Capital ownership costs for milk production (economic depreciation and interest) are computed using the capital recovery approach. Capital recovery is an estimate of the cost of replacing the capital investment for cattle housing, milking facilities, feed storage structures, manure handling and storage structures, feed handling equipment, tractors, trucks, and purchased dairy herd replacements used up in the annual production process, plus interest that the remaining capital could have earned in an alternative use. These costs were computed based on 2005 replacement cost estimates for the dairy assets reported by farmers in the ARMS. Farm expenditures on non- real.
