To control the costs of producing milk, dairy farmers and other professionals involved in dairy farming use various methods to measure the economic performance of their production. These methods can be difficult to understand due to the complexity of the business. This article aims to guide dairy producers, whether they are small-scale or part-time producers, in implementing a practical and effective cost control system.
The first step is to view your dairy farm as a business. Treat it as such by keeping a record of expenses and categorizing them. You can use a separate notebook or folders to organize your records. If you have a computer, using spreadsheets would be helpful. For those seeking more organization, speed, and quality in analysis, using livestock management software is an option. Financial management of a dairy farm requires good data collection and organization.
Remember that if you can't measure something, you can't manage it. The second step is to classify the costs involved in dairy production. It's beneficial to categorize your expenses as fixed or variable. Fixed expenses include labor, rent, water, electricity, telephone, and other recurring expenses. Variable expenses encompass temporary labor, materials for improvements and maintenance, office supplies, and more.
Categorize your expenses further into:
Dairy Herd Feeding: This includes costs for bran, corn, molasses, mineral salt, pasture maintenance, cleaning, fertilization, and agricultural defenses.
Veterinary Pharmacy: Account for expenses related to vaccines, dewormers, acaricides, medications, disinfection and cleaning materials, and any other expenses associated with the health of your dairy cattle.
Machines and Equipment: Include expenses for purchasing vehicles, trucks, tractors, machines, equipment, and tools. Don't forget to account for maintenance costs.
Taxes: Consider fees, interest, and social charges like FGTS, ITR, INSS, and IPVA.
Dairy Control: Keep track of your milk production. You can either record the total production daily or record the production per cow. The goal is to maintain discipline in this management practice.
Avoid double-counting expenses. For example, if you already accounted for the purchase of salt under "Dairy Herd Feeding," don't include it again under "Variable Expenses."
Once your expenses are organized, you can calculate the cost of producing a liter of milk. Set a frequency for conducting cost surveys, whether it's monthly, quarterly, or annually. Stick to your chosen period and record everything. This will enable you to evaluate the cost-effectiveness of your methods, compare them with those of other dairy farms, correct any issues, and adjust production goals.
Assuming you conduct monthly control, calculate your monthly expenses across all categories. Divide this total by the total amount of milk produced in that month. Consider all milk produced on your farm, including what was sold, used for cheese and other derivatives, given to calves, consumed on the property, or donated. Add up all the production.
For example, if your monthly effective operating cost is $10,000 and you produce a total of 30,000 liters of milk, the effective operating cost per liter of milk produced would be $10,000 / 30,000 = $0.33 per liter.
By keeping thorough records, you can also determine the average daily production, which is useful during market downturns. Although you can't control the price of milk, monitoring costs allows you to identify areas where you can reduce expenses.
If you choose to use software for control, you can gain even more insights, such as averages per animal and cost-intensive categories. It also helps you measure the intervals between deliveries, which directly impact your results.
Ultimately, investing in a management system is ideal, but if that's not feasible, avoid relying on guesswork. Maintaining control over your dairy farm's operations is crucial, and proper cost tracking is the key to success.
