Tuesday, March 12, 2013

Coping with Drought, high feed costs, low milk prices, tight margins with milk production in Dairy farming.


SEVAI -OFI Cow farm in Sirugamani

“Coping with Drought, high feed costs, low milk prices, tight margins with milk production” is the need of the hour in Dairy farming” said by K.Govindaraju while addressing the project functionaries of SEVAI Cow project in Sirugamani.He further said   A number of questions about the Challenges on coping with High cost of milk production is raised. Milk-feed ratio, income over feed cost, breakeven, variable costs, and fixed costs, are a few terms floating around, it requires a good set of milk farm records. Milk/feed ratio, used mostly as an indicator of the current profitability of the dairy operation, is a standard cow feed calculates monthly. Breakeven is straightforward, just calculate all the expenses on a dairy farm at a given production level and what milk price will meet those expenses. If a farm changes its milk production level or its expenses, that changes the breakeven price. Breakeven is a constantly moving target, especially with current commodity volatility. Over time, any business's gross income must average higher than its own breakeven, or eventually it will not be in business. Fixed costs are the expenses we have regardless of present milk production levels or herd size variation.  The largest fixed costs usually are medium and long-term bank payments, leases, and insurance. Inappropriately structured fixed assets payment plans usually have long-term negative consequences. On the other hand, keeping fixed expenses to a minimum may be a great long-term survival technique. Variable costs are costs that vary in proportion to changes in some activity such as milk production. If we decrease our herd size, the decreased feed and labor used to support those animals is variable cost. If we can reduce feed cost, it is a direct savings of variable costs. Feed expense is the largest variable cost on a dairy farm. Labor, electricity, and supplies are some other variable costs. Since feed cost is the largest variable cost on dairy farms, the dairy project has adopted Income over Feed Cost as one of the standards to measure profitability. Income over Feed Cost is the balance left after all feed expenses are paid. The challenge in calculating our own Income over Feed Cost is that the cost of growing, harvesting, and storing forages which includes land and machinery is part of feed cost. It may be tempting to lower feed cost by reducing or eliminating certain ingredients. However, the consequences are that you will frequently lose more milk income than feed expense saved and, elimination of some ingredients could lead to long-term negative health problems. Knowing what milk production level is needed to cover a cow's feed cost is important. To arrive at Income over Feed Cost, take our daily feed cost per cow and divide it by the income per litre of milk sold, The Income over Feed Cost helps the dairy manager make crucial decisions in any economic environment. . Keeping feed costs in line with our production and keeping fixed costs and other variable costs from getting out of control, are keys to good financial management. Drought, high feed costs, low milk prices, tight margins, and lack of resources are the challenges of dairy farm. It is the time to take control of our farm and its future.”-Govin

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