Budgets were also developed for Holstein cows producing 18,000 and 22,000 pounds of milk. The three levels reflect three different herds fed according to production, rather than the same herd fed at three different levels. While it may be argued that the cost to the milk production enterprise should be the cost of raising the animal, the milk production enterprise can be analyzed separately from other enterprises by expensing all produced inputs at market prices. Alfalfa hay and silage are the principal forages in the cow ration. A commercially mixed concentrate is fed.
All feed is valued at market prices.
Total labor requirements are 40 hours per cow per year. New purchase costs are used for all buildings, machinery and equipment. While this may overstate current costs experienced by dairy farmers, it measures the ability of the dairy enterprise to replace depreciable assets. When prices rise, depreciation claimed on earlier purchases does not offset the increased cost of replacing those purchases. In the long run, this will hurt an enterprise that doesn't take this into account.