The major economic impacts of the example
1,000-cow dairy unit in Missouri are associated
with the initial first-year investments and annual
farm sales that are reached at steady state
production.
Construction Impacts
A 1,000-cow dairy unit will require total investments of $3.4 million, or $3,415 per cow. These investments include $320,000 for land (640 acres at $500 per acre); $1,313,169 for building construction; $581,650 for machinery and equipment; and $1,200,000 for cows (Table B1).
Table B1. Total First Year Investments for a 1,000-Cow Dairy Unit in Missouri
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Milking centera $69,300
Freestall housingb 734,469
Land and other real estatec 390,000
Other facilitiesd 439,400
Parlor equipment 224,350
Other machinery and equipmente 357,300
Cows 1,200,000
Total investment 3,414,819
Investment per cow 3,415
Building consturectionf 1,313,169
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Source: the Missouri Dairy Plan
aBuilding structure, fans, and flush system.
bBuilding and equipment.
cLand, site prep, machinery shop and storage, and fences.
dLagoon, water system, commodity storage, and dry cow housing.
eTractors, pickup trucks, scales, and other equipment.
fExcludes investments for land, machinery and equipment, and
cows.
Housing construction for a 1,000-cow unit will take less than one year to complete and will cost $1,313,169. This expenditure consists of $69,300 for the milking center (excluding milking equipment); $734,469 for freestall housing ($835 per stall for 880 stalls); #70,000 for site preparation, machinery shed, and fences; and $439,400 for the lagoon, water system, commodity storage, and dry-cow housing.
Construction costs for building a 1,000- cow unit will have an indirect and induced economic impact throughout the Missouri economy. Multipliers were used from the IMPLAN model for new farm structures to estimate these effects in Missouri (Table B2).
Table B2. Missouri IMPLAN Multipliers for New Farm Structures
Direct Indirect Induced Total
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Multiplier per dollar of
construction costs
Construction
costs 1.0000 0.4968 0.4778 1.9746
Personal
income 0.0783 0.1645 0.1538 0.3966
Employmenta 3.4354 7.9655 8.9709 20.3718
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Source: The IMPLAN model
aMultiplier per $1.o million in construction costs.
The construction costs and personal income multipliers estimate the statewide economic impact of one dollar in construction spending. For example, one dollar in construction costs will generate $1.97 in statewide spending, and 40 cents in statewide personal income. The employment multipliers estimate the number of FTEs generated form $1 million in construction costs. Thus $1 million in construction costs will generate 3.4 FTEs in local construction, 8.0 FTEs from input suppliers, and 9.0 from increased household spending.
The total statewide impacts of first-year construction costs from a 1,000-cow dairy unit are presented in Table B3.
Table B3. Economic Impact of Construction from a 1,000-cow Dairy Unit
Direct Indirect Induced Total
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Construction
costs ($) 1,313,169 652,382 627,432 2,592,984
Personal
income ($) 102,821 216,016 201,965 520,803
Employment
(no. jobs) 4.5 10.5 11.8 26.7
Annual
wages ($) 22,792 20,652 17,144 19,468
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First-year construction costs of $1.3 million from Table B1 were used with the impact multipliers from Table B2 to estimate the economic effects in Table B3. These construction costs generate a total statewide economic impact of $2.6 million, $520,803 in personal income, and 27 FTEs. Average annual wages for all jobs created were $19,468. It should be noted that these economic effects do not include spending on machinery and equipment and cows. These expenditures are expected to have a significant one-time impact on the Missouri economy.
Sustained Economic Impacts
The 1,000-cow unit will reach a steady state level of production by year four and will result in annual milk production of 204,187 hundredweights. Assuming a milk price of $12.80 per hundredweight, it is expected that the unit will have annual milk sales of $2.6 million per year (Table B4). The unit will have $200,580 in cull cow sales (330 head per year at $608 per head), and $105,114 in calf sales. Total dairy farm sales will be $2.9 million per year.
In addition to farm sales, the dairy will also generate significant employment each year. This includes one salaried herdsperson ($24,960/yr), plus hourly labor (36,637 hours/yr. with an average wage rate of $5.83/hr). Total annual FTEs (including the herdsperson) will be 18.6 (Table B4). Total salary, wages, and benefits are $257,753 per year. Deducting personal Social Security and Medicare payments, $239,510 in personal income is directly generated from the 1,000-cow unit each year. It should be noted that this figure does not reflect a management draw of surplus cash by the owner/operator which is expected to average $340,000 per year.
Table B4. Annual Sales and Employment on a 1,000-Cow Dairy Unit in Missouri
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Annual Sales:
Milk $2,613,596
Cull incomea 200,580
Calf sales 105,114
Total 2,919,290
Annual employment:
FTEsbtal 18.6
Wages and salaries 253,508
Company benefitsc 20,436
Employee share of social security
and medicare 19,393
Net payroll (personal income) 233,072
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Source: The Missouri Dairy Plan.
a$608/head/yr, 330 head.
b2,080 hours per year.
cIncludes Social Security, Medicare, and FUTA company co-payments.
The IMPLAN multipliers used to estimate the statewide impact of output and employment form the 1,000-cow unit are presented below in Table B5. Note that direct multipliers for personal income and employment from the IMPLAN model were not used in this analysis since they were calculated from the Missouri Dairy Plan.
Table B5. Missouri IMPLAN Multipliers for Sale of Dairy Farm Products
Direct Indirect Induced Total
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....multiplier per dollar of sales....
Output 1.0000 0.6664 0.9353 2.6017
Personal income NAa 0.1756 0.3011 0.488
Employmenta NAa 9.6640 17.5610 39.3631
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aMultiplier per $1.0 million in construcion costs
The direct impact of annual farm sales form the 1,000-cow unit is taken directly from the Missouri Dairy Plan as presented in Table B4. The indirect and induced effects, however, are derived by multiplying direct annual farm sales or $2.9 million by the multipliers in table B5. These results are presented in Table B6.
Table B6. Missouri Economic Impact of Annual Sales from a 1,000-Cow Dairy Unit
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Direct Indirect Induced Total
Output ($)a 2,919,290 1,945,415 2,730,412 7,595,117
Personal
income ($) 233,072 512,627 878,998 1,624,697
Employment
(no. jobs)a 19 28 51 98
Annual
wages ($) 12,267 18,171 17,146 16,578
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aAnnual farm sales at steady state production in year four.
Direct annual farm sales of $2.9 million are estimated to have a statewide impact of $7.6 million from sales of input supplies to the farm (indirect effect) and increased household spending (induced effect). The indirect and induced effects at first glance may seem too high. To test this concern, total annual expenditures for a 1,000-cow unit at steady state production as reported in the Missouri Dairy Plan were used. These costs are presented in Table B7. Note that expenditures on inputs to the dairy farm total $2 million, which is comparable to the IMPLAN estimate in Table B6 of $1.94 million for indirect effects (expenditures on input supplies). Obviously, the IMPLAN multipliers are reasonable.
The employment numbers are also impressive, indicating the creation of 98 FTEs throughout the Missouri economy, creating an annual payroll of $1.6 million.
Table B7. Total Variable Annual Expenses Required for a 1,000-Cow Dairy Unit in Missouri
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Per cow Total
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Concentrates $720.30 $720,295
Forages 365.27 365,268
Seed expenses 0.88 879
Fertilizer and chemicals 4.06 4,057
Labor (includes benefits) 273.94 273,943
Marketing 189.49 189,486
DHI testing 15.00 15,000
Artificial insemination 17.00 17,000
Veterinary 25.00 25,000
Medicine 14.00 14,000
Supplies 58.00 58,000
Fuel and oil 15.32 15,318
Utilities 43.00 43,000
Building repairs 25.77 25,767
Machinery and equipment
repairs 26.20 26,198
Farm taxes (real estate and
personal property) 16.61 16,605
Insurance 19.02 19,018
Interest 149.04 149,036
Legal an dprofessional fees 8.00 8,000
Custom hire 12.42 12,420
Miscellaneous 19.18 19,184
Total 2,017.47 2,017,474
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Source: The Missouri Dairy Plan
