SmallScaleDairy Farming Manual 
Volume 1 




What should you know about basic production and business calculations?
1 How can you keep reception records?(4)
You should know how to keep records of the quality, price etc. of milk coming into your centre. 
2 How can you calculate fat contents for standardization?(510)
You should know how to:
 calculate the fat content of your products. 
3 How can you calculate production costs?(1127)
You should know how to find the costs of:

How can you keep reception records?
How can you calculate fat contents for standardization?
5 Before you can adjust the fat content (standardization), you must separate:  the cream from  the skim milk. Note: See also T8 Milk Payment. 
6 Check the fat content of your cream and whole milk or skim milk. 
7 Calculate the amounts
of:
 cream  skim milk  whole milk you mix to get the correct fat content for your product. Note: See T3 Milk Quality Control for a method of checking the fat content. 
Example 1: Fat content of standardized milk
8

Example 2: Fat content of cream
9

10

How can you calculate production costs?
11 You know:
 how much you pay farmers for their milk from the milk payment scheme

12
 how many l of milk you buy from the farmers
every
week or everymonth

13
 how much you pay for electricity or for wood, fuel oil etc. 
14
 how much you pay for processing aids
e.g. starter culture, detergents, rennet, salt etc. from the bills

15
 the costs of equipment e.g. trucks, tanks  buildings 
16
 the wages you pay your workers 
17
 how many units you produce of each product. 
18 When you calculate the costs of each
product
remember: fat is more expensive than skim milk. 
Example
4:
Production costs of market milk and butter This month,
the prices are: Milk price: 10 mu/l
Assuming
fat value is
The cost of 1 fu is:
From Example 3, each day: you receive: you produce: 200
1.2 fat whole milk >
195.4 13.4% fat + 2.1 kg
83% fat
Your daily payment to the farmer for milk is: 200 1x 10mh = 2000 mu/day Cost of l milk: Cost of 2.1 kg
milk (50%)=5mu
fat 4.6 kgx38%vfat
+ +
fat 3.4 fu x 1.19mu/fu milk 4.6
x 5 mu
=9.05 mu
=231 mu
Cost of 195.4 l milk
= 1,768 mu 1,999 mu ~ 2,000 mu
Cost 1 kg 231 mu = 110 mu

You can calculate costs for each litre of milk you receive.
19
Each day you receive 200 l milk. Each month you receive: 200 l x 30 days = 6,000 l milk. 
Electricity costs
20 If your electricity bill for 1 month is 6,000 mu, your electricity costs are: 6,000 mu/month = 1 mu/l milk.

Costs of chemicals
21 If your bill for chemicals is 1,500 mu for 1 month. Your chemicals costs are: 1,500 mu/month = ^{1}/_{4} mu/l milk. 6,000 l/month 
Depreciation costs
22 When new, your buildings cost 100,000 mu. After
20 years, you assume:
They lose value each year:
Assuming they lose the same value each year, depreciation costs/month: =
100,000 mu = 417 mu/mon
You assume your milk production stays the same. Therefore depreciation costs/l milk: =
417 mu/month = 0.07 mu/l.

23
When new, your equipment costs are: 300,000 mu. After
10 years, you assume:
Assuming it loses the same value each year,
300,000  50,000 mu = 2,083 mu/mon
Therefore, depreciation costs/l milk: =
2,083 mu/month = 0.35 mu/l.

Example 5: Total milk production costs of market milk
See Example 4 where 3.4 % pasteurized market milk cost 9.05 mu/l.
Your total production costs for 1 l market milk are:
24
mu
Total production costs for 1 l 3.4 % pasteurized milk = 11.49mu
Note: For your own production,add all of your other costs e.g. Transport, water etc. 
25
You must add your profit to the total production
costs.
1 l market milk 11.5 30 % profit (11.49 x 30)
3.5
Sale price
15.0 mu

Example 6: Total production costs of butter
See Example 3 where you need: 4.6 l of cream to make 2.1 kg of butter So for 1 kg of butter, you need
4.6 = 2.2
l cream.

26
mu butter 110.30 electricity
chemicals 0.25 depreciation
wages
packing materials 0.25 Total: 115.07mu/kgbutter 
27
Total production costs mu of 1 kg butter
115.00
Sale Price 150.00 mu/kg 

