Is dairy farming a profitable business?

With a herd of less than 100 cows, the dairy farming is usually unprofitable. According to research from the University of Minnesota, dairy farms with 40 – 60 cows experienced significant losses in 2019.

Dairy farms with approximately 150 cows cease losing money and start making a little profit. With a herd capacity of 300 to 600 cows or more, the dairy industry begins to pay off and generate significant revenues. This is because big farms are often more organized, get cheaper feed, antibiotics and other required products at wholesale price , and are considerably more efficient than small family farms.

Even the largest have problems

Dean Foods, the largest American dairy producer, filed for bankruptcy in 2019. According to the firm, the cause for the closure was a decrease in the consumption of cow’s milk and an increase in demand for plant milk. To understand the issue, consider that the average cost of producing one gallon of milk is $1.92 while the milk in stores costs as little as $1 per gallon. This indicates that the average farmer spends more money on milk production than the cheapest milk at Walmart.

Furthermore, according to the United States Department of Agriculture, demand for dairy products is significantly reduced in 2020 as a result of the COVID-19 pandemic. In general, it appears that dairy production will become more affordable, and more milk will be produced from plants. As a result, it must be acknowledged that dairy farming, particularly small dairy farms, will not be a successful enterprise in the future.

The cost of dairy farming

The cost of producing milk varies greatly between nations and dairy farms. In 2014, the global average cost of production for all nations studied was $233 per hundredweight (cwt) of milk ($46 per 100 kg). Production prices for hundredweight milk ranged from $2.28 per cwt ($4.5 US per 100 kg) in large agricultural systems in Cameroon (where milk was mostly a byproduct of cattle agriculture) to $59,9 per hundredweight ($118 per 100kg) for a typical farm in Switzerland.

The following expenses are mostly associated with milk production:

Feed – alfalfa, hay, grains, minerals,etc.
Labour expenses – are generally the second most expensive.
Water -Establishment of pasture -Fencing
Property tax
Leases for buildings
Vaccinating
Veterinarian
Licences
Leasing of machinery
Artificial insemination or the expense of a bull
Milking utensils: (Cleaning materials, paper towels, milk filters, milk tubing, and monthly milk tests)
Agriculture insurance
Depreciation of machinery and buildings
Repairs
Fuel

Dairy production

Dairy farming provides several chances for financial gain. After all, cheese, yoghurt, butter, milk powder, ice cream and a variety of other goods may be made from milk, which is abundant on every dairy farm. Profits from dairy products are much higher than profits from milk production alone. Having your own dairy farm allows you to manufacture dairy products at a lower cost and sell them at a higher profit margin.

According to an Australian dairy farmer, the cost of manufacturing a good cheese is up to seven times lesser than the price at which it is sold in supermarkets.

Conclusion

Conclusively, there is no single answer to the topic of dairy farming profitability. It is dependent on your region, as well as the amount and type of dairy products you wish to produce, and also the number of dairy animals you will have at your farm.

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