AUGUST 1998
E~B.
98-12
CENTRAL VALLEYS
REGION
1997
Eddy L. LaDue
tuart F. Smith
Wayne A. noblauch
Doug Bowne
Zaid Kurdieh
Charles Menti'
Charles Z. Radick
Linda D. Putnam
Department of Agricultural, Resource, aDd Managerial Economics
College of Agriculture and Life Sciences
CorDell University, Jtha a, New York 14853-7801
It is the Policy of Cornell University actively to support equality
of educabonal and employment opponunity. No person shall be
denied admi sian to any educational program or activiry or be
denied employment on the basis of any legally prohibited
discrimination involving, but not limited to. such factors as race,
color, creed, religion, national aT ethruc ongm, sex, age or
handicap. The University i committed to the mamtenance of
affirmative acbon programs which will assure the continuation of
such equality of opportunity.
1997 DAIRY FARM BUSINESS SUMMARY
CENTRAL V ALLEYS REGION
Table of Contents
I
Page
INTRODUCTION
1
Program Objectives
1
Fonnat Features
1
SUMMARY AND ANALYSIS OF THE FARM BUSINESS
2
Business Characteristics
2
Income Statement
2
Profitability Analysis
4
Farm and Family Financial Status
7
Statement of O\vner Equity
11
Cash Flow Statement
12
Repayment Analysis
14
Cropping Analysis
16
Dairy Analysis
18
Capital and Labor Efficiency Analysis
20
COMPARATIVE ANALYSIS OF THE FARM BUSINESS
21
Progress of the Fann Business
21
Regional Fann Business Chart
22
New York State Fann Business Chart
23
Financial Analysis Chart
25
Comparisons by Type of Bam and Herd Size
26
Herd Size Comparisons
26
IDENTIFY AND SET GOALS
33
GLOSSARY AND LOCATION OF COMMON TERMS
35
INDEX
38
1997 DAIRY FARM BUSINESS SU~ARY
CENTRAL VALLEYS REGION
INTRODUCTION
Dairy fann managers throughout New York State have been participating in Cornell Cooperative Extension's fann
business summary and analysis program since the early 1950's. Managers of each participating fann business receive a
comprehensive summary and analysis of their fann business. The infonnation in thi~ report represents averages of the data
submitted from dairy fanns in the Central Valleys Region for 1997.
Program Objective
The primary objective of the dairy fann business summary, DFBS, is to help fann managers improve the business
and financial management of their fann through appropriate use of historical data and the application of modem fann busi­
ness analysis techniques. This infonnation can also be used to establish goals that will enable the business to better meet its
objectives. In short, DFBS provides business and financial infonnation needed in identifying and evaluating strengths and
weaknesses of the fann business.
Format Features
This regional report follows the same general fonnat as the 1997 DFBS individual fann report received by all par­
ticipating dairy fanners. The analysis tables have an open column or section labeled My Fann. It may be used by any
dairy farm manager who wants to compare his or her business with the average data of this region. A DFBS Data Check-in
Fonn can be used by non-DFBS participants to summarize their businesses.
This report features:
(1)
an income statement including accrual adjustments for fann business expenses and receipts, as well as measures of
profitability with and without appreciation,
(2)
a complete balance sheet with analytical ratios;
(3)
a statement of owner equity which shows the sources of the change in owner equity during the year;
(4)
a cash flow statement and debt repayment ability analysis;
(5)
an analysis of crop acreage, yields, and expenses;
(6)
an analysis of dairy livestock numbers, production, and expenses; and
(7)
a capital and labor efficiency analysis.
*The Central Valleys Region includes Schoharie, Oneida, Madison, Otsego, Chenango, Onondaga, Oswego, Montgomery,
and Herkimer Counties. This publication includes the following number of fanns by county: Schoharie 8, Oneida 7, Madi­
son 3, Otsego 3, Chenango 5, Oswego 1 and Montgomery 1. This summary was prepared by Eddy L. LaDue, Department
of Agricultural, Resource, and Managerial Economics, College of Agriculture and Life Sciences, Cornell University. The
fann business data were collected by Doug Bowne, Cooperative Extension Agent, Oneida and Madison Counties; Charles
Mentis, Cooperative Extension Agent, Oswego County; Zaid Kurdieh, Cooperative Extension Agent, Chenango, Herkimer,
Otsego, Fulton and Montgomery Counties; Lisa Fields, Cooperative Extension Agent Schoharie County; and Charles Z.
Radick, Fann Accountant/Consultant, Herkimer, Otsego, Schoharie and Montgomery Counties. Stuart F. Smith, Wayne A.
Knoblauch and Cathy Wickswat assisted with the data collection process. Analysis and data management assistance were
provided by Linda D. Putnam. Judy Neno prepared the publication.
II
2
SUMMARY AND ANALYSIS OF THE FARM BUSINESS
Business Characteristics
Planning optimal management strategies is a crucial component of operating a successful farm. Various combi­
nations of farm resources, enterprises, business arrangements, and management techlIiques are used by the dairy farmers in
this region. The following table shows important farm business characteristics and the number of farms with each charac­
teristic.
BUSINESS CHARACTERISTICS
28 Central Valleys Region Dairy Farms, 1997
Type of Farm
Dairy
Part-time dairy
Dairy cash-crop
Certified organic milk producer
Rotational grazing farm
Number
26
0
2
0
5
Milking System
Bucket & carry
Dumping station
Pipeline
Herringbone parlor
Other parlor
Number
1
1
15
7
4
Type of Ownership
Owner
Renter
Number
25
3
Type of Business
Sole Proprietorship
Partnership
Corporation
Number
19
7
2
Production Records
DHIC
Owner-Sampler
Other
None
Number
20
2
3
3
Type of Barn
Stanchion or Tie-Stall
Freestall
Combination
Number
17
10
1
bSTUsage
Used on <25% of herd
Used on 25-75% of herd
Used on >75% of herd
Stopped using in 1997
Not used in 1997
Number
0
8
1
0
19
Business Record System
Account Book
Agrifax (mail-in only)
On-farm computer
Other
Number
3
2
11
12
Milking Frequency
2 times per day
3 times per day
Other
Number
23
4
1
The averages used in this report were compiled using data from all the participating dairy farms in this region un­
less noted otherwise. There are full-time dairy farms, part-time farms, dairy cash-crop farms, farm renters, partnerships,
and corporations included in the average. Average data for these specific types of farms are presented in the State Business
Summary.
Income Statement
In order for an income statement to accurately measure farm income, it must include cash transactions and accrual
adjustments (changes in accounts payable, accounts receivable, inventories, and prepaid expenses).
Cash paid is the actual cash outlay during the year and does not necessarily represent the cost of goods and services actu­
ally used in 1997.
Change in inventory: Increases in inventories of supplies and other purchased inputs are subtracted in computing accrual
expenses because they represent purchased inputs not actually used during the year. Decreases in purchased inventories are
added to expenses because they represent inputs purchased in a prior year and used this year.
-
3
CASH AND ACCRUAL FARM EXPENSES
28 Central Valleys Region Dairy Farms, 1997
Expense Item
Hired Labor
Feed
Dairy grain & concentrate
Dairy roughage
Nondairy
Machinery
Machinery hire, rent & lease
Machinery repairs & farm vehicle expo
Fuel, oil & grease
Livestock
Replacement livestock
Breeding
Veterinary & medicine
Milk marketing
Bedding
Milking supplies
Cattle lease & rent
Custom boarding
BST expense
Other livestock expense
Crops
Fertilizer & lime
Seeds & plants
Spray, other crop expense
Real Estate
Land, building & fence repair
Taxes
Rent & lease
Other
Insurance
Utilities (farm share)
Interest paid
Miscellaneous
Total Operating
Expansion livestock
Machinery depreciation
Building depreciation
TOTAL ACCRUAL EXPENSES
Cash
Paid
$ 30,490
Change in
Inventory
or Prepaid
Expense
$
0
92,291
708
0
-1,523
-943
0
2,835
16,335
6,934
0
38
-60
1,347
3,835
6,100
13,215
1,360
7,700
358
505
3,969
3,309
0
-29
6
0
-44
31
0
0
45
-66
7,105
4,092
4,157
329
-293
-204
5,610
5,685
10,531
-13
0
0
4,645
8,200
17,527
3,265
0
0
0
0
$262,107
5,157
$
-2,726
0
+
«
Change in
Accounts
Payable
$
92
Accrual
Expenses
$ 30,582
1,151
71
0
94,964
1,723
0
«
-46
68
-132
2,789
16,365
6,863
«
0
26
-29
0
0
83
0
0
9
125
1,347
3,890
6,065
13,215
1,404
7,753
358
505
3,932
3,500
-230
-71
10
6,546
4,313
4,371
-14
150
-14
5,609
5,835
10,516
0
13
0
-122
4,645
8,213
17,527
3,143
$ 1,138
0
$ 265,971
5,157
17,727
7,843
$ 296,698
«
«
«
«
«
«
«
«
«
Change in prepaid expenses (noted above by «) is a net change in non-inventory expenses that have been paid in advance
of their use. For example, prepaid lease expense on the beginning of year balance sheet represents last year's payment for
use of the asset during this year. End of year prepaid expense represents payments made this year for next year's use of the
asset. Adding payments made last year for this year's use of the asset, and subtracting payments made this year for next
year's use of the asset is accomplished by subtracting the difference.
Change in accounts payable: An increase in accounts payable from beginning to end of year is added when calculating ac­
crual expenses because these expenses were incurred (resources used) in 1997 but not paid for. A decrease is subtracted
because it represents payment for resources used before 1997.
Accrual expenses are an estimate of the costs of inputs actually used in this year's production. They are the cash paid, ad­
justed for changes in inventory, prepaid expenses, and accounts payable.
-
4
CASH AND ACCRUAL FARM RECEIPTS
28 Central Valleys Region Dairy Farms, 1997
Receipt Item
Milk sales
Dairy cattle
Dairy calves
Other livestock
Crops
Government receipts
Custom machine work
Gas tax refund
Other
Less nonfarm noncash capital**
Total Receipts
Cash
Receipts
+
$ 286,452
10,243
1,669
59
3,812
3,398
1,152
123
4,821
Change in
Inventory
$
$
1,067
0
0
0
-174
0
0
6
57
$
956
2,604
-391
1,760
-38 *
(-)
$ 311,728
Change in
Accounts
Receivable
+
$
0 **
3,935
Accrual
Receipts
$
(- )
$
287,519
12,847
1,669
-332
5,397
3,360
1,152
129
4,878
0
316,619
*Change in advanced government receipts.
**Gifts or inheritances of cattle or crops included in inventory.
Cash receipts include the gross value of milk checks received during the year plus all other payments received from the sale
of farm products, services, and government programs. Nonfarm income is not included in calculating farm profitability.
Changes in inventory of assets produced by the business are calculated by subtracting beginning of year values from end of
year values excluding appreciation. Increases in livestock inventory caused by herd growth and/or quality are added, and
decreases caused by herd reduction and/or quality are subtracted. Changes in inventories of crops grown are also included.
An increase in advanced government receipts is subtracted from cash income because it represents income received in 1997
for the 1998 crop year in excess of funds earned for 1997. Likewise, a decrease is added to cash government receipts be­
cause it represents funds earned for 1997 but received in 1996.
Changes in accounts receivable are calculated by subtracting beginning year balances from end year balances. Payments in
January 1998 for milk produced in December 1997 compared to January 1997 payments for milk produced in 1996 are
included as a change in accounts receivable in determining accrual milk sales.
Accrual receipts represent the value of all farm commodities produced and services actually generated by the farm business
during the year.
Profitability Analysis
Farm operators· contribute labor, management, and equity capital to their businesses and the combination of these
resources, and the other resources used in the business, determines profitability. Farm profitability can be measured as the
return to all family resources or as the return to one or more individual resources such as labor and management.
The return to any individual resource must be viewed as an estimate because the cost of other family resources
must be approximated to calculate returns to the selected resource. For example, the costs of operator and family labor and
management must be approximated to calculate the returns to equity capital.
* Operators are the individuals who are integrally involved in the operation and management of the farm business. They
are not limited to those who are the owner of a sole proprietorship or are formally a member of the partnership or corpora­
tion.
-
5
Net farm income is the return to the farm operators and other unpaid family members for their labor, management, and
equity capital. It is the farm family's net annual return from working, managing, and financing the farm business. This is
not a measure of cash available from the year's business operation. Cash flow is evaluated later in this report.
Net farm income is computed both with and without appreciation. Appreciation represents the change in values caused by
annual changes in prices of livestock, machinery, real estate inventory, and stocks and certificates (other than Farm Credit).
Appreciation is a major factor contributing to changes in farm net worth and must be included for a complete profitability
analysis.
NET FARM INCOME
28 Central Valleys Region Dairy Farms, 1997
Total
Item
Average
Per Cow
316,619
-833
1,821
4,835
-582
$ 321,860
296,698
25,162
$
$
19,921
Total accrual receipts
Appreciation: Livestock
Machinery
Real Estate
Other Stock & Certificates
Total Including Appreciation
Total accrual expenses
Net Farm Income (with appreciation)
Net Farm Income (without appreciation)
Total
$
My Farm
Per Cow
$
$
$
$
237
188
$
$
$--­
$--­
The chart below shows the relationship between net farm income per cow (with appreciation) and pounds of milk
sold per cow. Generally, farms with a higher production per cow have higher profitability per cow.
NET FARM INCOME/COW & MILK/COW
28 Central Valleys Region Dairy Farms, 1997
1200
1100
1000
900
u
<U
....
800
p.,
g. 700
-5 600
500
400
~
0
u 300
v 200
E
0
100
u
.E
0
-100
E
tl:l
~
-200
ti -300
Z
-400
-500
-600
-700
8000
•
•
i
•
•
• •
•
•
•
•
••
•
..
•
]
~
•
j
j
10000
12000
14000
•
16000
•
• 18000
Pounds Milk Sold Per Cow
•
•
•
• •
•
20000
22000
24000
6
Labor and management income is the retum which farm operators receive for their labor and management used in the farm
business. Appreciation is not included as part of the retum to labor and management because it results from ownership of
assets rather than management of the farm business. Labor and management income is calculated by deducting a charge
for family labor unpaid and the opportunity cost of using equity capital, at a real interest rate of five percent, from net farm
income excluding appreciation. The equity interest charge of five percent reflects the long-term average rate of retum
above inflation that a farmer might expect to earn in comparable risk investments.
LABOR AND MANAGEMENT INCOME
28 Central Valleys Region Dairy Farms, 1997
Item
Net farm income without appreciation
$
Average
My Farm
19,921
$----­
2,790
Family labor unpaid @ $1,550 per month
Interest on $426,856 average equity capital @ 5% real rate
21.343
Labor & Management Income per farm (1.50 Operators/farm)
$
-4,212
$----­
Labor & Management Income per Operator/Manager
$
-2,803
$----­
Labor and management income per operator averaged $-2,808 on these 28 farms in 1997. The range in labor and
management income per operator was from about $-69,000 to more than $29,000. Returns to labor and management were
negative on 50% of the farms. Labor and management income per operator was between $0 and $20,000 on 36% of the
farms while 14% showed labor and management incomes of $20,000 or more per operator.
DISTRIBUTION OF LABOR & MANAGEMENT INCOMES PER OPERATOR
28 Central Valleys Region Dairy Farms, 1997
30
25
25
<Il
E
....
20
'"
~
4-.
0
s::
<I)
u
....
<I)
0.
15
10
-
5
0
<-20
-20to-l0
-10 to 0
o to 10
10 to 20
Labor and Management Income (thousand dollars)
>20
7
Return on equity capital measures the net return remaining for the farmer's equity or owned capital after a charge has been
made for the owner-operator's labor and management. The earnings or amount of net farm income allocated to labor and
management is the opportunity cost of operators' labor and management estimated by the cooperators. Return on equity
capital is calculated with and without appreciation. The rate of return on equity capital is determined by dividing the
amount returned by the average farm net worth or equity capital. Rate of return on total capital is calculated by adding
interest paid to the return on equity capital and then dividing by average farm assets.
RETURN ON EQUITY CAPITAL AND RETURN ON TOTAL CAPITAL
28 Central Valleys Region Dairy Farms, 1997
Average
Item
Net farm income with appreciation
$
25,162
Family labor unpaid @$1,550 per month
2,790
Value of operators' labor & management
33,071
My Farm
$---­
Return on equity capital with appreciation
$
-10,699
Interest paid
+
17,527
Return on total capital with appreciation
$
6,828
$---­
Return on equity capital without appreciation
$
-15,940
$---­
Return on total capital without appreciation
$
1,587
$---­
$---­
+ ----
Rate of return on average equity capital:
with appreciation
-2.5%
---_%
without appreciation
-3.7%
---_%
with appreciation
1.0%
---_%
without appreciation
0.2%
---_%
Rate of return on average total capital:
Farm and Family Financial Status
The first step in evaluating the financial position of the farm is to construct a balance sheet which identifies and
values all the assets and liabilities of the business. The second step is to evaluate the relationship between assets, liabilities,
and net worth and changes that occurred during the year.
Financial lease obligations are included in the balance sheet. The present value of all future payments is listed as a liability
since the farmer is committed to make the payments by signing the lease. The present value is also listed as an asset, repre­
senting the future value the item has to the business. For 1997, lease payments were discounted by 9.25 percent to obtain
their present value.
Advanced government receipts are included as current liabilities. Government payments received in 1997 that are for par­
ticipation in the 1998 program are the end year balance and payments received in 1996 for participation in the 1997 pro­
gram are the beginning year balance.
Current Portion or principal due in the next year for intermediate and long term debt is included as a current liability.
-
8
1997 FARM BUSINESS & NONFARM BALANCE SHEET
28 Central Valleys Region Dairy Farms, 1997
Current
Farm cash, checking
& savings
Accounts receivable
Prepaid expenses
Feed & supplies
Total Current
Intermediate
Dairy cows:
owned
leased
Heifers
Bulls & other livestock
Mach. & equip. owned
Mach. & equip. leased
Farm Credit stock
Other stock/certificate
Total Intermediate
Dec. 31
Jan. 1
Farm Assets
$
4,605
$
24,256
0
58,078
23,301
0
59,044
$
86,950
$ 106,444
440
46,080
755
148,182
1,840
515
4,788
$ 309,044
4,550
$
86,884
$ 108,559
69
45,730
371
147,758
879
1,084
4.135
$ 308,585
Farm Liabilities
& Net Worth
Current
Accounts payable
Operating debt
Short Term
Advanced govt. receipts
Current Portion:
Intermediate
Long Term
Total Current
Intermediate
Structured debt
1-10 years
Financial lease
(cattle/machinery)
Farm Credit stock
Total Intermediate
Long Term
Land & buildings:
owned
leased
Total Long Term
$ 291,471
5,521
$ 296,992
$ 291,959
5,581
$ 297,540
Long Term
Structured debt
>10 years
Financial lease
(structures)
Total Long Term
Total Farm Assets
$ 692,986
$ 693,009
Total Farm Liab.
FARM NET WORTH
Jan. 1
$ 11,531
7,797
1,061
28
Dec. 31
$
12,669
11,279
670
66
23,942
6,657
$ 51,016
$
$ 101,058
$ 102,319
2,280
515
$ 103,853
948
1,084
$ 104,351
24,177
6,647
55,508
/
$ 106,212
$ 100,241
5,521
$ 111,733
5,581
$ 105,822
$ 266,602
$426,384
$ 265,681
$ 427,328
Nonfarm Assets, Liabilities & Net Worth (Average of 20 farms reporting)
Assets
Personal cash, checking
& savings
Cash value life insurance
Nonfarm real estate
Auto (personal share)
Stocks & bonds
Household furnishings
All other nonfarm assets
Total Nonfarm Assets
Jan. 1
$
$
594
23,909
21,445
3,520
8,972
7,875
4,746
71,061
Dec. 31
$
Liabilities & Net Worth
Nonfarm Liabilities
$
Jan. 1
3,096
$
Dec. 31
3,073
NONFARM NET WORTH
$ 67,965
$
75,975
1,176
27,767
21,045
3,955
11,628
$
7,925
5,552
79,048
Farm & Nonfarm Assets, Liabilities, and Net Worth*
Jan. 1
Dec. 31
Total Assets
$ 764,047
$ 772,057
Total Liabilities
269,698
268,754
TOTAL FARM & NONFARM NET WORTH
$ 494,349
$ 503,303
*Assumes that average nonfarm assets and liabilities for the nomeporting farms were the same as for those reporting,
-
9
The following condensed balance sheet, including deferred taxes, contains average data from only those farmers who
elected to provide the additional information required to compute deferred taxes. These data are from all New York farms,
not just Central Valley region farms.
Deferred taxes represent an estimate of the taxes that would be paid if the farm were sold at year end fair market values on
the date of the balance sheet. Accuracy is dependent on the accuracy of the market values and the tax basis data provided.
Any tax liability for assets other than livestock, machinery, land, buildings and nonfarm assets is excluded. It is assumed
that all gain on purchased livestock and machinery is ordinary gain and that listed market values are net of selling costs.
The effects of investment tax credit carryover and recapture, carryover of operating losses, alternative minimum taxes and
other than average exemptions and deductions are excluded because they have only minor influence on the taxes of most
farms. The dramatic impact of including deferred taxes is clear. Total liabilities were increased 47 percent on these 16
farms by including deferred taxes.
CONDENSED BALANCE SHEET INCLUDING DEFERRED TAXES
December 3 1, 1997
16 New York Dairy Farms, 1997
Liabilities & Net Worth
Assets
Current debts & payables
$
27,075
Current deferred taxes
Total Current Assets
$
115,159
Total Current Liabilities
Intermediate debts & leases
$
102,934
$
125,646
Intermediate deferred taxes
Total Inter. Assets
$
405,543
Total Intermediate Liabilities
Long term debts & leases
75,859
88,820
$
214,466
$
136,851
Long term deferred taxes
44,533
Total Long Term Assets
$
369,415
Total Long Term Liabilities
$
181,384
TOTAL FARM ASSETS
$
880,117
TOTAL FARM LIABILITIES
$
498,784
Farm Net Worth
$
381,333
Percent Equity (Farm)
Nonfarm debts
43%
$
8,620
Nonfarm deferred taxes
Total Nonfarm Assets
$
64,748
TOTAL ASSETS
$
944,865
102
Total Nonfarm Liabilities
$
8,722
TOTAL LIABILITIES
$
507,506
Total Net Worth
$
437,359
Percent Equity (Total)
46%
-
10
Balance sheet analysis involves examination of relative asset and debt levels for the business. Percent equity is calculated
by dividing end of year net worth by end of year assets and multiplying by 100. The debt to asset ratio is compiled by di­
viding liabilities by assets. Low debt to asset ratios reflect business solvency and the potential capacity to borrow. Debt
levels per productive unit represent old standards that are still useful if used with measures of cash flow and repayment
ability.
BALANCE SHEET ANALYSIS
28 Central Valleys Region Dairy Farms, December 31, 1997
Average
Item
Financial Ratios - Farm:
Percent equity
Debt/asset ratio: total
long-term
intermedia telcurrent
Farm Debt Analysis:
Accounts payable as % of total debt
Long-term liabilities as a % of total debt
Current & inter. liabilities as a % of total debt
Farm Debt Levels:
Total farm debt
Long-term debt
Intermediate & long term
Intermediate & current debt
$
62%
0.38
0.36
0.40
%
5%
40%
60%
%
%
%
Per Tillable
Acre Owned
$
1,725
687
1,365
1,038
Per Cow
2,460
980
1,946
1,480
My Farm
Per Tillable
Acre Owned
Per Cow
$---­
$
/
Farm inventory balance is an accounting of the value of assets used on the balance sheet and the changes that occur from
the beginning to end of year. Changes in the livestock inventory are included in the dairy analysis. Net investment indi­
cates whether the capital stock is being expanded (positive) or depleted (negative).
FARM INVENTORY BALANCE
28 Central Valleys Region Dairy Farms, 1997
Average of Region's Farms
Real Estate
Machinery & Equipment
$
291,471
$
148,182
Item
Value beginning of year
Purchases
Gift & inheritance
Lost capital
Sales
Depreciation
$
+
6,726*
0
2,489
741
7,843
$
+
16,229
0
747
17,727
Net investment
Appreciation
+
-4,347
4,835
+
-2,245
1,821
Value end ofyear
$
291,959
$
147,758
*$1,007 land and $5,719 buildings and/or depreciable improvements.
-
11
The Statement of Owner Equity has two purposes. It allows (1) verification that the accrual income statement and market
value balance sheet are consistent (in accountants terms, they reconcile) and (2) identification of the causes of change in
equity that occurred on the farm during the year. The Statement of Owner Equity allows you to determine to what degree
the change in equity was caused by (l) earnings from the business, and nonfarm income, in excess of withdrawals being
retained in the business (called retained earnings), (2) outside capital being invested in the business or farm capital being
removed from the business (called contributed/withdrawn capital) , (3) increases or decreases in the value (price) of assets
owned by the business (called change in valuation equity), and (4) the error in the business cash flow accounting.
Retained earnings is an excellent indicator of farm generated financial progress.
STATEMENT OF OWNER EQUITY (RECONCILIATION)
28 Central Valleys Region Dairy Farms, 1997
Average
Item
Beginning of year farm net worth
My Farm
$ 426,384
$--­
Net farm income w/o appreciation
+Nonfarm cash income
-Personal withdrawals & family
expenditures excluding
nonfarm borrowings
RETAINED EARNINGS
$ 19,921
+ 6,868
Nonfarm noncash transfers to farm
+Cash used in business
from nonfarm capital
-Note or mortgage from farm
real estate sold (nonfarm)
CONTRIBUTED/WITHDRAWN CAPITAL
$
0
$
+
3,224
+
Appreciation
-Lost capital
CHANGE IN VALUATION EQUITY
-
$--­
+
--­
30.567
+$
+$
-3,778
--­
682
+$
$
$
5,241
2.489
+$
2,752
+$
572
-$
= $ 427,328
=$
IMBALANCE/ERROR
End of year net worth*
+$
2,542
Change in Net Worth
Without appreciation
$
-4,297
$----­
With appreciation
$
944
$----­
*May not add due to rounding.
-
12
Cash Flow Statement
Completing an annual cash flow statement is an important step in understanding the sources and uses of funds for
the business. Understanding last year's cash flow is the first step toward planning and managing cash flow for the current
and future years,
The annual cash flow statement is structured to show net cash provided by operating activities, investing activities,
financing activities and from reserves. All cash inflows and outflows, including beginning and end balances, are included.
Therefore, the sum of net cash provided from all four activities should be zero. Any imbalance is the error from incorrect
accounting of cash inflows/outflows.
ANNUAL CASH FLOW STATEMENT
28 Central Valleys Region Dairy Farms, 1997
Item
Cash Flow from Operating Activities
Cash farm receipts
Cash farm expenses
Net cash farm income
Personal withdrawals & family expenses
including nonfarm debt payments
Nonfarm income
Net cash withdrawals from the farm
Net Provided by Operating Activities
Cash Flow From Investing Activities
machinery
Sale of assets:
+ real estate
+ other stock & cert.
Total asset sales
Capital purchases:
expansion livestock
+ machinery
+ real estate
+ other stock& cert.
Total invested in farm assets
Net Provided by Investment Activities
Cash Flow From Financing Activities
Money borrowed (intermediate & long term)
+ Money borrowed (short term)
+ Increase in operating debt
+ Cash from nonfarm capital used in business
+ Money borrowed - nonfarm
Cash inflow from financing
+
+
Principal payments (intermediate & long term)
Principal payments (short term)
Decrease in operating debt
Cash outflow for financing
Net Provided by Financing Activities
Cash Flow From Reserves
Beginning farm cash, checking & savings
Ending farm cash, checking & savings
Net Provided from Reserves
Imbalance (error)
Average
$
$
311,728
262.107
747
59
798
$
5,157
16,229
6,726
727
$
49,621
$
24,354
31,222
6,868
$
$
$
$
1,604
$
28,839
$
25,267
$
-27,235
$
2,483
$
55
$
570
29,007
127
3,482
3,224
655
$
36,495
$
34,012
33,494
518
0
$
4,605
4,550
13
ANNUAL CASH FLOW STATEMENT
Item
Cash Flow from Operating Activities
Cash farm receipts
Cash farm expenses
Net cash farm income
Personal withdrawals & family expenses
including nonfarm debt payments
Nonfarm income
Net cash withdrawals from the farm
Net Provided by Operating Activities
Cash Flow From Investing Activities
Sale of assets:
machinery
+ real estate
+ other stock & cert.
Total asset sales
Capital purchases:
expansion livestock
+ machinery
+ real estate
+ other stock & cert.
Total invested in farm assets
Net Provided by Investment Activities
Cash Flow From Financing Activities
Money borrowed (intermediate & long term)
+ Money borrowed (short term)
+ Increase in operating debt
+ Cash from nonfarm capital used in business
+ Money borrowed - nonfarm
Cash inflow from financing
+
+
Principal payments (intermediate & long term)
Principal payments (short term)
Decrease in operating debt
Cash outflow for financing
Net Provided by Financing Activities
Cash Flow From Reserves
Beginning farm cash, checking & savings
Ending farm cash, checking & savings
Net Provided from Reserves
Imbalance (error)
$---­
$---­
$---­
$---­
$---­
$---­
$---­
-
14
Repayment Analysis
A valuable use of cash flow analysis is to compare the debt payments planned for the last year with the amount
actually paid. The measures listed below provide a number of different perspectives on the repayment perfonnance of the
business. However, the critical question to many fanners and lenders is whether planned payments can be made in 1997.
The cash flow projection worksheet on the next page can be used to estimate repayment ability, which can then be com­
pared to planned 1998 debt payments shown below.
FARM DEBT PAYMENTS PLANNED
Same 24 Central Valleys Region Dairy Fanns, 1996 & 1997
Debt Payments
Average
1997 Payments
Planned
Made
13,415
30,725
288
$ 12,667
30,642
692
1,221
0
1,540
$ 44,404
Long tenn
Intennediate tenn
Shorttenn
Operating (net
reduction)
Accounts payable
(net reduction)
Total
$ 14,035
Per cow
Per cwt. 1997 milk
Percent of total
1997 fann receipts
Percent of 1997
milk receipts
$
$
$
1,554
MyFann
1997 Payments
Planned
Made
Planned
1998
$ 48,144
$
0
44,428
481
2.47
$
$
444
2.28
17%
15%
18%
17%
Planned
1998
$
$--­
$--­
$---­
$--­
$--­
$---­
$--­
$
$
29,345
402
450
The cash flow coverage ratio measures the ability of the fann business to meet its planned debt payment schedule.
The ratio shows the percentage of payments planned for 1997 (as of December 31, 1996) that could have been made with
the amount available for debt service in 1997. FaImers who did not participate in DFBS in 1996 have their 1997 cash flow
coverage ratio based on planned debt payments for 1998.
CASH FLOW COVERAGE RATIO
Same 24 Central Valleys Region Dairy Fanns, 1996 & 1997
Average
Item
MyFann
Cash fann receipts
Cash fann expenses
+ Interest paid
- Net personal withdrawals from fann*
$
286,667
240,385
17,313
24,643
$
(A) = Amount Available for Debt Service
(B) = Debt Payments Planned for 1997
(as of December 31, 1996)
(AlB) = Cash Flow Coverage Ratio for 1997
$
38,952
$
$
48,144
0.81
$
-
*Personal withdrawals and family expenditures less nonfann income and nonfann money borrowed. If family withdrawals
are excluded, or inaccurately included, the cash flow coverage ratio will be incorrect.
-
15
Item
Average no. of cows
Total cwt. of milk sold
Acclllal Operating Receipts
Milk
Dairy cattle
Dairy calves
Other livestock
Crops
Misc. Receipts
Total
Accrual Operating Expenses
Hired labor
Dairy grain & concentrate
Dairy roughage
Nondairy feed
Mach. hire, rent & lease
Mach. repair & vehicle expo
Fuel, oil & grease
Replacement livestock
Breeding
Vet & medicine
Milk marketing
Bedding
Milking supplies
Cattle lease
Custom boarding
bST
Other livestock expo
Fertilizer & lime
Seeds & plants
Spray & other crop expo
Land, bldg., fence repair
Taxes
Real estate rent & lease
Insurance
Utilities
Miscellaneous
Total Less Interest Paid
ANNUAL CASH FLOW WORKSHEET
My Farm
Regional Average
Per Cowl
Per Cwt.
Per Cow
Per Cwt.
106
20,898
$
$
$
$
2,712
121
16
-3
51
90
2,987
$
289
896
16
0
26
154
65
13
37
57
125
13
73
3
5
37
33
62
41
41
53
55
99
44
77
30
2,344
$
Net Accrual Operating Income
(without interest paid)
- Change in livestock & crop invent. *
- Change in accounts receivable
- Change in feed & supply inventory**
+ Change in accounts payable***
NET CASH FLOW
- Net family withdrawals
Available for Farm
- Farm debt payments
Available for Falm Investment
- Capital purchases
Additional Capital Needed
*Includes change in advance government receipts.
interest account payable.
$
$
$
$
$
$
$
$
Expected
Change
1998
Projection
13.76
0.61
0.08
-0.02
0.26
0.46
15.15
$
$
---­
$
$
1.46
4.54
0.08
0.00
0.13
0.78
0.33
0.06
0.19
0.29
0.63
0.07
0.37
0.02
0.02
0.19
0.17
0.31
0.21
0.21
0.27
0.28
0.50
0.22
0.39
0.15
11.89
$
$
$
$
Total
68,175
$
3,935
956
-2,726
1.138
67,148
$
23,699
43,449
$
50,509
-7,060
$
28,839
35,899
$
**Includes change in prepaid expenses.
$
$
$
----­
$
***Excludes change in
-
16
Cropping Analysis
The cropping program is an important part of the dairy farm business and often represents opportunities for im­
proved productivity and profitability. A complete evaluation of what the available land resources are, how they are being
used, the level of crop yields, and what it costs to produce crops is important in evaluating alternative cropping and feed
purchasing alternatives.
LAND RESOURCES AND CROP PRODUCTION
28 Central Valleys Region Dairy Farms, 1997
Average
Item
Land
Tillable
Nontillable
Other nontillable
Total
Crop Yields
Hay crop
Com silage
Other forage
Total forage
Com grain
Oats
Wheat
Other crops
Tillable pasture
Idle
Total Tillable Acres
Owned
154
41
88
282
Rented
152
6
16
174
Acres*
180
87
Farms
28
24
12
256
89
26
0
2
28
9
5
0
0
11
5
305
My Farm
Total
305
46
104
455
Owned
Prod/Acre
2.36 tn DM
14.24 tn
4.53 tn DM
l.33tnDM
2.99 tn DM
97 bu
51 bu
o bu
Prod/Acre
tnDM
tn
tnDM
tnDM
tnDM
bu
bu
bu
-~~-
*This column represents the average acreage for the farms producing that crop. Average acreages including those farms
not producing were hay crop 180, corn silage 75. corn grain 29, oats 5, tillable pasture 13, and idle 4.
Average crop acres and yields compiled for the region are for the farms reporting each crop. Yields of forage
crops have been converted to tons of dry matter using dry matter coefficients reported by the farmers. Grain production
has been converted to bushels of dry grain equivalent based on dry matter information provided.
The following crop/dairy ratios indicate the relationship between forage production, forage production resources,
and the dairy herd.
CROPIDAIRY RATIOS
28 Central Valleys Region Dairy Farms, 1997
Item
Total tillable acres per cow
Total forage acres per cow
Harvested forage dry matter, tons per cow
Average
2.88
2.42
7.22
My Farm
...
17
Croppinl: Analysis (continued)
A number of cooperators have allocated crop expenses among the hay crop, corn, and other crops produced. Fer­
tilizer and lime, seeds and plants, and spray and other crop expenses have been computed per acre and per production unit
for hay and corn. Additional expense items such as fuels, labor, and machinery repairs are not included. Rotational graz­
ing was used on five farms in the region.
CROP RELATED ACCRUAL EXPENSES
Central Valleys Region Dairy Farms Reporting, 1997
Total
Per
Till.
Acre
...
Item
No. of farms
reporting
Ave. number
of acres
Fert. & lime
Seeds & plants
Spray & other
crop expo
TOTAL
All
Com
Per
Acre
Com
Silage
Per
TonDM
Corn
Grain
Per Dry
Sh. Bu.
Pasture
Hay Crop
Per
Per
Acre
TonDM
28
7
8
305
152
186
$ 21.46
$
14.14
47.99
34.68
$ 10.83
0.57
0.41
$
7.83
14.33
53.28
12.03
$ 49.93
$ 135.95
$ 30.69
$
$ -----
$
$
$- - - -
0.63
1.61
9.92
8.56
$
Per
Total
Acre
2
50
10
$
3.98
$ 22.46
Per
Till
Acre
$
4.34
3.75
1.74
9.83
$
$
44.10
0.00
0.00
44.10
$
$
8.82
0.00
0.00
8.82
My Farm
Fert. & lime
Seeds & plants
Spray & other
crop expo
TOTAL
---
~---
$ ----- $
$
$- - -
$
$
-----
---
-~--
$
$
$
$
$
$
Most machinery costs are associated with crop production and should be analyzed with the crop enterprise. Total
machinery expenses include the major fixed costs (interest and depreciation), as wdl as the accrual operating costs. Al­
though machinery costs have not been allocated to individual crops, they are shown below per total tillable acre.
ACCRUAL MACHINERY EXPENSES
28 Central Valleys Region Dairy Farms, 1997
Average
Machinery
Expense
Fuel, oil & grease
Mach. repair & vehicle expo
Machine hire, rent & lease
Interest (5%)
Depreciation
Total
Total
Expenses
$
$
6,863
16,365
2,789
7,466
17,727
51,210
My Farm
Per Till.
Acre
$
$
22.50
53.66
9.14
24.48
58.12
167.90
Total
Expenses
Per Till.
Acre
$
$
$
$
-
18
Dairy Analysis
Analysis of the dairy enterprise can reveal strengths and weaknesses of the dairy farm business. Information on
this page should be used in conjunction with DHI and other dairy production information. Changes in dairy herd size and
market values that occur during the year are identified in the table below. The change in inventory value without apprecia­
tion is attributed to physical changes in herd size and quality. Any change in inventory is included as an accrual farm re­
ceipt when calculating all of the profitability measures on pages 6 and 7.
DAIRY HERD INVENTORY
28 Central Valleys Region Dairy Farms, 1997
Dairy Cows
Item
No.
Beg. year (owned)
+ Change wlo apprec.
+ Appreciation
End year (owned)
End including leased
Average number
104
107
108
106
Value
$ 106,444
3,663
-1,548
$ 108,559
No.
Bred
Value
No.
29
$
27
$
77
(all age groups)
25,212
-1,502
-265
23,445
Heifer
Open
Value
31
$
32
$
15,673
280
-361
15,592
No.
Calves
Value
22
$
23
$
5,196
162
1,334
6,692
My Farm:
Beg. year (owned)
+ Change wlo apprec.
+ Appreciation
End year (owned)
End including leased
Average number
$
$
$
$
$
$
$
$
_ _ (all age groups)
Total milk sold and milk sold per cow are extremely valuable measures of size and productivity, respectively, on
the dairy farm. These measures of milk output are based on pounds of milk marketed during the year. Farm managers on
DHI should compare milk sold per cow with their rolling herd average on the test date nearest December 31 to see how
close the DHI estimate of milk produced is to actual milk sales.
MILK PRODUCTION
28 Central Valleys Region Dairy Farms, 1997
Item
Total milk sold, lbs.
Milk sold per cow, lbs.
Average milk plant test, percent butterfat
Average
My Farm
2,089,799
19,636
3.67%
•
19
The cost of producing milk has been compiled using the whole fann method and is featured in the following table. Accrual
receipts from milk sales can be compared with the accrual costs of producing milk per cow and per hundredweight of milk.
Using the whole falm method, operating costs of producing milk are estimated by deducting nonmilk accrual receipts from
total accrual operating expenses including expansion livestock purchased. Purchased inputs cost of producing milk are the
operating costs plus depreciation. Total costs of producing milk include the operating costs of producing milk plus depre­
ciation on machinery and buildings, the value of unpaid family labor, the value of operators' labor and management, and
the interest charge for using equity capital.
ACCRUAL RECEIPTS FROM DAIRY, COSTS OF PRODUCING MILK,
AND PROFITABILITY
28 Central Valleys Region Dairy Farms, 1997
Accrual Cost of
Producing Milk
Operating costs
Purchased inputs
costs
Total Costs
Accrual Receipts
From Milk
Net Fann Income
without Apprec.
Net Farm Income
with Apprec.
Average
Per Cow
Total
Item
Per Cwt.
My Fann
Per Cow
Total
$ 242,028
$
2,283
$
11.58
$
$ 267,598
$ 324,802
$
$
2,525
3,064
$
$
12.80
15.54
$
$
$ 287,519
$
2,712
$
13.76
$
$
19,921
$
188
$
0.95
$
$
25.162
$
237
$
1.20
$
----­
--­
Per Cwt.
$
$
$
$
$
$
$
$
$
$
$
$
The accrual operating expenses most commonly associated with the dairy enterprise are listed in the table below.
Feed and crop expenses include total purchased dairy feed plus fertilizer, seeds, spray and other crop expenses.
DAIRY RELATED ACCRUAL EXPENSES
28 Central Valleys Region Dairy Fmms, 1997
My Fann
Average
Per Cow
Item
Purchased dairy grain
& concentrate
Purchased dairy roughage
Total Purchased
Dairy Feed
Purchased grain & conc.
as % of milk receipts
Purchased feed & crop expo
Purchased feed & crop expo
as % of milk receipts
Breeding
Veterinary & medicine
Milk marketing
Bedding
Milking supplies
Cattle lease
Custom boarding
bST
Other livestock expense
Per Cwt.
Per Cow
Per Cwt.
$
896
16
$
4.54
0.08
$
912
$
4.63
$- - - - ­
$
1,056
33%
$
5.36
$
%
$
$
37
57
125
13
73
3
5
37
33
0.19
0.29
0.63
0.07
0.37
0.02
0.02
0.19
0.17
$
%
$
39%
$
$---­
$
---­
-
20
Capital and Labor Efficiency Analysis
Capital efficiency factors measure how effectively the capital is being used in the falm business. Measures of
labor efficiency are key indicators of management's success in generating products per unit of labor input.
CAPITAL EFFICIENCY
28 Central Valleys Region Dairy Farms, 1997
Item
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
Per
Worker
215,217
$
Per
Cow
6,538
2,804
1,409
$
46,376
$
Per Tillable
Acre
2,272
$
Per Tillable
Acre Owned
4,500
1,930
490
0.46
My Farm
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
$
$
---­
$
$
----­
----­
- - ­
---­
LABOR FORCE INVENTORY AND ANALYSIS
28 Central Valleys Region Dairy Farms, 1997
Months
12.5
4.0
1.4
2.6
1.8
16.3
38.6
Labor Force
Operator number 1
Operator number 2
Operator number 3
Family paid
Family unpaid
Hired
Total
My Farm: Total
Operator's
/12
=
/12
/12
=
Value of
Labor & Mgmt.
$ 22,393
7,714
2,964
3.22 Worker Equivalent
1.50 Operator/Manager Equivalent
Worker Equivalent
Operator/Manager Equivalent
=
Average
Labor
Efficiency
Cows, average number
Milk sold, pounds
Tillable acres
Work units
Labor Costs
Value of operator(s)
labor ($1 ,550/mo.)
Family unpaid
($1,550/mo.)
Hired
Total Labor
Machinery Cost
Total Labor & Mach.
Years
of Educ.
14
13
15
Age
48
44
39
Per Worker
33
649,006
95
338
Total
106
2,089,799
305
1,087
Average
Per
Cow
Total
$
27,745
2,790
30,582
$ 61,117
$ 51.210
$ 112,327
$
262
$
$
$
26
289
577
483
1,060
Total
----­
Per
Cwt.
$
1.33
$
$
$
0.13
1.46
2.92
2.45
5.37
My Falm
Pcr Worker
My Farm
Per
Cow
Total
$
Per
Cwt.
$
$
$
$
$
$
$
$
--­
$
$
$
---­
--­
-
21
COMPARATIVE ANALYSIS OF THE FARM BUSINESS
Pro\:ress of the Farm Busines~
Comparing your business with average data from regional DFBS cooperatC'rs that participated in both of the last
two years can be helpful to establishing your goals for these parameters. It is equally important for you to determine the
progress your business has made over the past two or three years, to compare this progress to your goals, and to set goals
for the future.
PROGRESS OF THE FARM BUSINESS
Same 24 Central Valleys Region Dairy Farms, 1996 & 1997
Average of 24 Farms*
1996
1997
Selected Factors
Size of Business
Average number of cows
Average number of heifers
Milk sold, lbs.
Worker equivalent
Total tillable acres
Rates of Production
Milk sold per cow, lbs.
Hay DM per acre, tons
Corn silage per acre, tons
Labor Efficiency
Cows per worker
Milk sold/worker, 1bs.
Cost Control
Grain & conc. purchased
as % of milk sales
Dairy feed & crop expo
per cwt. milk
Labor & mach. costs/co\v
Operating cost of producing
cwt. of milk
Capital Efficiency* *
Farm capital per cow
Mach. & equip. per cow
Asset turnover ratio
Profitability
Net farm income w/o apprec.
Net farm income w/apprec.
Labor & mgt. income
per operator/manager
Rate of return on equity
capital w/appreciation
Rate of return on all
capital w/appreciation
Financial Summary
Farm net worth, end year
Debt to asset ratio
Farm debt per cow
*Farms participating both years.
**Average for the year.
97
76
1.825,201
2.93
274
100
73
1,948,719
3.01
289
18,808
2.8
14.8
19,455
2.5
14.0
33
622,935
33
647,415
31%
My Farm
1997
1996
32%
Goal
%
%
--­
$
$
5.70
1,088
$
$
5.25
1,036
$
$
$
$
$
$
$
11.23
$
11.25
$
$
$
$
$
6,574
1,442
0.51
$
$
6,611
1,412
0.44
$
$
$
$
$
$
$
$
43,780
55,449
$
$
22,491
24,244
$
$
$
$
$
$
$
13,511
$
-508
$
$
$
4.8'%
-2.4%
5.9%
1.1%
$ 413,054
0.37
$
2.446
$
$
408,847
0.38
2,468
%
_._--­
----­
%
%
--_%
%
%
--_%
$
$
$
$
$
$
-
22
Regional Farm Business Chart
The Farm Business Chart is a tool which can be used in analyzing your business. Compare your business by
drawing a line through or near the figure in each column which represents your current level of performance. The five
figures in each column represent the average of each 20 percent or quintile of farms included in the regional summary. Use
this information to identify business areas where more challenging goals are needed.
FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS
28 Central Valleys Region Dairy Farms, 1997
Worker
Equiv­
alent
Size of Business
Pounds
No.
Milk
of
Cows
Sold
(11 )*
(11)
(11 )
6.57
3.36
2.85
2.31
1.57
256
116
75
66
46
5,484,993
2,286,877
1,475,358
1,161,780
638,700
Pounds
Milk Sold
Per Cow
Rate of Production
Tons
Tons Corn
Hay Crop
Silage
DM/Acre
Per Acre
(10)
22,577
20,856
18,801
17,051
13,496
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(9)
(9)
(11)
(11)
3.6
3.0
2.4
2.1
1.6
19
16
14
12
9
47
38
33
27
20
941,698
752,526
606,269
464,729
305,861
Cost Control
Labor &
Machinery
Costs per Cow
Grain
Bought
Per Cow
% Grain is
of Milk
Receipts
Machinery
Costs
Per Cow
(10)
(10)
(11)
(11 )
(10)
(10)
18
26
31
37
46
$233
392
491
614
877
$ 783
1,006
1,106
1,236
1,655
$ 513
781
964
1,153
1,342
$3,55
4.41
4.84
5.65
7.14
$ 374
621
801
1,008
1,203
Value and Cost of Production
Total Cost
Milk
OpeL Cost
Receipts
Milk
Production
Per Cow
Per Cwt.
Per Cwt.
(10)
$3,082
2,855
2,593
2,305
1,812
(10)
$ 8.25
10.42
11.69
12.12
14.44
( 10)
$13.22
14.64
15.95
17.72
21.32
Feed & Crop
Expenses
Per Cow
Feed & Crop
Expenses Per
Cwt. Milk
Net Farm
Income
w/Apprec.
Profitability
Net Farm
Inc. w/o
Apprec.
Labor &
Mgt. Inc.
Per OpeL
Change in
Net Worth
w/Apprec.
(3)
(3)
(3)
(6)
$81,391
34,804
22,658
5,825
-32,343
$24,842
10,398
1,683
-9,323
-51,109
$54,897
12,581
1,297
-6,823
-46,298
$107,817
42,967
20,872
1,042
-30,136
*Page number of the participant's DFBS where the factor is located.
-
23
New York State Farm Business Charts
The Farm Business Chart is a tool which can be used in analyzing a business by drawing a line through the figure
in each column which represents the current level of management performance. The figure at the top of each column is the
average of the top 10 percent of the 300 farms for that factor. The other figures in each column are the average for the sec­
ond 10 percent, third 10 percent, etc. Each column of the chart is independent of the others. The farms which are in the
top 10 percent for one factor would not necessarily be the same farms which make up the top 10 percent for any other fac­
tor.
The cost control factors are ranked from low to high, but the lowest cost is not necessarily the most profitable. In
some cases, the "best" management position is somewhere near the middle or average. Many things affect the level of
costs, and must be taken into account when analyzing the factors.
FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS
300 New York Dairy Farms, 1996
Worker
Equivalent
(11)*
Size of Business
No.
Pounds
Milk
of
Cows
Sold
(11)
(11)
14.1
6.8
5.3
4.2
3.5
651
266
186
138
112
14,248.916
5,607,051
3,650,914
2,594,240
2,027,310
Pounds
Milk Sold
Per Cow
(10)
24,025
22,037
21,015
20,222
19,078
Rates of Production
Tons
Tons Com
Hay Crop
Silage
DM/Acre
Per Acre
(9)
(9)
4.9
3.8
3.4
3.1
2.8
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Per Worker
Worker
(11 )
(11)
21
19
18
17
16
57
45
40
37
34
1,138,608
912,193
793,393
679,606
620,615
-----------------------------------------------------------------------------------------------------------------------------------------------------
3.0
2.6
2.2
1.8
1.4
Grain
Bought
Per Cow
(10)
89
73
62
50
40
1,632,345
1,311,881
1,075,438
808,021
548,071
% Grain is
of Milk
Receipts
(10)
$434
608
685
746
804
17%
24
26
28
30
872
939
1,005
1,083
1,211
32
33
36
38
43
18,150
17,149
16,328
14,947
11,967
2.5
2.3
2.1
1.8
1.4
15
14
13
11
8
Cost Control
Machinery
Labor &
Costs
Machinery
Per Cow
Costs Per Cow
(11)
(11 )
31
28
26
23
19
558,524
505,026
463,816
388,967
274,100
Feed & Crop
Expenses
Per Cow
(10)
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$229
322
374
411
447
$683
827
904
971
1,036
$601
787
853
915
991
$3.68
4.50
4.83
5.14
5.38
479
520
571
642
801
1,088
1,154
1,251
1,354
1,610
1,062
1,123
1,184
1,280
1,475
5.66
5.96
6.29
6.83
7.80
*Page number of the participant's DFBS where the factor is located.
-
24
FARM BUSINESS CHART FOR
FARM MANAGEMENT COOPERATORS
300 New York Dairy Farms, 1996
Milk
Receipts
Per Cow
( 10)
Milk
Receipts
Per Cwt.
( 10)
Oper. Cost
Milk
Per Cow
(10)
Oper. Cost
Milk
Per Cwt.
(10)
Total Cost
Production
Per Cow
(10)
Total Cost
Production
Per Cwt.
(10)
$3,619
3,313
3,158
3,008
2,868
$16.22
15.60
15.30
15.09
14.93
$1,247
1,619
1,825
1,985
2,118
$8.22
9.87
10.57
11.15
11.53
$2,152
2,478
2,666
2,829
2,972
$13.09
14.18
14.66
15.28
15.76
2,709
2,564
2,431
2,226
1,796
14.80
14.70
14.60
14.48
14.08
2,259
2,415
2,556
2,738
3,048
11.96
12.42
12.96
13.91
15.79
3,084
3,209
3,365
3,550
3,922
16.43
17.08
17.74
19.20
23.08
Net Farm Income
Without Appreciation
Per
As % of Total
Total
Cow
Accrual Receipts
(3)
(10)
(3)
$321,819
115,924
79,222
56,906
41,652
$1,028
711
579
504
430
31,778
23,448
12,232
1,044
-35,684
354
259
146
14
-377
30.4%
22.1
18.2
15.7
13.4
11.3
8.5
5.2
0.5
-15.6
Profitability
Net Farm Income
With Appreciation
Per
Total
Cow
(3)
(10)
Labor &
Management Income
Per
Per
Farm
Operator
(3)
(3)
$347,786
134,601
94,669
65,624
52,280
$1,157
843
688
580
512
$224,564
76,776
43,729
25,394
16,055
$162,869
52,013
32,464
21,026
12,477
41,047
29,141
18,606
6,389
-26,815
426
330
231
78
-277
8,594
-50
-12,439
-25,888
-65,783
6,199
-55
-10,090
-21,207
-52,531
Farm Business Charts for farms with freestall barns and 150 cows or less, 151-300 cows, and more than 300 cows;
and farms with conventional barns with 60 cows or less and more than 60 cows are shown on pages 28-32.
Financial Analysis Chart
The farm financial analysis chart on page 25 is designed just like the Farm Business Chart and may be used to
assess the financial health of the farm business. Most of the financial measures used in the chart are defined on pages 6,
10, 14 and 20 of this publication. References to DFBS output page numbers for participating dairy farmers are provided in
the table headings.
­
25
FINANCIAL ANALYSIS CHART
300 New York Dairy Fanns, 1996
Planned Debt
Payments
Per Cow
(8)*
Available for
Debt Service
Per Cow
( 12)
Liquidity (repayment)
Cash Flow
Coverage
Ratio
(8)
$55
195
306
363
403
$873
672
575
512
463
3.10
1.87
1.47
1.21
1.05
10
12
14
$179
795
1,411
1,808
2,134
445
490
544
630
863
406
346
254
158
-239
0.90
0.77
0.62
0.27
-0.63
16
17
20
24
40
2,509
2,809
3,140
3,541
4,640
2%
7
Solvency
Leverage
Ratio**
-0.62
0.12
0.25
0.37
0.51
0.64
0.79
0.98
1.31
3.50
Asset
Turnover
(ratio)
(11 )
.82
.66
.59
.54
.50
DebtJAsset Ratio
Long
Current &
Intennediate
Tenn
(5)
(5)
Percent
Equity
(5)
97%
89
80
73
66
0.03
0.11
0.17
0.24
0.31
0.00
0.00
0.07
0.20
0.28
61
56
50
43
27
0.38
0.43
0.51
0.60
0.86
0.38
0.46
0.57
0.70
1.07
Efficiency (Capital)
Real Estate
Machinery
Investment
Investment
Per Cow
Per Cow
(11 )
(11)
$1,235
1,886
2,168
2,423
2,685
$524
753
895
1,022
1,144
Debt Payments
as Percent
of Milk Sales
(8)
Debt Per
Cow
(5)
Profitability
Percent Rate of Return with
appreciation on:
Equity
Investment***
(3)
(3)
21%
12
9
6
4
2
-1
-4
-9
-46
Total Fann
Assets
Per Cow
(11 )
$4,083
5,051
5,528
5,954
6,387
6,773
.47
3,016
1,323
7,285
.44
3,479
1,472
7,873
.39
3,897
1,649
8,752
.34
4,502
1,896
11,530
.25
6,861
2,618
*Page number of the participant's DFBS where the factor is located.
**Dollars of debt per dollar of equity, computed by dividing total liabilities by total equity.
***Return on all fann capital (no deduction for interest paid) divided by total fann assets.
13%
9
7
5
4
2
1
-1
-3
-10
Change in
Net Worth
wi Appreciation
(6)
$243,775
87,972
58,367
37,579
25,888
17,129
9,226
1,735
-8,219
-65,498
-
26
Comparison by Type of Barn and Herd Size
When analyzing a dairy fann business by comparing it to a group of fanns, it is important that the group of fanns
have used as many of the same physical characteristics as possible as the fann being analyzed. To assist in this endeavor,
dairy fanns in the summary have been divided into those with freestall and those with conventional housing. Conventional
housing includes stanchion and tiestall barns. Within each group, is a further classification by size of the dairy herd.
The table on page 27 includes the average values for the resulting five groups of dairy fanns. The average size of
farms in the five groups ranges from 47 cows on the small conventional fanns to 604 cows on the largest freestall fanns.
The largest freestall fanns averaged the highest milk output per cow and per worker, the lowest total cost of pro­
duction and investment per cow, and the greatest returns to labor, management and capital. The large conventional fanns
showed average profits somewhat higher than the small freestall farm businesses.
Farm business charts have been computed for each of the five housing and herd size categories and are on pages
28-32. By comparing the fann's performance on the most appropriate business chart, a fann manager will be better able to
evaluate his or her business performance.
Herd Size Comparisons
A detailed comparison of profitability, financial situation and business analysis factors across herd sizes is con­
tained on pages 41-50 of the 1996 State Summary*. As herd size increases, the average profitability generally increases
(page 41)*. Net fann income without appreciation averaged $10,342 per fann for the less than 40 cow farms and $259,047
per fann for those with 300 cows and over. This relationship generally holds for all measures of profitability including rate
of return on capital.
Fann net worth increases rapidly as herd size increases (pages 45-48)*, even though percent equity was higher on
the smaller farms. The group with more than 300 cows demonstrated the strongest ability to make debt payments.
Crop yields showed little relationship to herd size, but fertilizer and lime expenses, and machinery cost per tillable
acre generally increased as herd size increased (pages 49-50)*. The fanns with 300 and more cows per farm averaged 53
percent more milk sold per cow than the smallest fanns. All of the groups with 85 or more cows averaged above 18,000
pounds of milk sold per cow while the fanns smaller than 85 cows averaged 16,500 pounds of milk sold per cow. Fann
capital per worker increased, and fann capital per cow decreased as herd size increased. Milk sold per worker increased
dramatically as herd size increased, ranging from 313,758 pounds at the lowest herd size category up to 1,000,157 pounds
at the largest size category.
-
*Wayne A. Knoblauch, and Linda D. Putnam, Dairy Fann Management Business Summary, New York, 1996, Department
of Agricultural, Resource, and Managerial Economics, Cornell University, R.B. 97-14, September 1997.
27
Item
SELECTED BUSINESS FACTORS BY TYPE OF BARN AND HERD SIZE
270 New York Dairy Fanns, 1996
Conventional
Freestall
Fanns with:
<= 60 Cows
>60 Cows
<=150 Cows
151-300 Cows
>300 Cows
69
55
63
48
35
Cropping Program Analysis
Total Tillable acres
Tillable acres rented*
Hay crop acres*
Corn silage acres*
Hay crop, tons DM/acre
Corn silage, tons/acre
Oats, bushels/acre
Forage DM per cow, tons
Tillable acres/cow
Fert. & lime exp.ltillable acre
Total machinery costs
Machinery cost/tillable acre
155
56
102
24
2.1
13.6
48
7.1
3.3
$16.46
$22,250
$144
282
112
160
57
2.6
14.4
55
8.1
3.3
$24.64
$41,761
$148
315
121
167
73
2.5
14.3
33
7.3
3.0
$23.00
$53,443
$170
567
285
254
166
2.7
15.5
42
6.9
2.6
$26.67
$101,702
$179
1,174
546
452
465
3.2
17.1
48
6.8
1.9
$29.89
$247,248
$211
Dairy Analysis
Number of cows
Number of heifers
Milk sold, Ibs.
Milk sold/cow, Ibs.
Operating cost of prod. milklcwt.
Total cost of prod. milklcwt.
Price/cwt. milk sold
Purchased dairy feed/cow
Purchased dairy feed/cwt. milk
Purchased grain & cone. as % milk rec.
Purchased feed & crop exp.lcwt. milk
47
35
758,356
16,061
$11.52
$18.39
$14.85
$792
$4.91
31%
$5.62
86
69
1,510,688
17,562
$11.10
$15.94
$15.00
$791
$4.50
29%
$5.40
105
78
1,967,450
18,789
$12.21
$16.73
$15.04
$881
$4.70
30%
$5.57
$189,979
$7,599
$3,608
$3,974
$1,486
0.38
$203,875
$7,136
$3,631
$3,269
$1,486
0.43
Labor Efficiency
Worker equivalent
Operator/manager equivalent
Milk sold/worker, Ibs.
Cows/worker
Labor cost/cow
Labor cost/tillable acre
1.88
1.24
403,381
25
$706
$214
Profitability & Balance Sheet Analysis
Net farm income (without appreciation)
Labor & management income/operator
Rate Return on all capital with appreciation
Farm debt/cow
Percent equity
$14,070
$-3,360
-0.1%
$2,175
71%
Number offanns
Capital Efficiency
FanTI capital/worker
Farm capital/cow
Farm capital/tillable acre owned
Real estate/cow
Machinery investment/cow
Asset turnover ratio
*Average of all farms, not only those reporting data.
222
164
4,491,591
20,213
$12.28
$15.28
$15.07
$1,044
$5.16
32%
$5.94
604
444
13,142,057
21,774
$12.05
$14.21
$14.91
$994
$4.57
30%
$5.21
$233,684
$7,166
$3,879
$3,279
$1,427
0.45
$237,054
$5,958
$4,691
$2,476
$1,030
0.59
$263,840
$5,591
$5,378
$2,316
$879
0.64
3.01
1.42
501,890
29
$587
$179
3.22
1.56
611,009
33
$572
$191
5.58
1.90
804,945
40
$532
$208
12.80
2.04
1,026,723
47
$594
$306
$41,852
$9,116
4.1%
$1,817
74%
$30,343
$972
3.1%
$2,424
66%
$78,707
$20,575
6.6%
$2,587
56%
$259,047
$80,897
9.6%
$2,553
55%
-
28
FARM BUSINESS CHART FOR SMALL CONVENTIONAL STALL DAIRY FARMS
69 Conventional Stall Dairy Farms with 60 or Less Cows, New York, 1996
Size of Business
Worker
No.
Pounds
Equivof
Milk
alent
Cows
Sold
(11 )
(11 )*
(11 )
2.97
2.51
2.13
2.00
1.96
60
57
54
51
48
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold
Silage
Hay Crop
Per Cow
DM/Acre
Per Acre
(10)
(9)
(9)
1,203,435
1,013,799
938,605
828,545
766,044
21,572
19,519
18,174
17,275
16,753
3.7
3.1
2.7
2.4
2.2
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11 )
(11 )
21
18
17
16
15
50
36
30
28
26
799,962
579,006
500,345
480,813
437,443
-----------------------------------------------------------------------------------------------------------------------------------------------------
1.77
1.58
1.50
1.42
1.07
Grain
Bought
Per Cow
(10)
46
44
42
39
33
715,358
660,636
604,158
550,236
366,328
% Grain is
of Milk
Receipts
(10)
$340
525
619
664
708
18%
23
26
29
30
741
783
849
945
1,172
32
34
36
39
47
16,026
15,128
13,790
12,459
9,254
Machinery
Costs
Per Cow
(11)
2.1
1.9
1.6
1.5
1.0
Cost Control
Labor &
Machinery
Costs Per Cow
(11 )
14
12
11
9
6
24
22
21
20
17
Feed & Crop
Expenses
Per Cow
(10)
384,217
352,174
320,834
271,110
205,488
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$153
298
353
392
432
$680
902
1,017
1,084
1,137
$431
666
791
830
859
$3.48
4.38
4.95
5.28
5.45
464
498
574
679
903
1,197
1,264
1,342
1,467
1,819
909
978
1,055
1,143
1,308
5.86
6.18
6.42
6.96
7.82
Value and Cost of Production
Total Cost
Milk
Oper. Cost
Milk
Production
Receipts
Per Cwt.
Per Cwt.
Per Cow
(10)
(10)
(10)
Profitability
Net Farm Income
Without Appreciation
Total
Per Cow
(3)
(10)
Labor &
Mgmt. Inc.
Per Oper.
(3)
Change in
Net Worth
w/Apprec.
(6)
$3,227
2,915
2,731
2,573
2,481
$8.08
8.91
9.79
10.61
11.33
$14.39
15.53
16.46
17.03
17.65
$47,874
37,039
28,499
23,329
18,072
$1,027
750
593
524
406
$26,356
17,242
10,327
4,918
2,053
$88,439
30,717
19,252
15,786
10,484
2,380
2,220
2,066
1,830
1,370
11.66
12.40
12.97
14.00
16.62
18.44
19.46
20.82
22.97
27.50
12,298
7,513
3,382
-2,821
-29,650
248
160
75
-75
-562
-2,090
-6,685
-14,211
-22,342
-49,645
6,180
1,006
-3,150
-8,142
-22,857
*Page number of the participant's DFBS where the factor is located.
I
!
-
29
FARM BUSINESS CHART FOR LARGE CONVENTIONAL STALL DAIRY FARMS
55 Conventional Stall Dairy Farms with More Than 60 Cows, New York, 1996
Worker
Equivalent
(11)*
5.29
4.11
3.39
3.15
3.00
Size of Business
No.
Pounds
of
Milk
Sold
Cows
(11 )
(11 )
142
Pounds
Milk Sold
Per Cow
(10)
2,417,978
2,016,357
1,863,454
1,617,046
1,526,996
III
101
92
82
Rates of Production
Tons
Tons Com
Hay Crop
Silage
DM/Acre
Per Acre
(9)
(9)
22,410
20,557
19,202
18,293
18,043
5.3
3.7
3.5
3.2
2.8
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11 )
( 11)
21
18
17
16
15
48
39
36
33
31
816,762
666,640
614,542
579,071
544,006
------------------------------------------------------------------------------------------------------------------------------------------------------
2.87
2.59
2.50
2.14
1.74
Grain
Bought
Per Cow
(10)
1,389,911
] ,309,439
1,219,710
1,153,288
907,431
76
74
70
66
64
% Grain is
of Milk
Receipts
(10)
$416
554
634
669
726
15%
22
24
27
30
799
880
951
1,066
1,145
32
33
34
38
44
17,627
2.5
17,007
2.4
2.1
16,479
1.9
15,248
1.4
13,017
Cost Control
Machinery
Labor &
Machinery
Costs
Per Cow
Costs Per Cow
(11)
(11 )
$7.25
8.67
9.90
10.53
11.17
30
27
25
22
18
Feed & Crop
Expenses
Per Cow
(10)
524,015
489,153
443,699
395,763
286,535
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$280
342
399
440
470
$771
849
890
966
1,039
$612
704
787
848
883
$3.51
4.19
4.60
4.93
5.19
507
539
568
645
781
1, III
1,221
1,312
1,385
1,607
945
1,070
1,146
1,234
1,317
5.62
5.89
6.11
6.80
7.64
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Milk
Production
Receipts
Per Cwt.
Per Cwt.
Per Cow
(10)
(10)
(10)
$3,347
3,081
2,865
2,755
2,677
15
14
12
11
5
$12.60
13.68
14.61
15.27
15.73
Profitability
Net Farm Income
Without Appreciation
Total
Per Cow
(3)
(10)
$126,115
76,332
58,470
50,403
44,176
$1,196
905
798
626
540
Labor &
Mgmt. Inc.
Per Oper.
(3)
$64,873
38,043
29,481
19,651
16,879
Change in
Net Worth
w/Apprec.
(6)
$90,224
64,355
39,264
31,945
26,831
------------------------------------------------------------------------------------------------------------------------------------------------------
2,626
2,521
2,410
2,309
1,985
11.44
11.83
12.42
13.50
15.64
16.40
16.89
17.28
18.29
22.38
39,967
31,455
25,322
17,743
-24,090
*Page number of the participant's DFBS where the factor is located.
452
370
327
173
-317
12,437
6,386
-1,715
-20,528
-45,435
22,572
11,896
6,776
225
-28,152
-
30
FARM BUSINESS CHART FOR SMALL FREESTALL DAIRY FARMS
63 Freestall Bam Dairy Farms with 150 or Less Cows, New York, 1996
Worker
Equivalent
(11 )*
Size of Business
No.
Pounds
of
Milk
Cows
Sold
(11)
(11 )
Pounds
Milk Sold
Per Cow
(10)
Rates of Production
Tons Com
Tons
Hay Crop
Silage
DM/Acre
Per Acre
(9)
(9)
Labor Efficiency
Cows
Pounds
Milk Sold
Per
Worker
Per Worker
(11)
(11)
3,165,908
24,516
4.3
19
59
1,036,200
145
5.12
22,148
3.6
18
43
836,779
4.44
140
2,809,190
131
2,462,621
20,888
3.2
3.94
17
38
727,081
2,231,843
20,001
3.0
16
3.63
122
35
656,951
19,221
2.8
15
34
114
2,097,629
630,173
3.35
-----------------------------------------------------------------------------------------------------.------------------------------------------------­
15
1,896,454
18,516
2.7
33
598,483
3.16
106
17,205
2.5
31
1,722,674
14
545,410
2.91
96
16,352
2.50
1,522,757
2.2
13
28
498,264
81
12
466,291
1,250,795
15,632
1.8
25
2.19
72
888,080
13 516
1.3
10
22
1.55
57
390,808
Grain
Bought
Per Cow
(10)
% Grain is
of Milk
Receipts
(10)
Machinery
Costs
Per Cow
(11 )
Cost Control
Labor &
Machinery
Costs Per Cow
(11 )
Feed & Crop
Expenses
Per Cow
(10)
Feed & Crop
Expenses Per
Cwt. Milk
(10)
/
$260
$681
$710
$490
18%
$3.85
845
24
380
891
4.68
629
425
951
915
5.16
734
26
462
1,011
29
972
5.32
788
493
30
999
1,055
836
5.42
.----------.------------------------------------------------------------------------------------_.---------------.-------.--------------_.------------­
1,100
1,072
882
32
548
5.71
577
1,156
1,130
943
35
6.19
615
1,233
1,189
37
6.48
989
1,318
1,084
38
646
1,282
6.93
790
1,582
1,446
7.59
1 208
41
Value and Cost of Production
Total Cost
Milk
Oper. Cost
Milk
Production
Receipts
Per Cwt.
Per Cwt.
Per Cow
(10)
(10)
(10)
Profitability
Net Farm Income
Without Appreciation
Total
Per Cow
(3)
(10)
Labor &
Mgmt. Inc.
Per Oper.
(3)
Change in
Net Worth
w/Apprec.
(6)
$3,740
3,316
3,090
2,984
2,880
$9.76
10.35
10.85
11.52
12.04
$14.32
15.01
15.57
16.11
16.64
$97,857
69,667
51,429
39,709
35,698
$872
619
511
446
364
$45,473
25,567
18,664
11,608
7,908
$85,446
60,647
40,918
27,830
20,346
2,766
2,588
2,488
2,317
2,049
12.39
12.83
13.70
14.80
16.12
17.21
17.64
18.46
19.46
21.51
28,862
21,470
10,039
-3,808
-28,596
274
193
96
-35
-380
1,195
-5,943
-13,657
-24,434
-47,468
15,396
8,719
910
-9,794
-43,680
*Page number of the participant's DFBS where the factor is located.
-
31
FARM BUSINESS CHART FOR MEDIUM FREESTALL DAIRY FARMS
48 Freestall Barn Dairy Farms with 151-300 Cows, New York, 1996
Worker
Equiv­
alent
(11 )*
Size of Business
No.
Pounds
Milk
of
Cows
Sold
(11)
(11 )
Pounds
Milk Sold
Per Cow
(10)
Rates of Production
Tons
Tons Corn
Silage
Hay Crop
DM/Acre
Per Acre
(9)
(9)
Labor Efficiency
Cows
Pounds
Milk Sold
Per
Worker
Per Worker
(11 )
(11)
7.88
7.12
6.56
6.19
6.01
283
270
259
248
237
6,803,006
5,867,677
5,404,483
5,030,295
4,690,388
25,468
23,534
22,532
21,375
20,783
4.3
3.9
3.8
3.5
3.3
23
20
19
18
17
68
54
49
45
41
1,299,135
1,086,749
990,062
897,337
828,328
5.42
5.20
4.75
4.16
3.27
219
201
187
176
163
4,194,819
3,941,415
3,582,997
3,383,605
2,754,728
20,184
19,165
18,366
16,961
14,384
3.0
2.5
2.3
2.0
1.2
15
15
14
13
9
39
36
35
31
27
796,346
770,387
693,874
613,575
486,569
Grain
Bought
Per Cow
(10)
% Grain is
of Milk
Receipts
(10)
Cost Control
Machinery
Labor &
Machinery
Costs
Per Cow
Costs Per Cow
(11)
(11 )
$637
747
832
898
971
2\%
26
27
30
32
1,008
1,044
1,092
1,199
1,291
33
36
37
41
45
$9.74
10.64
11.12
11.52
11.89
$12.80
13.88
14.28
14.50
15.02
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$258
302
351
408
443
$657
745
798
846
944
$822
964
1,036
1,085
1,147
$4.17
4.71
5.02
5.40
5.75
494
526
570
643
728
1,013
\,083
1,179
1,364
1,527
1,194
1,269
1,389
1,443
1,719
6.18
6.50
7.03
7.59
8.68
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Production
Receipts
Milk
Per Cow
Per Cwt.
Per Cwt.
(10)
(10)
(10)
$3,824
3,636
3,413
3,259
3,124
Feed & Crop
Expenses
Per Cow
(10)
Profitability
Net Farm Income
Without Apprec.
Total
Per Cow
(3)
(10)
$233,259
154,020
124,422
109,516
95,367
$991
649
566
487
450
Labor &
Mgmt. Inc.
Per Oper.
(3)
Change in
Net Worth
w/Apprec.
(6)
$110,437
82,859
73,344
50,964
38,058
$184,695
137,445
104,559
80,265
64,476
-------------------------------------------------------------------------------------------------------------------------------------------------------
2,991
2,902
2,733
2,518
2,200
12.42
12.85
13.91
14.49
16.03
15.53
16.18
16.97
17.48
18.97
82,390
63,806
45,286
-857
-74,163
*Page number of the participant's DFBS where the factor is located.
379
315
216
-5
-317
30,202
12,729
-153
-25,875
-79,530
50,655
28,330
9,867
-18,458
-91,546
-
32
FARM BUSINESS CHART FOR LARGE FREESTALL DAIRY FARMS
35 Freestall Barn Dairy Farms with 300 or More Cows, New York, 1996
Worker
Equivalent
(11 )*
32.14
17.15
15.36
14.27
12.86
Size of Business
No.
Pounds
of
Milk
Cows
Sold
(11)
(11 )
Pounds
Milk Sold
Per Cow
(10)
37,033,757
21,804,174
15,227,082
13,003,869
12,027,844
1,697
955
703
597
525
24,803
24,077
23,149
22,525
22,250
Rates of Production
Tons
Tons Corn
Hay Crop
Silage
DM/Acre
Per Acre
(9)
(9)
5.7
4.7
3.8
3.6
3.3
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11)
(11)
20
20
20
18
18
61
53
50
47
46
1,378,113
1,137,106
1,084,070
1,029,827
996,098
----------------------------------------------------------------_ ... ---------------------_ .. -----------------------------------------------------------­
10.92
10.17
9.30
8.62
7.16
493
406
366
346
313
21,744
21,091
20,653
19,853
18,614
10,351,685
8,809,368
7,925,753
7,172,671
6,410,978
Grain
Bought
Per Cow
( 10)
% Grain is
of Milk
Receipts
( 10)
Machinery
Costs
Per Cow
(11 )
$711
800
877
979
1,005
23%
25
28
29
31
$243
310
373
398
411
1,023
1,068
1,131
1,167
1,232
32
34
35
36
39
446
474
485
541
662
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Production
Milk
Receipts
Per Cwt.
Per Cwt.
Per Cow
(10)
(10)
(10)
$3,715
3,567
3,394
3,351
3,314
$10.54
11.34
11.59
11.90
12.13
$12.90
13.31
13.70
13.92
14.32
3.1
2.6
2.5
2.3
2.2
Cost Control
Labor &
Machinery
Costs Per Cow
(11)
18
16
15
14
12
45
41
39
39
33
943,313
922,957
883,987
773,624
684,809
Feed & Crop
Expenses
Per Cow
(10)
Feed& Crop
Expenses Per
Cwt. Milk
(10)
$723
884
922
953
1,003
$901
1,006
1,072
1,107
1,140
$4.39
4.64
4.89
5.08
5.42
1,036
1,061
1,110
1,208
1,408
1,189
1,266
1,293
1,336
1,396
5.64
5.76
5.87
5.93
6.45
Profitability
Net Farm Income
Without Appreciation
Total
Per Cow
(3)
(10)
845,578
470,286
343,687
318,634
253,916
$730
655
572
535
512
Labor &
Mgmt. Inc.
Per Oper.
(3)
$591,699
227,950
168,299
115,496
83,964
Change in
Net Worth
w/Apprec.
(6)
$527,102
349,326
286,678
256,533
201,351
------------------------------------------------------------------------------------------------------------------------------------------------------
3,257
3,200
3,101
2,989
2,712
12.31
12.47
12.75
13.15
13.98
14.83
15.27
15.52
15.75
16.26
212,235
168,430
121,635
72,892
17,407
*Page number of the participant's DFBS where the factor is located.
422
368
318
189
42
66,114
51,618
33,784
12,134
-29,249
139,175
97,918
63,594
37,437
-147,916
-
33
IDENTIFY AND SET GOALS
If businesses are to be successful, they must have direction. Written goals help provide businesses with an identi­
fiable direction over both the long and short term. Goal setting is as important on a dairy farm as it is in other businesses.
Written goals are a tool which farm operators can use to ensure that the business continues to move in the desired direction.
Goals should be SMART:
I.
Goals should be Specific.
2.
Goals should be Measurable.
3.
Goals should be Achievable but challenging.
4.
Goals should be Rewarding.
5.
Goals should be Timed with a designated date by which the goal will be achieved.
Goal setting on a dairy farm should be a process for writing down and agreeing on goals that you have already
given some thought to. It is also important to remember that once you write out your goals they are not cast in concrete. If
a change takes place which has a major impact on the farm business, the goals should be reworked to accommodate that
change. Refer to your goals as often as necessary to keep the farm business progressing.
It is important to identify both objectives (long-range) and goals (short-range) when looking at the future of your
farm business.
A suggested format for writing out your goals is as follows:
a.
Begin with a mission statement which describes why the business exists based on the preferences and
values of the owners.
b.
Identify 4-6 objectives.
c.
Identify SMART goals.
Worksheet for Setting Goals
1.
Mission and Objectives
-
34
Worksheet for Setting Goals (Continued)
II. Goals
What
How
When
Who is Responsible
Summarize Your Business Perfonnance
The Farm Business and Financial Analysis Charts on pages 22-25 can be used to help identify strengths and
weaknesses of your fann business. Identify three major strengths and three areas of your fann business that need im­
provement.
Strengths:
_
Needs improvement
_
-
35
GLOSSARY AND LOCAnON OF COMMON TERMS
Accounts Payable - Open accounts or bills owed to feed and supply firms, cattle dealers, veterinarians and other pro­
viders of farm services and supplies.
Accounts Receivable - Outstanding receipts from items sold or sales proceeds not yet received, such as the payment
for December milk sales received in January.
Accrual Expenses - (defined on page 3)
Accrual Receipts - (defined on page 4)
Annual Cash Flow Statement - (defined on page 12)
Appreciation - (defined on page 5)
Asset Turnover Ratio - The ratio of total farm income to total farm assets, calculated by dividing total accrual oper­
ating receipts plus appreciation by average total faml assets.
Balance Sheet - A "snapshot" of the business financial position at a given point in time, usually December 31. The
balance sheet equates the value of assets to liabilities plus net worth.
bST Usa~e - An estimate of the percentage of herd, on average, that was supplemented with bovine somatotropin
during the year.
Capital Efficiency - The amount of capital invested per production unit. Relatively high investments per worker with
low to moderate investments per cow imply efficient use of capital.
Cash From Nonfarm Capital Used in the Business - Transfers of money from nonfarm savings or investments to
the farm business where it is used to pay operating expenses, make debt payments and/or capital purchases.
Cash Flow
Covera~c Ratio
- (defined on page 14)
Cash Paid - (defined on page 2)
Cash Receipts - (defined on page 4)
Chan~e
in Accounts Payable - (defined on page 3)
Chan~e
in Accounts Receivable - (defined on page 4)
Chan~e
in Inventory - (defined on page 2)
Current Portion - (defined on page 7)
Dairy (farm) - A farm business where dairy farming is the primary enterprise, operating and managing this faml is a
full-time occupation for one or more people and cropland is owned.
Dairy Cash-Crop (farm) - Operating and managing this farm is the full-time occupation of one or more people,
cropland is owned but crop sales exceed 10 percent of accrual milk receipts.
Debt Per Cow - Total end-of-year debt divided by end-of-year number of cows.
Debt to Asset Ratios - (defined on page 10)
Deferred Taxes - (defined on page 9)
Dry Matter - The amount or proportion of dry material that remains after all water is removed. Commonly used to
measure dry matter percent and tons of dry matter in feed.
Equity Capital - The faml operator/manager's owned capital or farm net worth.
­
36
Expansion Livestock - Purchased dairy cattle and other livestock that cause an increase in herd size from the begin­
ning to the end of the year.
Farm Debt Payments as Percent of Milk Sales - Amount of milk income committed to debt repayment, calculated
by dividing planned debt payments by total milk receipts. A reliable measure of repayment ability, see page 14.
Farm Debt Payments Per Cow - Planned or scheduled debt payments per cow represent the repayment plan sched­
uled at the beginning of the year divided by the average number of cows for the year. This measure of repayment
ability is used in the Financial Analysis Chart.
Financial Lease - A long-tenn non-cancellable contract giving the lessee use of an asset in exchange for a series of
lease payments. The tenn of a financial lease usually covers a major portion of the economic life of the asset. The
lease is a substitute for purchase. The lessor retains ownership of the asset.
Income Statement - A complete and accurate account of fann business receipts and expenses used to measure profit­
ability over a period of time such as one year or one month.
Labor and Manaeement Income - (defined on page 6)
Labor and Manaeement Income Per Operator - The return to the owner/manager's labor and management per full­
time operator.
Labor Efficiency - Production capacity and output per worker.
Liguidity - Ability of business to generate cash to make debt payments or to convert assets to cash.
Net Farm Income - (defined on page 5)
Net Worth - The value of assets less liabilities equal net wOl1h. It is the equity the owner has in owned assets.
Operatine Costs of Producine Milk - (defined on page 19)
Opportunity Costs - The cost or charge made for using a resource based on its value in its most likely alternative use.
The opportunity cost of a farmer's labor and management is the value he/she would receive if employed in his/her
most qualified alternative position.
Other Livestock Expenses - All other dairy herd and livestock expenses not included in more specific categories.
Other livestock expenses include; bST, DHIC, registration fees and transfers.
Part-Time Dairy (farm) - Dairy farming is the primary enterprise, cropland is owned but operating and managing
this fann is not a full-time occupation for one or more people.
Personal Withdrawals and Family Expenditures Includine Nonfarm Debt Payments - All the money removed
from the farm business for personal or nonfarm use including family living expenses, health and life insurance, in­
come taxes, nonfann debt payments, and investments.
Profitability - The return or net income the owner/manager receives for using one or more of his or her resources in
the farm business. True "economic profit" is what remains after deducting all the costs including the opportunity costs
of the owner/manager's labor, management, and equity capital.
Purchased Inputs Cost of Producine Milk - (defined on page 19)
Renter - Farm business owner/operator owns no tillable land and commonly rents all other fann real estate.
Repayment Analysis - An evaluation of the business' ability to make planned debt payments.
Replacement Livestock - Dairy cattle and other livestock purchased to replace those that were culled or sold from the
herd during the year.
Return on Eguity Capital- (defined on page 7)
­
37
Return on Total Capita! - (defined on page 7)
Solvency - The extent or ability of assets to cover or pay liabilities. Debt/asset and leverage ratios are common meas­
ures of solvency.
Total Costs of Producing Milk - (defined on page 19)
Whole Farm Method - A procedure used to calculate costs of producing milk on dairy farms without using enterprise
cost accounts. All non-milk receipts are assigned a cost equal to their sale value and deducted from total farm ex­
penses to determine the costs of producing milk.
-
38
INDEX
Pagels)
Accounts Payable
3,8
Financial Analysis Chart
Accounts Receivable
Accrual Expenses
4,8
3,5
Financial Lease
Accrual Receipts
4,5
Acreage
Advanced Government Receipts
16
7,8
Age
Amount Available for Debt Service
20
14
Annual Cash Flow Statement..
Appreciation
Asset Turnover Ratio
Balance Sheet
12
5,11,18
20
8
Barn Type
2
bST Usage
Business Type
2
2
Pagels)
25
Income Statement
Inflows
Labor & Mgmt. Income
8
2
12
6
Labor & Mgmt. Income Per Opel'.
Labor Efficiency
6
20
Land Resources
Liquidity
16
10
Lost Capital
Machinery Expenses
Milking Frequency
Milk Production
Milking System
10
3,17
2
18
2
Capital Efficiency
Cash From Nonfarm Capital Used in
20
Money Borrowed
Net Farm Income
Net Investment
12
5
10
the Business
Cash Flow Coverage Ratio
12
14
Net Worth
Number of Cows
8
18
Operating Costs of Prod. Milk
19
Cash Paid
Cash Receipts
Certified Organic Milk Producer
Change in Accounts Payable
Change in Accounts Receivable
Change in Inventory
Change in Net Worth
Crop Expenses
Crop/Dairy Ratios
Current Portion
Dairy (farm)
Dairy Cash-Crop (farnl)
2
4,12
2
3
4
2,3
11
3,17
16
7,8
2
2
Debt per Cow
10
Debt to Asset Ratios
Deferred Taxes
10
9
Depreciation
Dry Matter.
Education
Equity Capital
3,10
16
20
7
Expansion Livestock
3,12
Expenses
Farm Business Chart
3
22-25,28-32
Farnl Debt Payments as Percent
of Milk Sales
Farm Debt Payments Per Cow
13
13
Opportunity Cost
Other Livestock Expenses
Outflows
Part-Time Cash-Crop Dairy (farm)
Part-Time Dairy (farm)
Percent Equity
6
3
12
2
2
9, 10
Personal Withdrawals and Family Expenditures
Including Nonfarm Debt Payments
Principal Payments
Profitability
Purchased Inputs Cost
Receipts
Record System
12
12
4
22,23
4
2
Repayment Analysis
Replacement Livestock
14
3
Retained Earnings
11
Return on Equity CapitaL
Return on Total Capital
Rotational Grazing
7
7
2, 17
Solvency
10
Total Costs of Producing Milk
Whole Farm Method
Worker Equivalent
19
19
20
Yields Per Acre
16
­
(
OT ER ~R.M.E. EXTENSION BULLETt S )
Author(s)
98-11
Dairy Farm Business Summary, Northern New York
Region, 1997
Milligan, A.A., L.D. Putnam,
G. Yarnall. P. Beyer, A. Deming and
W Van Loa
98-10
Dairy Farm Business Summary, Southeastern New York
Region, 1997
Knoblauch, W.A., L.D. P tnam,
S.E. Hadcock, L.A. Hulle, M. Kiraly
and J,J. Walsh
98·09
Dairy Farm BUSIness Summary, Western and Central
Plateau Region, 1997
Knoblauch, WA, LD. Putnam,
C.A. Crispell, J.W. Grace,
J.S. Petzen, A.N. Dufresne and
G. Albrecht
98-08
Dairy Farm Business Summary, Northern Hudson Region,
1997
Conneman, G.J., L.D. Putnam,
C.S. Wickswat, S. Buxton and
D.R. Wood
98-07
Dairy Farm Business Summary, Western and Central Plain
Region. 1997
J. Karszes, C. Mentis, G. Allhusen
Knoblauch, W.A., L.D. Putnam,
and J. Hanchar
Dairy Farm Business Summary, New York Large Herd
Farms, 300 Cows or Larger, 1997
Karszes, J., K.A. Knoblauch and
L.D. Putnam
98-05
A Presentation Guide to the U.S. Food Industry
Green, G.M., E. W. McLaughlin and
K. Park
98-04
Estate and Succession Planning for Small Business
Owners
Tauer, L W. and D.A. Grossman
98-03
Profile of the Work Force on Dairy Farms in New York and
Wisconsin
McClenahan, E.J. and RA Milligan
98-02
MICRO DFBS. A Guide to Processing Dafry Farm
Business Summaries in County and RegTOnal Extension
Offices for Micro DFBS Version 4 1
Putnam, L.b. and W.A. Knoblauch
98-01
Estimation of Regional Differences In Class I Milk Values
Across U.S. Milk Markets
Pratt, J.E., A.M Novakovlc,
P.M Bishop M W. Stephenson.
E M. Erba and C. Alexander
97-22
FISA .- A Complete Set of Financial Statements for
AgriCUlture
LaDue. E.L.
97-21
New York Economic Handbook, 1998: Agribusiness
Economic Outlook Conference
A.R.M.E. Staff
To order single copies of AAME publications, write to' PUblications, Oepartment of Agricultural, Resource, and Managerial Economics,
Warren Hall. Comell University, Ithaca, NY 14853-7801. Visit our Web site at http://www.cals.comell.eduJdeptlarmeifor a more
complete list of recenl publications.
-