those at lowest cost was from 37 cents to $2.52. It will be seen that an average 

 cost determined from such a wide range must be considered as an approximation. 



The average cost the previous year was 93 cents per pound butter-fat. The 

 increase may be accounted for by the heavy drop in livestock values. Had 

 the value of livestock values, as shown in the inventory, not decreased during the 

 year, the cost would have been 96 cents per pound butter-fat. Again, had the 

 livestock sold during the year brought as good prices as prevailed during the pre- 

 vious year, the cost would have been 93 cents, or the same as the previous year. 

 It has been stated that the feed was cheaper during 1920-1 than during the 

 previous year, and one might think that it would cost less to produce butter-fat 

 on that account. It must be remembered, however, that dairymen on these 

 farms not only bought, but also sold feed, so that the drop in feed prices did not 

 affect the cost of production of the butter-fat. Labour was slightly lower, but 

 taxes were higher, and other expenses about the same. 



As the average selling price of the butter-fat was 70 cents per pound, one 

 can see that many farmers must have produced butter-fat at a loss. A large 

 percentage of the farmers own their own farms, and for that reason do not have 

 to meet the expense of interest with cash. This explains how farmers can stay 

 in the dairy business and yet show an apparent loss. However, it is not a 

 business-like way to conduct the farming operations. Most other manufacturing 

 plants must allow for an interest payment, since interest has to be paid. 



It was found that the average cost of producing a pound of butter- fat when 

 interest was left out altogether was 67 cents. Since the average selling price 

 was 70 cents per pound, this leaves an average spread of 3 cents per pound butter- 

 fat with which to meet interest on investment. Such a margin is equivalent to 

 one-half of one per cent, of the investment in these farms for the year. This 

 percentage is arrived at by multiplying the total number of pounds of butter-fat 

 sold by three, and expressing the product as a percentage of the total capital 

 invested in the dairy business of the 63 farms. 



THE EFFECT OF THE SIZE OF THE HERD AND THE AMOUNT OF 



BUTTER-FAT SOLD PER COW ON THE COST OF 



PRODUCING BUTTER-FAT. 



Table No. 19. 



It will be noted that the farmers producing at lowest cost used, on the 

 average, larger herds of cows. The smallest herds were in the group with highest 

 costs. Because of the relatively reduced overhead charges per cow in the case 

 of the larger herds, the cost of production of butter-fat tended to be lower. It 

 does not necessarily follow, however, that the largest herd was operated at 

 greatest profit. Most profitable operation of farms depends upon a due balance 

 being maintained between the dairy herd and other factors. 



The production per cow is a factor of no small importance in considering 

 the means of reducing the cost of production. The dairyman must realize this 

 fact, and have enough courage to override sentiment and get rid of cows that 

 are not producing up to this standard. Just what the standard production should 

 be cannot be determined at present; but, so far as appears from investigation 

 up to the present, the average herd should produce at least 250 Ibs. of saleable 

 butter-fat per cow per year, and as much above this as possible. Many herds 

 are now above this standard, but a large number of them fall below. 



The last column of Table No 19 shows the cost of producing a pound of 

 butter-fat in the three different groups, not allowing for any interest on capital 

 investment in the farm. When we consider that the farmer sold the butter-fat 



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