📖 Economics

Economics Glossary

3 essential economics terms explained — from Income Over Feed Cost to practical dairy farming knowledge.

3 Terms in Economics

35 Total Glossary Terms

Understanding Economics in Dairy Farming

Dairy economics ultimately comes down to one equation: Revenue – Cost = Profit. Feed represents 50–60% of variable costs, so optimizing feed efficiency is the highest-impact lever. A $1/day improvement in IOFC across a 200-cow herd for 305 days equals $61,000/year in additional profit. Understanding your cost structure and revenue drivers is essential for survival in the volatile dairy industry.

Key Principles

IOFC is the Gold Standard

Income Over Feed Cost measures feeding program profitability directly. Track weekly. IOFC >$10/day is excellent, $7–10 is good, <$5 needs immediate action.

>$10/day target

Revenue per CWT Matters

Maximize revenue per CWT through component premiums (butterfat, protein), quality bonuses (low SCC), and volume consistency. Premiums can add $1.50–3.00/CWT above base.

$1.50–3.00 premium

Feed Cost per CWT

Feed cost per CWT = (total ration cost per ton × DMI in lbs) ÷ 2,000 ÷ milk production per cow. Optimize for lowest cost per unit of nutrient, not lowest cost per ton.

$8–10/cow/day

Seasonal Planning

Summer IOFC drops 15–25% due to heat stress. Plan ahead — increase energy density before summer, ensure cooling systems work. Winter may see improvement with fresh forage.

15–25% summer drop

I

Income Over Feed Cost

IOFC economics

Revenue per cow minus feed cost per cow. The gold standard KPI for dairy profitability. Higher IOFC = more profitable herd.

P

Pregnancy Rate

PR economics

The percentage of eligible cows that become pregnant per estrus cycle. Calculated as Heat Detection Rate × Conception Rate. Target: >25% per 21-day cycle.

R

Revenue per CWT

Revenue per cwt economics

The total milk revenue per 100 lbs (hundredweight) of milk sold. Includes base price plus/component premiums minus quality penalties. A key pricing metric for dairy profitability.

Frequently Asked Questions

How do I calculate IOFC? +

IOFC = Milk Revenue – Feed Cost. Example: 80 lbs milk × $0.20/lb = $16.00. Feed: 48 lbs DMI × $0.175/lb = $8.40. IOFC = $7.60. Track weekly to catch trends.

What is a good feed cost per cow? +

Feed cost per cow = total ration cost per ton × (DMI in lbs ÷ 2,000). A cow eating 48 lbs DMI/day from a $350/ton TMR costs $8.40/day. Target $8–10/day for lactating cows.

How does milk price affect IOFC? +

IOFC is directly tied to milk price. At $0.20/lb, 80 lbs milk = $16.00 revenue. At $0.18/lb, same production = $14.40. A $0.02/lb price drop reduces IOFC by $1.60/cow/day.

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