Effect of Business and Dairy Herd Management Practices on the Variable Cost of Producing Milk

A Cobb-Douglas-type function was used to study the effect of several business and dairy herd factors on the variable cost of production per 45.4 kg milk in 410 New York State dairy herds. The model used was a recursive system of equations with milk sold per cow per year and total variable cost associated with milk production as endogenous variables. Solutions were obtained using the two-stage least squares procedure. Relationships were essentially linear between variable production cost per 45.4 kg of milk and average age of the herd, percent days in milk, average age at first calving, average body weight, average days dry, fat test, and kilograms of concentrates fed. For average days open, herd size, number of cows per worker, tillable acres per cow, percent cows leaving the herd, and capital investment per cow, relationships were curvilinear. A lower variable production cost was associated with those herds having fewer days open, younger age at first calving, higher percent days in milk, lower percent cows leaving the herd, and heavier cows. Average body weight of all cows, average days dry, cows per worker, and tillable acres per cow had very little relationship with the variable production cost.