Dairy Farm Labor: Cost, efficiency, and change from 2011 to 2021

October 25, 2021

The Cornell University Charles H. Dyson School of Applied Economics & Management has released a new publication that summarizes cost, efficiency and changes associated with hired labor on New York dairy farms from 2011 to 2021. We understand that New York is not Michigan. However, the states are very similar in dairy production and labor conditions. We feel the data collected, analyzed and reported is valuable and pertinent to a Michigan dairy producer.

As the average dairy farm size grows, reliance on hired labor increases and the cost associated with the hired workforce is a significant expense. For most farms participating in the Dairy Farm Business Summary and Analysis Project (DFBS), hired labor is the second largest expense category after purchased grain and concentrates. With farms participating in the DFBS project for multiple years, an analysis of costs and efficiencies associated with hired labor and how they have changed over the last 10 years was recently summarized. Below are selected highlights from the 2021 hired labor publication:

  • Average herd size grew between 2.9% to 6.8% a year
  • Hired worker equivalents increased between 2.0% to 8.3% a year. One hired worker equivalent equals 2,760 hours of labor a year.
  • Total payroll expenses for the year more than doubled over the timeframe, reflecting an increase in the amount of hired labor along with increases in labor costs per hour. The total payroll costs increased on average 7.5% a year.
  • The cost per hour increased on average 3.5% a year, from $12.92 per hour in 2010 to $17.34 per hour in 2020, or a 34.2% increased from 2010 to 2020.
  • The rate of change in hired labor costs per hour from one year to the next is accelerating, with increases over 5% occurring twice in the last 4 years.
  • Labor efficiency as measured by milk sold per worker equivalent increased 0.5% a year for 2011 through 2015. From 2016 to 2020, milk sold per worker equivalent increased by 3.4% a year on average.

Labor costs per hundredweight of milk sold increased from $2.66 to $3.08, an increase of 15.8% over 10 years. The percent increase in labor costs per hundredweight of milk sold is less than the increase in cost per hour in hired labor, reflecting management changes undertaken by the farms over the timeframe to increase labor efficiency. If labor efficiency had not improved, cost per hundredweight would have increased to $3.62.

The full 2021 hired labor publication can be found HERE>>>>.

Adapted from Cornell University.