For the second straight year, California's cost to produce milk jumped over 10 percent. Nearly all the higher costs were due to higher feed prices.
by Corey Geiger, Hoard's Dairyman Managing Editor
Rising feed costs were the root cause of the higher costs to produce milk in the nation's leading milk production state. In 2012, total cost to produce milk rose 11.2 percent when compared to the previous year, reported the California Department of Food and Agriculture. In its annual survey, feed costs - hay, grain and by-product feeds - rose 13.7 percent and averaged $11.48 for every 100 pounds of milk produced. Those costs associated with feeding cows accounted for 65.3 percent of all California dairy farm expenses. Meanwhile, all other cost categories were relatively flat.
This represented the second straight year rising feed costs took a significant bite out of producer milk checks as shown in the graph which illustrates quarterly feed prices from 2003 to 2012. When comparing 2011 to 2010, there was a 15 percent jump in the cost of production for California dairy producers. Like 2012, most of those rising financial outlays were attributed to feed prices, reported the state's ag department.
With feed costs headed skyward for two straight years and milk prices down slightly, that placed a further squeeze on West Coast dairy producers. When looking specifically at California's Mailbox prices, milk checks fell 8.5 percent over the previous year to average $16.92 per hundredweight (cwt). The final result to the bottom line was a 35 percent reduction in average income over feed cost or $5.45 per cwt.
To review the entire 52-page California Cost of Production 2012 Annual, go to: www.cdfa.ca.gov/dairy/dairycop_annual.html
The author is the managing editor, and he brings 18 years of industry leadership to our readers overseeing all editorial content and production of the magazine. His degree is from the University of Wisconsin-Madison with a combined degree in dairy science and agricultural economics.
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