Why you should be tracking your annual margin per cow

When it comes to knowing whether your dairy farm is maximizing revenue, annual feed margin per cow is one of the key indicators to watch. Luckily, Lactascan makes it easy to do just that. Here’s why tracking your annual margin per cow is so important.

 

What is annual margin per cow?

Your annual margin per cow is your daily feed margin over 365 days.

So to calculate your annual margin per cow, you need to know your daily feed margin. You can get that by taking your milk pay, minus deductions and feed costs, multiplied by the number of kg of butterfat delivered. You can plug your numbers into this equation:

Income/kg – payroll deductions – feed costs = margin/kg

kg of butterfat produced X margin/kg = daily feed margin

Let’s look at an example with a gross income of $22/kg (butterfat + protein + LOS). After deductions and feed costs, we have a margin of around $14/kg. If each cow produces 1.4 kg of butterfat, that gives a daily feed margin of $19.60 per cow. The equation would be:

1.4 kg of butterfat X $14 = $19.60/cow

To find the annual margin per cow, we simply multiply the result by 365 days:

$19.60/cow X 365 days = $7,154/cow

The good news is that you don’t have to calculate all this by hand. All the data is available in Lactascan, the dairy analysis solution available on AgConnexion. You’ll find your annual margin per cow on page 3 of your report.

On each of the 19 month lines, you have the annual margin for that month, which is calculated from the margin/kg, multiplied by the kg delivered per cow that month, multiplied by 365 days.

Balancing costs and production

If you take a close look at the equations above, you’ll notice that to achieve a profitable annual margin per cow, you need two things:

1. Good margin/kg, which comes from controlling costs

2. Good production/cow, which comes from delivering more kg/cow/day

In other words, it’s important to pay attention to your costs, but it’s just as (and maybe even more) important to drive production.

Track, compare and improve

On page 7 of your Lactascan report, you can track the changes in your annual margin per cow from month to month. That way you can see if your farm is improving over time. As always, your agri-advisor can help.

You can also compare your annual margin per cow to the average for all Lactascan farms or the top 25%.

And now, the top 25% of farms are also ranked by how much money they make per cow in 365 days.

Maybe you’re already making your quota and are at +10 days. Nevertheless, increasing production can still work to your advantage. If you can deliver more kg/cow and need less milk to meet your quota, you open the door to a number of smart management strategies, such as voluntary disposals or buying more quota without having to expand your operation.