Impact of expenditures for veterinary services and medical supplies on dairy farm productivity and profitability.

The value of the marginal product (VMP) for veterinary services and medical supplies (VETMED), and the profit maximizing level of VETMED were estimated for dairy producers. Data from the Pennsylvania Farmers Association-Dairy Farm Business Analysis system during the years of 1986 to 1990 were used to evaluate the functional relationship between production and expenditures for VETMED. Other input variables examined were man-year equivalents of labor, asset values, value of feed fed, and culling rate. Data were screened to reflect economically viable dairy farms in Pennsylvania, and 173 such farms participated for each of the 5 years analyzed. The VMP was estimated for 1990. Profit maximizing levels for VETMED were estimated for 1990 holding other input variables at their mean values. Mean expenditures for VETMED were $2,606/farm, or $43/cow in 1990. The VMP for VETMED was estimated to be $3.22 or $4.98, depending on the method of calculation. In other words, the marginal dollar spent on VETMED generated $3.22 ($4.98) in additional revenue from milk production. The profit maximizing level of expenditures for VETMED was $138/cow, substantially more than the mean, indicating the potential for farms in this data set to improve profitability through additional expenditures on VETMED.