There is a perception that U.S. Agricultural input costs rose slowly and steadily through 2006 before taking a big jump in 2007 due to major increases in energy costs. This jolt caused dairy farmers — especially grazing and organic farms — to question if it pays to feed grain to dairy cows.
Another, perception is that the "grazing advantage" increased with the 2006-2007 grain price jolt.
To test these perceptions, farm financial data from Wisconsin confinement, grazing (non-organic) and organic farms from 1995 to 2010 was examined to compare feed costs and Net Farm Income From Operations.
Some results were:
1. Estimated total allocated feed costs/cwt. sold trended upward throughout the period for all, indicating that many external factors (weather, increasing energy costs) have somewhat similar effects on all dairy systems in most years.
2. As expected, estimated total allocated feed costs/cwt. sold increased noticeably from 2006 to 2007, and all of the yearly average numbers beginning in 2007 were higher than in any previous year for all Wisconsin groups, suggesting a new and higher plateau for feed costs.
3. Despite differences in the level of NFIFO of the Wisconsin dairy systems, their NFIFO/Cwt sold tended to move in the same direction most years indicating that many external factors (weather, milk prices) influencing profitability have similar effects on all dairy systems in most years.
4. 2008 was the year of the highest estimated total allocated feed costs and NFIFO /CWT sold.