882.27 262,02 5.28 1.8 3.3 Interest on investment 7,245.05 658.64 13.28 4,6 8.3 Total costs 85,025.29 7,729.56 155.80 54,4 98.6 Income not milk (Table 2) 5,185.11 471.37 9.51 3,3 6.0 Net cost of milk, ranch 79,840.18 7,258.19 146.29 51.1 92.6 Hauling 141, 569?^^ mkt. milk B,P. 5,601.11 509.19 10.26 4,0 7.4 Cost of milk at plant 85,441.29 7,767.38 156.55 55.1 100.0 Income from milk sold 75,394.41 6,854.03 138.15 48.4 87.8 Net loss to dairjrmen -10, 046.88 -913.35 -18.40 -6.7 -12.2 -5- Miscellaneous expense consists of all costs for the dairy enterprise. Tax- es on the herd and on dairy buildings and equipment, repairs on equipment, electric power, fuel for sterilizing, veterinary services, insurance, and cow testing ex- penses make up the bulk of this classification of costs. Depreciation is that part of the original cost of each building or piece of equipment that must be set aside each year in order to return to the owner his original investment by the time the said equipment is worn out and must be replaced. For each piece of equipment on each dairy the depreciation was computed by dividing actual original cost by the probable length of useful life of that particular piece of equipment. Interest on investment is included as a legitimate part of the cost of pro- duction. In these records it was computed at 6% on the average total investment over a period of years. Equipment and buildings upon which a depreciation was charged for purposes of computing interest were valued at half the original cost since the average annual value, over the life of the facility, would decline from cost to zero. Interest is sometimes said to be profit and not a recognized cost of production. This will be the case when all banks, finance companies and others, cease to require interest on the money they have invested in the dairy business in the form of loans to dairymen and when corporations cease to pay interest on bonds and dividends on stock. Interest in many cases is an actual cash cost which must be met. No record was made of the interest paid on borrowed capital by the 11 dairymen, although in one or two cases it was considerable. If dairymen ara to be expected to live and maintain their families, they must receive above the cash dairy expenses enough wages to live on, enough surplus with which to buy now equip- ment when needed, and enough additional to pay interest on all the capital invested, whether by themselves or by others. TABLE 4 Investment, Depreciation, and Interest on Investment as Determined by 1932 Survey* Average Interest Average Original Value Deprecia- on Average Invest- Cost per Herd tion per Invest- ment per per Herd 1932 Herd ment Cow Dairy lots and corrals 596.87 35.81 12.03 Buildings, fences, etc. 3963,26 1981.63 151.89 118.90 39.95 Dairy equipment 1628.14 814.07 110.13 48.84 16.41 Feed on hand January 1 1127.04 67.62 22.72 Dairy stock 6457.72 387.47 130.19 Total 10977.33 262.02 658,64 1 1 221,30 1 — * Table 4 shows the value of facilities per herd and per cow and the depreciation per herd and the interest on investment per herd. 6. Costs in 1932 and 1933 Compared Dairying costs can only "be determined through a cycle of operations lasting one year where feed is grown and fed as with 10 of the 11 herds surveyed for the 1932 costs. Therefore no attempt was made to secure information on current costs for 1933 except verbal opinions as to how 1933 costs might vary from those of 1932. It was the concensus of opinion that in 1933, average costs would be slightly high- er because of increased feed costs and in a few cases higher labor and stock costs, the latter due to heavier losses from tubercular cows» Feed prices for both 1932 and 1933 were obtained from dealers and others. These show concentrates to be high- er in August of 1933 than in the same month of 1932, If costs of these items aver- age higher for 1933 than for 1932, the cost of dairying will be higher in the later year. Several of the herds would have more cows in 1933, however, and thus attain slightly lower costs aside from feed. The figures in table 3 show costs in 1932 to have been about 51, Ij^ per pound of butterfat at the ranch or 55,1^ delivered to the plant in Fresno. In order to arrive at an estimate of costs for 1933 and for cal- culation of costs in future years, a standard of costs has been calculated for 1933. This standard is varied somewhat from the actual survey data of 1932 to make it con- form to a unified set of conditions. Calculated Standard of Costs for Market Milk Production This standard of costs is made up for an 80-acre dairy farm carrying an aver- age of 45 cows throughout the year. Two full-time men furnish the labor for growing the crops and handling the cows, and additional farm labor is hired for silage har- vesting and haying. The cows are assumed to have a cow testing record of 310 pounds of butterfat and to furnish for sale about 275 pounds. The dairy farm is assumed to have no enterprise other than the dairy, although for purposes of computing costs it will be divided into a farm enterprise, a dairy, and a farm home. The dairy herd of 45 cows and young stock is fed alfalfa hay, silage, pasture and some oat hay, all produced on the place, and 60,750 pounds of purchased concentrates. One hundred hours of man labor per cow were used in the dairy enterprise, with this labor figured at 30 cents an hour. Both the feed and labor used are re- duced in quantity over the 1932 survey costs because of certain assumed changes in the management and efficiency of the standard herd. The 1932 survey is an average of costs under several different feeding and management systems with part machine and part hand milking. This computed standard of costs is set up not as represent- ing the average cost of dairying in 1933 but to show the costs which would prevail in a well-managed dairy, located on a good dairy farm, with cows of slightly better than average production, and with an economical size of herd exactly balanced to the feed produced on the farm. Better management and higher production might reduce costs in some herds considerably below this figure, but at the same time there would be as many or more dairies in which costs as low as the standard shown could not be attained. Table 5 shows the investment in facilities assumed for computing interest on investment and depreciation for the standard costs. A summary of the investment totals is shown in table 6, and of the dairy herd in table 7, The feed produced and fed the dairy herd is shown in table 8, while a method of computing concentrate costs appears in table 9, A summary of all costs for the entire dairy farm is shown in table 10, Table 11 shows a computation of costs under this standard compared with the 1932 survey. -7- TABLE 5 Standard Equipment Costs for a Market Milk Dairy and 80-Acre Dairy Farm Length Original Average Interest Deprecia- Item of life cost value at 6% tion Improvements Milking barn for 30 cows 40 500.00 250.00 15.00 12.50 Shelter and feed barn, etc. 40 1000,00 500.00 30.00 25.00 2 silos 20 600.00 300.00 18.00 30.00 Milk house 30 300.00 150.00 9.00 10.00 House for hired help 30 300,00 150.00 9.00 10.00 Well and pump house - dairy share 40 100.00 50.00 3,00 2.50 Corral fences, bull pens, etc. 20 250.00 125.00 7.50 12.50 Total dairy improvements 3050.00 1525.00 91.50 102. 50 Equipment Milking machine - 2 unit 15 450.00 225.00 13.50 30.00 Milk cooler - 2 coil 13 65.00 32.50 1,95 5.00 Electric refrigerator, tank & pump 20 700.00 350.00 21,00 35. DO Sterilizer, oil heater 10 90.00 45.00 2.70 9.00 Water system, 3/4 to dairy 20 225,00 112.50 6.75 11.25 Milk cans, 14 at |4.50 10 63.00 31.50 1.89 6.30 Miscellaneous small equipment 10 50.00 25.00 1,50 5.00 Automobile and trailer, J to dairy 10 425.00 212.50 12,75 42.50 Total dairy equipment 2066.00 1034 . 00 62.04 144.05 Farm improvements Irrigation, well 40 200,00 100.00 6.00 5.00 Pump house 40 30.00 15.00 ,90 .75 Pump and motor for irrigation 20 750.00 375.00 22.50 37.50 Horse barn, garage, shop, etCe 40 800.00 400.00 24.00 20.00 Fences, field and pasture, 4 mi. 20 600.00 300.00 18.00 30.00 Total farm improvements 2380.00 1190.00 71.40 93.25 Farming equipment Auto and trailer, 1/2 to farm 10 425.00 212.50 12.75 42.50 Horses, 4 10 500.00 250.00 15.00 50.00 Tractor, 10 D.B.H, P. wheel 10 900.00 450.00 27.00 90.00 Plows, tractor and horse 10 150.00 75.00 4.50 15.00 Harrows, disk and spike 10 200.00 100.00 6.00 20.00 2 sets harness 10 120.00 60.00 3.60 12.00 2 wagons 20 200.00 100.00 6.00 10.00 1 mower 10 • 95.00 47.50 2.85 9.50 1 rake 10 60.00 30.00 1.80 6.00 Ensilage cutter 10 300.00 150.00 9.00 30.00 Manure spreader 10 180.00 90.00 5.40 18.00 Corn planter - 2 row 10 80.00 40,00 2.40 8.00 Corn cultivator 10 75.00 37.50 2.25 7.50 Fresno scraper 10 32.00 16.00 ,96 3.20 Ditcher 10 65.00 32.50 1,95 6.50 Misc. hand and shop tools 10 150.00 75,00 4.50 15.00 Total farming equipment 3532.00 1766.00 105.96 343.20 Land at f 200 an acre No. acres Av. val. Interest Dairy lots and corrals 3.0 600.00 36.00 Land in permanent pasture 15.0 3000.00 180, 00 Land in alfalfa 40.0 8000.00 480.00 Land in silage, oats, etc. 20.0 4000.00 240.00 Sub-total - farm and dairy 78.0 15600.00 936.00 Farmstead or home, gardens, etc. 2.0 400,00 24.00 Total land 80.0 16000.00 960.00 -8- TABLE 6 Summary of Investment for Standard Dairy Farm Average investment for farm 6% Interest on investment Deprecia- tion Invest. per cow (45 cows) Invest, per acre (80 acres) Land in dairy lots Dairy buildings & improvements Dairy equipment Dairy feed on hand January 1 Dairy cattle 600.00 1525.00 1034 . 00 1500.00 4755,00 36.00 91.50 62.04 90.00 285.30 102.50 144.05 13.33 33.89 22.98 33.33 105.67 7.50 19.06 12.93 18.75 59.44 Sub-total, dairy investment Farm improvements Farm equipment Crop & pasture land, 75 acres 9414.00 1190.00 1766.00 15000.00 564.84 71.40 105.96 900.00 246.55 93.25 343.20 209.20 26.44 39,24 333.33 117.68 14.88 22.08 187 . 50 Sub- total, farm and dairy Dwelling and farmstead 27370.00 2400.00 1642.20 144.00 683 . 00 100.00 608.21 53.33 342.14 30.00 Grand total 29770.00 1786.20 783.00 661.54 372.14 Table 6 shows a summary of assumed investment for an 80 acre-45 cow dairy farm. Costs of dairying naturally have to go back to land values and costs of growing feed so this standard example must necessarily consider the entire farm enterprise. The dairy farm can be considered in three parts: the dairy, the feed crop or farm- ing enterprise, and the farm home with its dwelling, yard, gardens, etc. The farm- stead investment and costs are not included in costs shown in subsequent tables since they are part of the personal living expenses of the dairyman. TABLE 7 Dairy Stock in Standard Herd No. No. Average Income No , head Average Total died sold price from average value value sales for year per head Bulls 0 0 00,00 000.00 2.0 250.00 500. 00 Cows 1 10 25,00 250.00 45,0 75.00 3375.00 Calves under 3 months 3 22 2.00 44,00 4.0 10,00 40.00 Calves 3 months to 1 year 1 2 10.00 20,00 12,0 20,00 240.00 Heifers 1 to 2 years 1 1 20.00 20.00 12.0 30.00 360.00 Heifers 2 to 3 years 0 1 40.00 40.00 6.0 40.00 240.00 Totals 6 36 374.00 81.0 4755.00 A herd of 45 cows would have a replacement requirement of about 25% as shown by the 1932 survey. This would mean bringing in about 10 to 12 first-calf heifers each year. In order to maintain this number of cov/s with no increase or decrease in the stock inventory and with no cows purchased, the number of stock in the above table would be required and the losses and sales would be about as shown. The sales of 36 head of all ages would bring an income of about |374.00 which would be the net stock income if there were no purchases nor inventory changes. However, a new bull would probably be purchased every fourth year at a cost of about |300, so an annual bull purchase cost of about |75.00 should be deducted, leaving a net stock income of $299, or $6.64 per cow. The net stock income determined by the 1932 sur- vey was |9.17 a cow, but would justifiably be higher than normal because of better than average stock, and some sales of purebred animals. -9- TABLE 8 Standard Feed Requirements Pounds per cow For 45 cow herd Digestible nutrients Total fed Quantity From Hay, from 40 acres alfalfa, 10 acres oats Concentrates Silage, from 20 acres Pasture, 15 A. permanent and some crop 4780 1000 2230 1490 9560 1350 8900 7450 220 T 60750 lb. 200 T 178 hd.mo. 40 A. Purchased 20 A. 15 A. Total feed 9500 27260 75 A. The above schedule of feed consumed is slightly lower than shown by the 1932 survey but because of lower producing cows and less young stock in the herds this would be adequate. This proportion of nutrients in hay, concentrates, silage, and pasture is a desirable one from the standpoint of efficient production. The figures for quantity of feed per cow include that consumed by bulls and young stock. An additional 10 acres of oat hay, which would be grown on half the 20 acres of silage land, is not included above but is set aside for use of the 4 horses. Under the above schedule no roughage would be bought or sold in the aver- age season but all concentrates would be purchased as shown in table 9. TABLE 9 Concentrates Fed and Costs per Ton Per 1932 cost July 1933 cost Average 1933 cost Kind of feed cent Feed Mix. Feed Mixture Feed Mixture feed per ton per ton per ton per ton per ton per ton Ground barley 50.0 20.75 10.38 25.00 12.50 Beet pulp 15.0 21.08 3.16 17.00 2.55 Mill run 15.0 25.08 3.76 28.00 4.20 C.S. meal - 43^ 10.0 26.90 2.69 38.00 3.80 Cocoanut meal 10.0 26.08 2.61 27.00 2.70 Total Concentrates 100.0 22.60 25.75 Table 9 shows the cost of the five concentrates most commonly used and the pro- portions in which they are sold to Fresno dairymen. The per cent of each of the five feeds was obtained from estimates of two Fresno feed dealers. The 1932 prices are likewise averages of monthly prices supplied by Fresno feed dealers. Applying the percentages sold to prices per ton the price of feed purchases in 1932 would be |22.60 a ton or $1.13 a hundredweight. In the survey 94^2^ v/as the estimated price for the year. This is 19j^ lower than for the above mixture but may be accounted for by the fact that several dairymen bought a larger quantity of cheaper feeds at the time feed prices were lowest and furthermore bought part of their feed from growers. Some raisins and other products were also included. It is not assumed that the above feeds would be used as a mixture thruout the year but that a year's purchase would approximate the proportions shown. The cost of such a mixture in July 1933 is also computed and a place is left for computation of 1933 feed costs when yearly average prices have been obtained. With present feed costs and market trends the 1933 average price for all concentrates will probably be higher than the July figures. In computing standard costs for 1933 a concentrate cost of $24.00 a ton or $1,20 per cwt. will be used which would be comparable to the 94^ per cwt. obtained by the 1932 survey. -10- TABLE 10 Summary of Standard Dairy Farm Costs i oxax Dairy jrer cow Farm rer A. Item dairy enx er— uaxi y enter- I ai m farm prxs e ^ fi o COWS ) prise \ 1 O A. ^ Wi r'oH 1 SI "Hat — AAQD Viniirc at '^C\J 1407 on "=51 s on O X w . V,y\^^ 7 nn 1 • uu loQ? nn vp€xai>OX a ±AUui — 'xUov 111 o* a v OUjC lo*^"^ on xuoo • uu nn » OOA OA Tlf O"? 0 f OO , ox C A A/I oU, U4 Less income - stock sold 1^ A A A 374 . 00 »2 p. ji AA 374 . 00 8, ol Net costs 6855. 20 3101. 39 68, 92 3753. 81 C A A >l 50. 04 rarm leeo. — cLeuiX uairy anu credit farm 220 tons hay at |11.00 2420,00 53.78 2420.00 200 tons silage at $4.00 800.00 17.78 800.00 Pasture 15 A. and crop fields 533.81 11.86 533.81 Total cost milk at ranch 6855.20 6855.20 152.34 The above table shows a summary of the total dairy farm costs segregated between the dairy and farm enterprises. Farm costs are transferred to the dairy enterprise by charging the dairy for the feed produced and crediting the farm for the feed at a value sufficient to cover the farm costs. Manure from the dairy is put on the farm but is not charged to the farm nor credited to the dairy since such a double entry would not change the net cost of the milk produced. TABLE 11 Analysis of Standard Dairy Costs Total Standard Per lb. 1932 survey dairy per cow B.F. std. per cow per lb. enter- prise 1933 1933 B,F. Hay, 220 T, at $11.00 2420.00 53.78 19,5 52.02 18,2 Concentrates, 60750# at $1,20 729.00 16.20 5.9 16,47 5.8 Silage, 200 T. at $4.00 800.00 17.78 6.5 9,20 3,2 Pasture $3.00 head month 533.81 11.86 4.3 14,97 5,2 Feed cost 4482.81 99.62 36.2 92.66 32,4 Hired labor 315,00 7.00 14,66 5.1 Operator's labor 1035,00 23.00 8.4 18,14 6.4 Miscellaneous 510,00 11.33 4.1 11.78 4.1 Depreciation 246.55 5.48 2.0 5.28 1.8 Interest 564 . 84 12.55 4.6 13.28 4.6 Total cost 7154.20 158.98 57,8 155.80 54.4 Less net stock income 299.00 6.64 2.4 9.51 3.3 Net cost of B.F, at ranch 6855.20 152.34 55.4 146.29 51.1 Hauling to plant 371.25 8.25 3.0est. 10.26 4.0 Cost at plant 7226.45 160.59 58.4 156.55 55.1 The above table presents an opportunity to compare the 1932 survey with the computed standard. The ranch cost' of butterfat shown by the standard is 55.4 as compared to 51.1 cents per pound shown by the 1932 survey. -11- Adjustments of Standard Costs for Changing Conditions The foregoing tables 5 to 11 show a standard of reasonable costs of produc- ing market milk (at the ranch) to be 55.4j2^ per pound of butterfat. This cost will reimburse the operator at 30j2^ an hour for his labor and will allow the payment of 30{Z^ an hour for all farm and dairy labor. It will also provide enough income to maintain the enterprise by replacing worn out facilities and reimbursing for in- vested capital at 6 per cent. Such a price would tend to increase production only when other enterprises were relatively less profitable. This price would allov/ a value of |200 an acre for good dairy farm land and a price of |75 a head for good non- tubercular cows capable of producing 310 pounds of butterfat. It would meet all cash costs at 1933 levels and with dairy feed concentrates at |l,20 a hundred pounds or |24 a ton. Any price much lower than 55. 4j!^ will result in lowered land values, lower wages and standards of living, and ultimately lowered productive capacity. If costs should change materially, this cost of 55,4^ a pound at the ranch would be raised or lowered. The present outlook is for increased cost of hired labor, concentrates, and some of the things dairymen must purchase in the v;ay of supplies and equipment. The past few years, hay at harvest time has been sold for less than the cost of production. Under prevailing costs, |10 to |12 a ton is the cost of producing alfalfa hay but it has been obtainable for as low as ^6 by pur- chase with present price levels. Wages of 30(2^ an hour are inadequate to support farm workers on a desirable American standard of living and yet due to a tremendous oversupply of labor, some workers have in the immediate past been available for as low as 15 or 20j^ an hour, although even in 1932 dairy help was shown to receive an average of 26^^ an hour. In order to determine the cost of butterfat under varying costs of goods and services used in dairying, adjustments on the standard cost of 55.45^ will be presented. The amount of each classification of expense is shown in table 12 on the basis of one pound of butterfat with the prices at which this cost was computed. If such a classification of expense were reduced 10 per cent, the cost per pound of butterfat for that item would also be reduced by 10 per cent. The hay, silage, and pasture costs used are production costs rather than purchase prices. The feed pro- duction costs reflect land values, interest rates, water costs, seed costs, taxes, labor, power, and equipment costs. Adjustments to make in the cost of farm grown feed for variations in labor and other costs can be computed as with butterfat costs, but will be omitted here. With different feeding practices than shown, adjustments would have to be made. For example, the silage could be converted to hay by dividing the quantity by 2.5, while a head month of pasture could be converted to hay by dividing by 2, and this quantity of hay added to the given hay. Such a change would increase the hay to ,031 tons per pound of butterfat and the total feed cost per pound from 36.2 to 40.1 for the 1933 standard. -12- TABLE 12 Cost of Producing One Pound of Butterfat in Market Milk with Input Prices so Adjustments Can be Made for Changes in Input Costs Quantity Standard for 1933 Example A. Item used for Price per Per lb. Assumed prices Cost per 1 lb. B«F. unit B.F. for example lb. B.F. Hay .0177 T "ftl 1 -nor" +r»ri 4kl 0 a + /-vn Concentrates .0025 T OA. n n 5- 9 7.5 Silage .0163 T 4 n n 6.5 $ 4,50 a ton 7.3 Pasture .0143 Hd.mo, 3 hd, mo. 4.3 1 4 a hd. mo. 5.7 Total feed 36.2 41.7 Labor .36 hr. 30^ hr. 10.9 40j^ an hour 14.4 Miscellaneous 1933 prices = 100% 4.1 120% 4.9 Depreciation 1933 « = 100% 2.0 110% 2,2 Interest 1933 values at 6%= 100% 4.6 110% 5.1 Total cost 57.8 68.3 Net stock income .0009 cull cows at $25 2*4 Cull cows at |40 3.6 Net cost B.F. at farm 55.4 64.7 The above table presents data enabling the computation of a standard cost of production for a pound of butterfat with any given set of prices for items used in the dairy business. With hay, concentrates, silage, pasture and labor, a definite quantity is given which multiplied by the price will give the cost per pound of butterfat for that item. The standard costs as determined in tables 5 to 11 are shown. The last two columns give an example computed from the unit costs shown. Miscellaneous costs, depreciation, and interest on investment are figured as a cer- tain per cent of 1933 costs. This example might be considered to apply to 1930 con- ditions although prices used are not definitely correct but assumed for purposes of illustration only. Suppose that in 1934 the above data were to be used to estimate the cost of production per pound of butterfat in market milk. Suppose the costs or prices of items the dairjmian must use were as shown in table 13 under example B (this is not a prediction but merely an illustrative example). Labor ^04 an hour, land values up to |300 an acre, and general prices of equipment, etc., about 150% of 1933 levels, would probably result in the cost of production of hay being around $16.00 a ton. Therefore prices assumed are as shown under example B, A space is provided for the reader to compute a set of costs under example C, TABLE 13 Computation of Costs Multiply Example B. Example C. by Input Cost per Input Cost per costs lb. B.F. costs lb. B.F. Hay, Cost per ton .0177 $16.00 28.3 Concentrates, Cost per ton .0025 36.00 9.0 Silage, » " " .0163 6.00 9.8 Pasture, " " hd, mo. .0143 4.50 6.4 Labor, " " hour .3600 .50 18.0 Misc., per cent of 1933 4.l52f 140% 5.7 Depreciation, per cent of 1933 2.0 150% 3.0 Interest on investment. % of 1933 4.6 150% 6.9 Total 87.1 Less net stock income - cull cows .0009 $66.00 5.9 Net cost at ranch 81.2