How Much is A Dairy Farmer Worth?Farm Tender Jun 19, 2018
Worldwide, dairy farming is one of the most common commercial operations in the agri-food sector. It is a primary sector activity where the basic raw material i.e. milk is the prime produce. Large dairy farms also have facilities for secondary sector activities such as processing the milk to produce cheese or cream or similar milk-based products. Globally, dairy farming is big business with annual turnover in billions of dollars.
Apart from the big players who own huge factories, there are many small dairy farmers who are in this business for generations. The farm is family-owned and mostly run by family members.
Running a Dairy Farm
At a glance, dairy farming looks good business. You have your own farm, run it the way you like and the best thing is you live in pristine surroundings amidst nature. However, it’s not as rosy as it looks from the outside.
As a dairy farmer, you have to be up at the crack of dawn and work till late in the afternoon. There are no specific holidays for you as you cannot stay away from your farm. There will be no weekends either for you to relax the entire day. In fact, dairy farming is a way of life for people who have been doing it for generations.
Apart from the basic job of milking your cows; you need to care for them regularly, which can be quite a task. You also need to have a good knowledge about the working of different machineries and how to keep them in top condition.
To run your farm successfully, you should also know about the financial part and how to increase your business or sustain it successfully. You should also have good marketing skills and connections to sell all that milk produced in your farm.
Is Dairy Farming Worth It?
With all that trouble, the basic question is how profitable is dairy farming today. There are many factors that affect the profitability of dairy farming.
Imputed labour is the work done by family members instead of hiring workers for the same work. Imputed labour is considered as unpaid labour since you don’t really ‘pay’ yourself at an hourly rate when you are working on your own farm.
According to Dairy Australia, imputed labour costs are calculated at a standard per hour rate which is about $28 per hour.
It takes into account what you would have to pay to a hired labour if you are to replace yourself and make him work the same hours as you do at your farm. However, the calculations don’t really work out to $28 per hour when you look closely at how you pay hired workers under different heads.
Paying Trained Workers
The standard hourly payment rate for male full-time employees is $34.60. This is for employees who have the required training and skills to supervise and manage your farm under your guidance. They are categorized as FLHL8 i.e. Farm and Livestock Hand with Level 8 training certified.
Wages for this category of trainer workers include minimum hourly wages of $22.80 per hour along with half payment for overtimes and double payment for milking on Sundays. Considering the fact that the worker puts in 50 hours of work per week, the rates work out around $27.97 per hour. It is almost equal to $28 that is the standard rate for imputed labour.
However, add to that superannuation payment at the rate of 9.5% which hikes the hourly payment rate to up to $30.43. Full-time workers at your dairy farm are also entitled to sick leave and annual leave. So while you are paying them for 30 days, they actually work for 26/27 days in any given month.
During those days, you will either have to hire casual workers or do work yourself. Dairy farming is an industry where there are no ‘off-days’ i.e. the work goes on for 365 days a year.
Paying Untrained Workers
You can hire unskilled workers i.e. FLHL5 certified to fill in for your regular trained workers. Assuming the unskilled worker works for the same hours as your regular employee who is on leave, you would still have to pay him the minimum hourly rates along with 25% additional for the temporary nature of work.
When calculated, the total payment you make to such unskilled temporary workers adds up to $30.48 per hour.
Assuming your permanent workers are entitled to four weeks of leave annually and another week for sickness or other reasons through the months, you would have to spend additional $7620 per annum to pay your casual labourers. Calculated over the months, this adds up another $2.99 to your labour costs. So there is no way you can hire an employee for as low as $28 per hour which is the minimum standard rate for imputed labour.
Therefore, shortly speaking, you pay $34.60 per hour to your trained regular workers and $30.48 per hour for unskilled; casual workers. However, as imputed labour, you pay only $28 to yourself or your family members. This is way below the standard minimum rate for dairy workers who are employed in your farm; whether skilled or unskilled.
So despite putting in all the effort, working from dawn to dusk and labouring 365 days a year, you are actually paying yourself far less when you are working on your own.
What is the Actual Profit
The minimum standard payment rate of $28 per hour for imputed labour actually distorts the profitability calculation of your dairy farm. On paper, it might look you are making more profit by paying yourself less but consider other personal expenditure that eats into your profit.
Apart from labour costs, you have to run the dairy farm and your family and $28 per hour is just not enough for it.
So keeping all perspectives in mind, running a dairy farm is not as profitable as it looks like. However, if dairy farming is in your genes and the farm is in the family for generations, there is little you can do but carry on the best you can.
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