Economic and financial analysis of dairy farms

Objectives of this research are to study the present milk production situation, costs and returns to milk production the purposive sampling survey was encountered into this study by aiming at the farms with dairy cows of 100 heads and over which are considered large enough to expand as industrial size in the future. Data on farm operation in the year 1994-1995 were collected for analysis. The net cash flow of small farm size (100-200 heads) was 361,317.04 baht/year, while that of medium farm size (200-500 heads) was --860,801.11 baht/year. For critical analysis, if concentrate price was allowed to increase by 10 percent, only small farm size had the positive net cash flow. In the case of yield of milk was reduced by 10 percent, or concentrate price was allowed to increase by 10 percent and yield was also decreased by 10 percent in the same period of time, both small and medium farm sizes had negative net cash flow. Since the data of the large farm size (500 heads) were insufficient for analysis, the net cash flow was not thus presented in this study. Only one small farm size could affort to expand to absorb the greater number of dairy cows in 20 years time. The study indicated that with the discount rate of 13 percent, it generated net present value of 2,642,161.77 baht, benefit-cost ratio of 1.08, the internal rate of return of this farm was 17.24 percent, while sensitivity analysis was not feasible. The study on production cost by basing on only the actual milk yield found that the small farm size had the cost of 12.17 baht/kg, the medium farm size had 12.99 baht/kg, while that of large farm size was 13.52 baht/kg, the average cost for all farm sizes was 12.63 baht/kg. The cost of production with respect to actual milk yield and milk equivalent found that the production cost was 9.26 baht/kg for small farm size, 9.66 baht/kg for medium farm size and 9.76 baht/kg for large farm size. The average cost for all farm sizes was 9.45 baht/kg. The recommendation made from this study were that training on animal health care, animal management, yield increasing and cost reduction should be implemented continuously. The price of milk paid to farmers should be adjusted closely to the concentrate price.