Dairy Farm Profitability: How to Calculate Cost per Litre of Milk

Many farmers know their milk price but not their cost per litre. Without it, you cannot tell whether a price change, a new feed or a new animal makes you money. The calculation is simple once you keep basic records.

Step 1: Add up monthly costs

Include everything for one month:

• Feed: green fodder (including the cost of growing it), dry fodder, silage, concentrate, minerals.
• Labour: wages, including family labour valued at a fair wage.
• Veterinary and medicines, AI and breeding costs.
• Utilities: electricity, water, fuel.
• Other: repairs, transport, interest on loans, and an allowance for shed and equipment depreciation.

Step 2: Add up milk produced

Total litres produced in the same month, including milk fed to calves and used at home.

Step 3: Divide

Cost per litre = total monthly cost ÷ total litres produced.

Compare it with your average milk price. Also count other income — sales of calves, culled animals and manure — when calculating overall profit.

The biggest profit levers

Feed efficiency

Feed concentrate according to milk yield, grow and preserve good fodder, and avoid waste at the trough.

Calving interval

An animal that calves every 13 months spends more of her life near peak milk than one that calves every 18 months. Every month you cut from the calving interval increases milk per year without more feed for an extra animal.

Low producers

Animals that consistently produce little milk, have repeated mastitis or do not get pregnant often cost more to keep than they earn. Records identify them so you can decide whether to treat, rebreed or sell.

Health

Mastitis, tick fever and FMD all cut milk heavily. Prevention is almost always cheaper.

Milk quality and price

Clean milk with good fat and SNF earns more from processors and keeps buyers loyal.

Review every month

Look at cost per litre, milk per animal, and profit per animal each month. Trends matter more than a single month's numbers.