When feed cost makes up 40 to 60 percent of a dairy operation’s expenses, knowing your income over feed cost (IOFC) is very valuable to help determine if your herd is on track or not. Penn State dairy educators have developed the Penn State Income Over Feed Cost Tool and are using it to help dairy producers across the state monitor feed costs during this current economic downturn.
This tool is now available online, free of charge, and programs will be offered across Pennsylvania this fall to help producers and their advisers learn how to use this valuable resource.
“We have been monitoring income over feed cost for the Penn State dairy herd for several years,” reports Virginia Ishler, manager of the Penn State Dairy Research Complex. “Last summer IOFC averaged about $10 per cow compared to only $4.60 per cow this summer. Unfortunately, all other expenses have stayed the same or gone up. How is the dairy industry to survive when income is dramatically reduced?”
The question led Penn State Dairy Extension educators to create the IOFC tool to help producers get in the habit of calculating and monitoring this number over time. The results have been favorable.

“Some herds have been doing a terrific job of either controlling costs and/or improving milk production so that they are optimizing IOFC even during these difficult times,” explains Ishler, adding: “Other herds have been struggling and their IOFC has been negative.” But, she says, regardless of where that number falls, there are opportunities to make improvements on every dairy. “The key is knowing where your herd is currently in terms of income over feed cost and the impact that any management change you make can have on profitability.”
The Penn State IOFC Tool has proven to be a great benefit for Pennsylvania’s Profit and Target Teams. More than 200 Profit and Target teams have been developed with training and support from Penn State Dairy Extension and the Center for Dairy Excellence. “Our Profit Team has been evaluating the valuable information the IOFC tool has to offer. It has provided us with a healthy discussion of where we are right now and areas we need to look at to improve our dairy business,” notes Brandon Weary, a dairy producer from Newville, Pa.
Ishler believes that if the dairy industry is to survive during the volatility of these economic times, agricultural professionals, extension, lenders, and producers need to be working together. “Everyone already has a full plate and pulling together the right pieces of information and making smart decisions to implement management plans takes effort and time. The chances for success are much higher if producer and consultant are working together,” observes Ishler.
Penn State Dairy Alliance is providing a series of educational programs this fall to show producers and their advisers how to use the Penn State IOFC tool and other resources to improve profitability. The focus will be on what producers should be evaluating in order to manage risk and avoid potential pitfalls.
Consultants who are working with Profit/Target Teams should attend “Tools to Improve On-farm Profitability for Team Advisors” offered Sept. 29 at the Centre County Visitor Center, State College, Pa., and on Oct. 1 at the Cumberland County Cooperative Extension Office in Carlisle, Pa.

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Dairy producers should attend a two part-series that will help them plan a cash flow statement and use IOFC to manage profitability. The first workshop in the series, “How to Plan a Dairy Cash Flow Statement” will be offered:

  • Oct. 8, Clinton County Cooperative Extension Office, Mill Hall, Pa.
  • Oct. 12, Penn State DuBois campus, DuBois, Pa.
  • Oct. 13, Mifflin County Cooperative Extension Office, Lewistown, Pa. 
  • Oct. 22, Shady Maple Smorgasbord, East Earl, Pa.  

The second workshop in this series is titled, “Plan Your Farm’s Cash Flow Statement,” and will be held:

  • Oct. 15, Clinton County Cooperative Extension Office.
  • Oct. 19, Penn State DuBois Campus. 
  • Oct. 20, Mifflin County Cooperative Extension Office. 
  • Jan. 21, Cumberland County Cooperative Extension Office.

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Registration is under way for all programs. Call Penn State Dairy Alliance at (888) 373-7232 or register online with your credit card.

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Source: Penn State Dairy Alliance