Most dairy producers are usually reluctant to disclose financial records. Currently, DHI records do not provide comprehensive financial information. Milk production, especially the rolling herd average, has been criticized as a poor indicator of profitability. Actually, the main purpose of the rolling herd average is to measure efficiency of production and not necessarily profitability. DHI can be used to study the relationship between milk production and feed cost.
Feed represents the single largest cost of producing milk.
Other items contribute to the total cost of producing milk besides feed. However, many of these costs are fixed such as insurance, taxes and utilities. These costs vary little if any with level of milk production in contrast to feed. Total feed cost rises with production level. IOFC calculated as the difference between value of product and total feed cost increases in the same manner.