Sensitivity of contribution margin in milk production on family farms

Abstract

Milk production in Serbia is characterized by small surface of production and a large number of small family farms. For rural areas where this production is mostly carried out, economic profitability of production contributes to becoming a family business. This study refers to milk family farms of smaller and medium economic and production capacity, for which the economic analysis in the period of three years was applied and production results were calculated. Applying the calculation method the total revenues and total costs, and contribution margins per cow and per liter of produced milk were computed. By comparing the results obtained on farms A and B, conclusions were drawn, and the sensitivity of contribution margins to change of the given parameters (purchase prices of milk and milk produced per cow) was determined by sensitivity analysis. The stability in production is realized by achieving higher contribution margins with satisfactory milk yield per cow and quality milk, as well acceptable purchase prices of milk.