BS in Agricultural Business
This study examined whether it is more cost effective for a dairyman who operates two dairies (A and B) in west Texas to own-raise or custom raise his dairy calves. The two dairies currently raise calves differently: calves are own raised on Dairy A and custom raised on Dairy B. Existing resources would allow a switch to own raising on Dairy B or custom raising by Dairy A, so an analysis of the comparative costs was appropriate.
This study analyzed information on key costs associated with own raising calves on Dairy A during a 135-day period in 2011. Because differences in revenues under the two calf-raising methods were minimal, revenue changes were ignored in this study. Data were collected through phone interviews with the dairy owner, based on existing record-keeping systems at the two dairies. The costs included feed, labor, health, equipment operations costs, opportunity costs and other miscellaneous costs. The total costs were analyzed using a partial budgeting approach during the period were estimated and used to calculate a cost per calf per day for own raising on Dairy A. This value was compared to the cost of custom raising based on existing contracts for Dairy B.
During the 135-day period examined, custom raising was less costly than own-raising: own-raising costs were $2.45 per calf per day compared to $2.23 per calf per day under current custom raising contracts. The total cost difference between own and custom raising for the period examined was more than $15,000, or more than $40,000 on an annual basis. This suggests that the owner of the dairies may find it advantageous to contract with the current custom raiser for the calves on Dairy A. However, the period of time for which data were available was limited, so cost data for a longer time period should be examined to reach a more definitive conclusion about the best management choice for this dairy owner.