Source: Alberta Agriculture and Forestry
The annual Economics of Milk Production publication provides information on the costs and returns of producing milk in Alberta.
‘Dairy farmers closely watch their costs and returns to remain efficient and profitable,’ says Pauline Van Biert, research analyst with Alberta Agriculture and Forestry. ‘They watch their milk production levels to be able to supply the amount of milk the consumer is asking for.’
Due to the COVID-19 pandemic, 2020 was a challenge. By April 2020, there was a huge shift in milk demand as consumption patterns changed from the food service industry to cooking at and staying at home.
‘This also stalled revenues. Both revenues and production requirements saw improvement by the end of the year as demand for dairy products rose to near pre-pandemic levels.’
Despite the pandemic, there was little change to cost of production between 2019 and 2020. The average cost to produce a hectolitre of milk – 100 litres – in 2020 was $83.24. This was less than a 1% increase, up only 77 cents, from $82.54 per hectolitre in 2019.
‘On a per cow basis, this equals close to $8,100 per cow for the year, of which $3,531 was spent on feed,’ explains Van Biert. ‘Good quality feed is necessary for animals to stay healthy and produce quality milk.’
Gross income dropped about 1% to $86.41/hectolitre sold from $87.01/hectolitre sold in 2019. This was not due to the milk prices farmers received, but more the fact that cattle inventories saw little change from beginning to end of year.
‘Farmers seemed focused on herd and farm stability and managing milk production through already uncertain times, rather than movement of cattle,’ says Van Biert.
Additional study results include:
- Regardless of market fluctuation, the average milk price dairy farmers received for their milk sales remained stable between 2019 and 2020.
- Average herd size increased from 189 to 202 dairy cows (not including heifers).
- Total costs per cow decreased as did average milk production per cow.
- Cost of grains remained close to 2019 values while the prices for both hay and silage decreased. The average cost of feed per hectolitre remained similar to 2019, as production levels were similar. Total cost of feed did decrease on a per cow basis.
- Labour hours per cow decreased but the wages per hour have increased thus not showing a savings in cost per hectolitre. However, less labour and larger herd size indicate improvements in efficiencies at the farm level.
The Economics of Milk Production also highlights differences between top third and bottom third herds based on different cost indicators. Costs can fluctuate as much as 22% between high and low cost producers.
Read Economics of Milk Production, 2020: The Dairy Cost Study and find the reference supplemental factsheets there as well.
Dairy farmers in Alberta volunteer to participate on the annual Dairy Cost Study and provide information on their dairy enterprise. In return, they receive a business analysis to use in their daily farm management. From this dataset, weighted sample averages are calculated resulting in this Alberta benchmark report.
For more information about the Dairy Cost Study or a printed copy of the study, connect with Pauline Van Biert: