Production Cost Study Highlights Jersey Advantages F

1 BOTTOM-LINE MANAGEMENTP roduction cost Study Highlights Jersey AdvantagesFor the seventh consecutive year, thedifferences between Jersey and Hol-stein profitability are revealed from an in-depth analysis by National All- Jersey the annual cost survey from the Cali-fornia Department of Food & 2008, the average cost of produc-tion on a per cow basis was lower for Jer-seys compared to Holsteins. Evaluatingdifferent pricing systems, Jersey enterpris-es were also more profitable, on the basisof both net income per hundredweight ofmilk shipped and net income per CostsCalifornia is the only state inthe that has an impartialagency that collects and reportscomprehensive information onthe Production costs for milk .

2 Ithas done this since 1955. By law,CDFA must take into account theinformation from this surveywhen setting minimum class the california cost of Pro-duction 2008 Summary, a seven-person cost of Production Unitcollected and summarized datafrom 157 Grade A dairy opera-tions that cooperated farms, with an average herdsize of 1,239 cows, of the state s 1,905 dairies,with just under million totalcows (958 per operation). Information onexpenditures is collected on-site quarter-ly, from unaudited accrual basis financialstatements.

3 Jersey -only and Holstein-onlyherd reports are published by CDFA andwere used for this Per CowThe 2008 summary includes 14 Jerseyoperations (average, 1,732 cows) and 118 Holstein herds (1,309 cows). Av-erage per cow investment was sim-ilar across these dairies: $2,914 forJersey operations, and $2,996 herds studied, Jerseyproduction averaged per day, testing milk -fat and true protein. Thiswas an increase of nearly twopounds per day over the Production per cow inthe Holstein herds was lbs. per daywith fat and true Cheddar cheese yield per hundred-weight for Jerseys was lbs.

4 Per cwt.,for average yield per cow of 2,111 lbs. Thiscompares to Holstein cheese yield per lbs., for total yield per cow of 2, It cost In 2008 CDFA reports costs in five categories:(1) feed, (2) labor, (3) herd replacement,(4) operating, and (5) milk marketingcosts. In addition, CDFA considers the costof management and a reasonable return oninvestment. The summary of productioncosts by breeds are summarized on a perhundredweight basis in Table 1 (below) andon a per cow basis in Table 2 (opposite).As a percentage of the total, Jersey costsof Production were distributed as feed, for labor, for total re-placement costs, other operatingcosts, and for milk marketing.

5 Thedistribution of costs for Holstein herds feed, labor, replace-ments, other operating costs, for milk per Hundredweight. For Jerseys,total cost of Production was $ percwt. Of this, $ was for feed, $ labor, $ for replacement costs;$ in operating costs; and $ formilk marketing costs. The average cost toproduce a hundredweight of Holstein milkwas $ , or $ less, with roughlyhalf of the difference was accounted forby the difference in feed costs per hun-dredweight volume of milk 1 also lists the averageCalifornia mailbox prices for2008: $ per cwt.

6 For Jerseymilk, and $ per cwt. for Hol-stein milk . The california mailboxprice dropped by less than 1%from the previous year for Jerseymilk, compared to a drop forHolstein milk . This can be attrib-uted to Production caps imposedduring 2008 in the state. Cooper-atives and processors eliminatedvolume premiums and alsocharged costs associated with dis-posing of excess milk back to per Cow. On a per cow ba-sis (Table 2), 2008 productioncosts for Jersey herds averaged$3,012 versus $3,667 per cow in Holsteinherds, a difference of $655 ( ).

7 Largely because of record-high feed pric-es, Jersey per cow costs increased by 16%from 2007, while the per-cow Holsteincosts were higher by 2 also includes input costs aver-aged for 2006 through 2008: $2,678 percow for Jersey and $3,159 for Holstein, adifference of $481 or and Net Income on per Cwt. BasisFive pricing systems were ex-amined to calculate revenue frommilk Production , and then esti-mate net income. These were Fed-eral Order multiple componentpricing (MCP); the Californiaregulated price system; andcheese yield pricing formulas rep-(continued to next page)Fig.

8 Annual Production costs per cow for 2008, based onCalifornia cost of Production Annual Summary 1. 2008 average cost of Production per hundredweightmilk produced and average mailbox price, by costs per cwt$ $ $ (.70) (.20)Operating (.07)Total cost per cwt.$ $ $ price per cwt.$ $ $ 2009 AMERICAN Jersey CATTLE ASSOCIATION and NATIONAL ALL- Jersey INC., Reynoldsburg, Ohio 43068-236208_CDFA cost of , 1:31 PM22006200720083-Year Average BreedJersey Holstein Holstein Holstein Holstein of Herds161561613014118 Average Herd Size1,0081,0571,3061,1941,7321,3091,3491 ,187 Average Yield per Cow Pounds Milk16,032 21,852 (5,820)16,464 22,392 (5,928)16,870 21,774 (4,904)16,455 22,006 (5,551) Pounds Fat752795(43)769811(42)778783(5)766796(3 0) Pounds True Protein571675(104)580685(105)607694(87)5 86685(99) Production Costs per Cow Total Feed cost $1,251 $1,479($228)$1,461 $1,732 ($271)

9 $1,774 $2,177 ($403)$1,495 $1,796 ($301) Total Labor 317325(8)305329(24)298344(46)307333(26)T otal Herd Replacement Cost24223210219302(83)251377(126)237304( 67) Operating Costs544574(30)535615(80)607645(38)56261 1(49) Total milk Marketing Costs73110(37)75113(38)82124(42)77116(39 )Total Production cost ($ / cow / year)$2,427 $2,720($293)$2,595 $3,091 ($496)$3,012 $3,667 ($655)$2,678 $3,159 ($481)% Change from Previous source: cost of Production Summaries, california Department of Food & Agriculture ( )Table cost of Production on per cow basis for 2006, 2007 and 2008 with 3-year per hundredweight (cwt.)

10 For different pricingsystems by Order MCP /1$ $ $ regulated price yield, single make-allowance yield with whey yield, variable make allowance avg. price: $ protein $ fat, $ other solids/22008 avg. price: $ fat, $ overbase SNF, $ quota SNF/3 CME average block Cheddar price: $ income per hundredweight (cwt.) for differentpricing systems by Order MCP$ $ $ regulated yield, single yield with whey yield, variable make per cow for pricing system by Order MCP$3,740$4,157 $(418) california regulated price3,2323,768(536)Cheese yield, single make-allowance3,3873,790(403)Cheese yield with whey value3,5253,774(249)Cheese yield, variable make allowance 3,6113,816(205)