JUNE 1997
E.B.97-08
NEW YORK
LARGE HERD
FARMS,
300 COWS
OR LARGER
1996
Ja on Karszes
Wayne A. Knoblauch
Linda D. Putnam
Department of Agricultural, Resource, and Managerial Economi
College of Agriculture and Life cience
CorneD U ·ver ity Ithaca, New York 14853.7801
It is the Policy ofComell University actively to support equality
of educational and employment opportunity. No person shall be
denied admission to any educational program or activity 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 or ethnic ongin, sex, age or
handicap_ The University is committed to the maintenance of
affirmative action programs which will a.ssme the continuation of
such equality of opportunity.
1996 DAIRY FARM BUSINESS SUMMARY
LARGE HERD DAIRY FARMS
300 Cows or Larger
Table of Contents
INTRODUCTION
Page
1
Program Objectives
1
Format
1
PROGRESS OF THE FARM BUSINESS
SUMMARY AND ANALYSIS OF THE FARM BUSINESS
2
.4
Business Characteristics
4
Income Statement
4
Profitability Analysis
7
Farm and Family Financial Status
9
Statement of Owner Equity
13
Cash Flow Statement.
14
Repayment Analysis
16
Cropping Analysis
19
Dairy Analysis
21
Cost of Producing Milk
23
Capital and Labor Efficiency Analysis
24
CONDENSED SUMMARY AND SELECTED BUSINESS FACTORS
25
INCOME AND EXPENSE PROFILES
27
FARM BUSINESS CHART
29
IDENTIFY AND SET GOALS
32
GLOSSARY AND LOCATION OF COMMON TERMS
34
INDEX
38
-
INTRODUCTION
Dairy farmers throughout New York State have been participating in Cornell Cooperative Extension
Farm Business Summary and Analysis Programs since the early 1950's. Managers of each partici­
pating farm business receive a comprehensive summary and analysis of the farm business. The in­
formation in this report represents an average of the data submitted from dairy farms with herds of
300 cows and larger in New York State for 1996.
Program Objective
The primary objective of the Dairy Farm Business Summary, DFBS, is to help farm managers im­
prove the business and financial management of their dairy farm through appropriate use of historical
farm data and the application of modem farm business analysis techniques. This information can
also be used to track changes within the business, establish goals that will enable the business to
better meet its objectives, compare the performance of the farm to other dairy producers, and estab­
lish a basis for financial projections of planned changes within the business.
Format
This report is comprised of four sections. The first section charts the progress of the large herd farm
businesses over two years. Thirty-one of the large herd farms participated in the summary the last
two years. The average of selected business factors are presented for these farms and the changes
that occurred from 1995 to 1996 are calculated.
The summary and analysis section lists the average data for the 32 large herd farms that participated
in the 1996 DFBS program. The format follows that of the individual farm DFBS printout and con­
tains a brief explanation of each table and chart.
The third section presents a condensed summary and selected business factors for farms with 300­
500 cows and farms with more than 500 cows.
The fourth section contains the income and expense profiles for the 300 cow and larger farms on a
per cow and per cwt. of milk basis.
The fifth section contains business charts for key measures of farm performance.
1
The large herd summary is comprised of farms with 300 or more cows. Cayuga, Chautauqua, Cort­
land, Erie, Genesee, Ontario, Saratoga, Schuyler, Washington, Wayne and Wyoming counties had
farms of this size in 1996. This report was written by Jason Karszes, Cooperative Extension agent
for Erie and Wyoming counties and Wayne A. Knoblauch, Professor, Farm Management. Linda
Putnam was in charge of data preparation. Melody Clark prepared the publication.
2
PROGRESS OF THE FARM BUSINESS
Comparing your business with average data from large DFBS dairy farms that participated in both of
the last two years can be helpful in comparing performance and establishing goals for your business.
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. Please refer to the
table on Page 3 for selected factors from 31 farms with over 300 cows that participated in this DFBS
project each of the last two years.
From 1995 to 1996 the average large herd grew 9.4 percent by adding 53 cows. With this increase in
herd size, farm capital per cow fell 0.8 percent to $5,625 and debt per cow increased 2.1 percent to
$2,614. The increase in herd size contributed to a small gain in labor efficiency. The 9.4 percent in­
crease in herd size led to a 7.6 percent increase in worker equivalent on the farms. Cows per worker
equivalent increased by 1 percent to 47 cow per worker and milk sold per worker equivalent in­
creased by 2 percent to 1,019,420 pounds.
Milk sold per cow increased 51 pounds a cow, or 0.2 percent. This small increase in milk production
per cow coupled with the increase in herd size increased milk marketed from 1995 to 1996 by 9.7
percent to 13,456,339 pounds per farm.
A major change from 1995 to 1996 was in the cost to operate the farm. Total farm operating costs
per cwt. increased 11.6 percent from $11.80 per in 1995 to $13.17 in 1996. Leading the increase
was the change in feed costs. Grain & concentrate purchased per cwt. of milk sold went from $3.50
per cwt. in 1995 to $4.52 in 1996, a $1.02 (29.1 percent) change. Dairy feed and crop expenses in­
creased 25.1 percent to $5.19 in 1996. This increase was due to the increase in feed costs. Crop ex­
penses stayed flat on a cost per cwt. of milk sold basis. Labor costs also increased on these farms,
with the labor cost per cwt. of milk sold increasing 4.3 percent to $2.44 per cwt. of milk sold and a
6.4 percent in cost per worker equivalent. On the other hand, interest cost per cwt. of milk decreased
8.5 percent to $0.86 per cwt. of milk sold and milk marketing costs decreased 18.6 percent to $0.48
per cwt. of milk sold. The decrease in milk marketing cost reflects the repeal of the milk marketing
assessment in 1996.
The average milk price received on these farms increased $1.89 to $14.87 per cwt. of milk sold, a
14.6 percent increase. This increase in milk price coupled with the decrease in milk marketing costs
led to a $2.00 increase in the net price received on the farm in 1996. This is a 16.1 percent increase
over 1995. The decline in beef and calf prices continued into 1996. Accrual dairy cattle income fell
22.8 percent and calf sales decreased 44.4 percent per cow.
While there was a large increase in the cost to produce milk, efforts to minimize the increased al­
lowed these farms to take advantage of the unusual increase in milk prices in 1996. Profit levels
from 1995 to 1996 increased dramatically. Net farm income without appreciation increased 9.2 per­
cent. Labor and management income per operator increased 55.3 percent to $82,068. The rate of re­
turn on equity capital without appreciation rose 17.6 percent to 8.7 percent while the rate of return on
all capital without appreciation increased 40.8 percent to 10 percent. Farm net worth increased 8.9
percent to $1,949,753. Debt to asset ratio stayed flat at 0.46.
While 1996 was a challenging year in terms of rapid changes in different areas, the progress these 31
farms made from 1995 to 1996 showed that opportunity to make profits existed and yielded positive
results.
­
3
PROGRESS OF THE FARM BUSINESS
Same 31 Large Herd Dairy Farms, 1995 & 1996
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
Com silage per acre, tons
Labor Efficiency & Costs
Cows per worker
Milk sold/worker, lbs.
Hired labor cost/cwt.
Hired labor cost/worker
Hired labor cost as % of milk sales
Cost Control
Grain & conc. purchased as % of milk sales
Grain & conc. per cwt. milk
Dairy feed & crop expense per cwt. milk
Labor & mach. costs/cow
Total farm operating costs per cwt. sold
Interest costs per cwt. milk
Milk marketing costs per cwt. milk sold
Operating cost of producing cwt. of milk
Capital Efficiency(average for the year)
Farm capital per cow
Mach. & equip. per cow
Asset turnover ratio
Income Generation
Gross milk sales per cow
Gross milk sales per cwt.
Net milk sales per cwt.
Dairy cattle sales per cow
Dairy calf sales per cow
Profitability.
Net fann income w/o apprec.
Net fann income w/apprec.
Labor & mgt. income per oper./manager
Rate of return on equity capital w/o apprec.
Rate of return on all capital w/o apprec.
Financial Summary
Fann net worth, end year
Debt to asset ratio
Fann debt per cow
1995
Average of 31 Fanns
1996
Percent
Change
564
417
12,262,793
12.27
1,073
617
454
13,456,339
13.20
1,164
9.4
8.9
9.7
7.6
8.5
21,755
3.4
17.8
21,806
3.3
17.3
0.2
-2.9
-2.8
46
999,413
$2.34
$23,386
18%
47
1,019,420
$2.44
$24,874
16%
2.2
2.0
4.3
6.4
-11.1
27%
$3.50
$4.15
$932
$11.80
0.94
0.59
$10.29
30%
$4.52
$5.19
$997
$13.17
0.86
0.48
$12.02
29.1
25.1
7.0
11.6
-8.5
-18.6
16.8
$5,670
$870
0.59
$5,625
$867
0.64
-0.8
-0.3
8.5
$2,822
$12.98
$12.39
$267
$27
$3,243
$14.87
$14.39
$206
$15
14.9
14.6
16.1
-22.8
-44.4
$197,911
$267,654
$52,861
7.1%
7.4%
$262,883
$292,317
$82,068
10.0%
8.7%
32.8
9.2
55.3
40.8
17.6
$1,790,534
0.46
$2,559
$1,949,753
0.46
$2,614
11.1
8.9
0.0
2.1
-
4
SUMMARY AND ANALYSIS OF THE FARM BUSINESS
Business Characteristics
Planning the optimal management strategies is a crucial component of operating a successful farm.
Various combinations of farm resources, enterprises, business arrangements, and management tech­
niques are used by the dairy farmers in this region. The following table shows important farm busi­
ness characteristics and the number of farms with each characteristic.
BUSINESS CHARACTERISTICS
32 Large Herd Dairy Farms, 1996
Type of Farm
Dairy .
Number
32
Type of Ownership
Owner
Number
32
Type of Business
Single proprietorship
Partnership
Corporation
Number
Business Record System
Account Book
Agrifax (mail-in only)
On-Farm Computer
Other
Number
4
3
24
BSTUsage
<25%
25-75%
>75%
Stopped Use in 1996
Not Used
Number
2
25
13
9
Type of Bam
Stanchionrrie-Stall
Freestall
Combination
Number
0
32
0
Milking System
Pipeline
Herringbone parlor
Other parlor
Number
0
24
8
Milking Frequency
2x/day
3x/day
Other
Number
6
25
Production Records
DHIC
Owner-Sampler
Other
None
Number
26
2
4
0
10
I
I
I
2
2
Income Statement
In order for an income statement to accurately measure farm income, it must include cash transac­
tions 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 actually used in 1996.
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 pur­
chased in a prior year and used this year.
-
5
CASH AND ACCRUAL FARM EXPENSES
32 Large Herd Dairy Fanus, 1996
Expense Item
Hired Labor
Feed
Dairy grain & concentrate
Dairy roughage
Nondairy
Machinery
Mach. hire, rent/lease
Mach. rep. & farm veh. exp
Fuel, oil & grease
Livestock
Replacement livestock
Breeding
Vet & medicine
Milk marketing
Bedding
Milk supplies
Cattle lease/rent
Custom boarding
Other livestock expense
Crops
Fertilizer & lime
Seeds & plants
Spray, other crop expo
Real Estate
Land/bldg./fence repair
Taxes
Rent & lease
Other
Insurance
Utilities (farm share)
Interest paid
Miscellaneous
Total Operating Expenses
Expansion livestock
Machinery depreciation
Building depreciation
Total Accrual Expenses
Cash
Paid
$ 328,590
Change in
Inventory or
Prepaid
Expense
1,280 «
$
640,335
8,801
219
29,193
82
0
+
Change in
Accounts
Payable
$ 2,599
=
Accrual
Expenses
$ 329,910
-3,848
162
0
607,294
8,882
219
39,681
84,450
32,267
-42 «
903
816
527
-220
-285
40,250
83,327
31,166
19,653
17,234
65,796
64,319
31,048
45,328
6,219
16,152
53,910
0«
-150
3,579
84 «
2,206
2,497
0«
0«
1,649
0
-568
-758
-32
-108
115
344
82
-107
19,653
16,816
61,459
64,203
28,734
42,947
6,562
16,234
52,157
33,453
27,275
27,665
2,249
3,791
316
557
-53
-227
31,761
23,431
27,122
31,121
21,125
34,305
-95
74 «
-330 «
-194
0
-32
31,021
21,052
34,604
16,673
41,261
116,999
20,795
$1,824,674
$ 34,895
373 «
3 «
0«
260
48,736
0«
-6
194
-855
-1,030
$ -3,741
$
0
16,294
41,452
116,143
19,506
$1,772,198
$ 34,895
$ 67,225
$ 54,727
$1,929,045
$
$
Change in prepaid expenses (noted above by «) is a net change in non-inventory expenses that have
been paid in advance of their use. If 1996 funds used to prepay 1997 leases exceed the amount of
1996 leases prepaid in 1995, the amount of this excess is subtracted to exclude it from 1996 accrual
lease expenses. The excess prepaid lease is charged against the future year's business operation. A
decrease in prepaid lease is added to accrual expenses because it represents use of resources during
this year that were paid for in past years.
-
6
Change in accounts payable: An increase in accounts payable from beginning to end of year is added
when calculating accrual expenses because these expenses were incurred (resources used) in 1996
but not paid for. A decrease is subtracted because the resource was used before 1996.
Accrual expenses are the costs of inputs actually used in this year's production. They are the total of
cash paid, as well as changes in inventory, prepaid expenses, and accounts payable.
CASH AND ACCRUAL FARM RECEIPTS
32 Large Herd Dairy Farms, 1996
Receipt Item
Milk sales
Dairy cattle
Dairy calves
Other livestock
Crops
Government receipts
Custom machine work
Gas tax refund
Other
Less nonfarm noncash cap.**
Total Receipts
Cash
Receipts
$1,998,698
63,455
9,554
3,047
9,349
12,165
1,363
529
13,100
+
Change in
Inventory
$
$ 61,995
79
10,079
921
( -)
$2,111,259
+
Change in
Accounts
Receivable
*
o **
$ 73,074
(-)
$
4,940
-67
21
90
1,840
125
17
79
254
0
7,300
=
Accrual
Receipts
$ 2,003,638
125,383
9,575
3,216
21,269
13,211
1,379
608
13,355
(-)
0
$ 2,191,633
*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 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 sub­
tracted. Changes in inventories of crops grown are also included. An annual increase in advanced
government receipts is subtracted from cash income because it represents income received in 1996
for the 1997 crop year in excess of funds earned for 1996. Likewise, a decrease is added to cash
government receipts because it represents funds earned for 1996 but received in 1995.
Changes in accounts receivable are calculated by subtracting beginning year balances from end year
balances. The January milk check for this December's marketings compared with the previous Janu­
ary's check is included as a change in accounts receivable.
Accrual receipts represent the value of all farm commodities produced and services actually gener­
ated by the farm business during the year.
­
7
Profitability Analysis
Fann operators 3 contribute labor, management, and equity capital to their businesses and the combi­
nation 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.
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,
financing, and owning 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
32 Large Herd Dairy Farms, 1996
Average
Total
Per Cow
Item
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 (w/o appreciation)
$ 2,191,633
1,169
3,718
19,430
4,197
$ 2,220,147
1,929,045
$ 291,102
$ 262,588
Total
MyFann
Per Cow
$
$
$470
$424
$
$
$
$
TOTAL COST TO PRODUCE MILK vs. NET FARM INCOME PER COW
32 Large Herd Dairy Farms, 1996
18
Q,l
u
=
•
17
"C
...
.s....
0
Q.,
<I.l
0
~16
~
u
•
~15
•••
.-.
..::.::
U ~14
:!0
~
13
•
•
.. . ••
•
••
~
•
••
•• •
••
12
-30
70
170
270
370
470
$ Net Farm Income Per Cow (w/o appreciation)
570
•
'. 670
30perators are the individuals who are integrally involved in the operation and management of the farm busi­
ness. They are not limited to those who own the farm or are formal members of the partnership or corpora­
tion.
8
Labor and management income is the return which farm operators receive for their labor and man­
agement used in operating the farm business. Appreciation is not included as part of the return 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 unpaid family
labor and the opportunity cost of using equity capital, at a real interest rate of five percent, from net
farm income excluding appreciation. The interest charge of five percent reflects the long-term aver­
age rate of return above inflation that a farmer might expect to earn in comparable risk investments.
LABOR AND MANAGEMENT INCOME
32 Large Herd Dairy Farms, 1996
Average
Item
Net fann income without appreciation
Family labor unpaid
@
$
$1,500 per month
262,588
MyFann
$----­
1,950
Interest on $1,856,828 average equity capital
@
5% real rate
92,841
Labor & Management Income per Fann (2.02 operators/fann)
$
167,797
$----­
Labor & Management Income per OperatorlManager
$
83,068
$----­
Labor and management income per operator averaged $83,068 on these 32 farms in 1996. Returns to
labor and management were negative on 16 percent of the farms. Labor and management income per
operator ranged from $0 to $40,000 on 19 percent of the farms while 44 percent showed labor and
management incomes of $80,000 or more per operator.
DISTRIBUTION OF LABOR & MANAGEMENT INCOMES
PER OPERATOR
32 Large Herd Dairy Farms, 1996
50 . . . . - - - - - - - - - - - - - - - - - - - - - - - - - - - - . - - - - - - , 44
45
en 40
~
35
p., 30
4-<
.:: 25
Q) 20
=
2
~ 15
10
-
5
o
<0
o to 20
20 to 40
40 to 60
Income (thousand dollars)
60 to 80
>80
9
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 re­
turned by the average farm net worth or equity capital. Return on total capital is calculated by add­
ing interest paid to the return on equity capital and then dividing by average farm assets to calculate
the rate of return on total capital.
RETURN ON EQUITY CAPITAL AND RETURN ON TOTAL CAPITAL
32 Large Herd Dairy Farms, 1996
Item
Average
My Farm
Net farm income with appreciation
Family labor unpaid @ $1,500 per month
Value of operators' labor & management
Return on equity capital with appreciation
Interest paid
Return on total capital with appreciation
$ 291,102
1,950
73,301
$ 215,851
+ 116,143
$ 331,994
$
Return on equity capital without appreciation
Return on total capital without appreciation
Rate of return on average equity capital:
with appreciation
without appreciation
Rate of return on average total capital:
with appreciation
without appreciation
$ 187,337
$ 303,480
$
$
$
+
$
11.62%
10.09%
%
%
9.62%
8.79%
%
%
Farm and Family Financial Status
The first step in evaluating the financial position of the farm is to construct a balance sheet which
identifies 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 pay­
ments 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, representing the future value the item has to the business.
For 1996, leases were discounted by 8.75 percent.
Advanced government receipts are included as current liabilities. Government payments received in
1996 that are for participation in the 1995 program are the end year balance and payments received
in 1995 for participation in the 1996 program 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.
­
10
1996 FARM BUSINESS & NONFARM BALANCE SHEET
32 Large Herd Dairy Farms, 1996
Farm Liabilities
Jan. 1
Farm Assets
Current
Farm cash, checking
& savings
Accounts recei vable
Prepaid expenses
Feed & supplies
Total Current
Intermediate
Dairy cows:
owned
leased
Heifers
Bulls/other livestock
Mach.lequipment owned
Mach.lequipment leased
Farm Credit stock
Other stock/certificate
Total Intermediate
$
13,120
117,134
6,055
334,522
$ 470,831
$ 587,952
13,456
244,128
6,621
452,316
61,651
18,436
62,209
$1,446,769
Dec. 31
$
13,924
124,434
7,497
391,895
$ 537,750
$ 614,034
14,101
281,264
6,647
506,561
49,730
19,509
77,690
$1,569,536
& 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
Landlbuildings:
owned
leased
Total Long Term
$1,412,855
0
$1,412,855
$1,463,816
0
$1,463,816
Long Term
Structured debt
>10 years
Financial lease
(structures)
Total Long Term
Total Farm Assets
$3,330,455
$3,571,102
Total Farm Liab.
FARM NET WORTH
Jan. 1
Dec. 31
$ 39,361
114,987
29,391
921
$
91,144·
41,432
$ 317 ,237
96,255
52,599
$ 347,424
$ 504,373
$ 511,546
75,107
18,436
$ 597,916
63,831
19,509
$ 594,886
35,620
134,958
27,992
0
$ 638,100
$ 692,338
0
$ 638,100
0
$ 692,338
$1,553,253
$1,777 ,202
$1,634,648
$1,936,454
Total Assets
$ 3,386,105 $ 3,643,956
Total Liabilities
1,554,453
1,642,584
TOTAL FARM & NONFARM NET WORTH
$ 1,831,652 $2,001,372
*Assumes that average nonfarm assets and liabilities for the nonreporting farms were the same as for those reporting.
11
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.
Deferred taxes represent an estimate of the taxes that would be paid if the farm were sold at year end
fair market values and date on the balance sheet. Accuracy is dependent on the accuracy of the mar­
ket values and the tax basis data provided. Any tax liability for assets other than livestock, machin­
ery, land, buildings and nonfarm assets is excluded. It is assumed that all gain on purchased live­
stock and machinery is ordinary gain and that listed market values are net of selling costs. The ef­
fects 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. However, they could be important.
CONDENSED BALANCE SHEET INCLUDING DEFERRED TAXES
December 31, 1995
Average of 11 New York Dairy Farms Reporting Data, 1995
LIABILITIES & NET WORTH
ASSETS
Current debts & payables
Current deferred taxes
Total Current Assets
Total Intermediate Assets
$ 128,267
$ 470,523
$ 95,207
76,367
Total Current Liabilities
$171,574
Intermediate debts & leases
Intermediate deferred taxes
$132,835
124,500
Total Intermediate Liabilities
Long term debts & leases
Long term deferred taxes
$257,335
$142,335
68,412
Total Long Term Assets
$ 427,795
Total Long Term Liabilities
TOTAL FARM ASSETS
$1,026,585
TOTAL FARM LIABILITIES
Farm Net Worth
Percent Equity (Farm)
$639,713
$386,872
38%
Nonfarm debts
Nonfarm deferred taxes
Total Nonfarm Liabilities
$
Total Nonfarm Assets
$
49,423
TOTAL ASSETS
$1,076,008 TOTAL LIABILITIES
Total Net Worth
Percent Equity (Total)
$210,804
55
12,287
$ 12,842
$652,555
$423,453
39%
­
12
Balance sheet analysis involves examination of relative asset and debt levels for the business. Per­
cent 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 dividing liabilities by assets. Low debt to asset ratios
reflect business solvency and the potential capacity to borrow. Debt levels per productive unit repre­
sent old standards that are still useful if used with measures of cash flow and repayment ability.
BALANCE SHEET ANALYSIS
32 Large Herd Dairy Farms, 1996
Item
Average
Financial Ratios - Farm:
Percent equity
Debt/asset ratio: total
long-term
intermediate/current
54%
0.46
0.47
0.45
%
2%
42%
58%
%
%
%
Farm Debt Analysis:
Accounts payable as % of total debt
Long-term liabilities as a % of total debt
Current & intermediate liabilities as a % of total debt
Farm Debt Levels:
Total farm debt
Long-term debt
Long-term & intermediate
Intermediate & current debt
Per Tillable
Acre Owned
$2,586
1,095
2,037
1,491
Per Cow
$ 2,591
1,097
2,040
1,493
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 in­
cluded in the dairy analysis. Net investment indicates whether the capital stock is being expanded
(positive) or depleted (negative).
FARM INVENTORY BALANCE
32 Large Herd Dairy Farms, 1996
Item
. Value beginning of year
Purchases
Gift/inheritance
Lost capital
Sales
Depreciation
Average of 32 Farms
Real Estate
Machinery & Equipment
$ 1,412,855
$
452,316
$ 139,476
0
+
45,642
7,576
54,727
*
$
+
126,565
0
-
8,812
67,225
Net investment
Appreciation
=
31,531
19.430
=
+
50,527
3,718
Value end of year
$ 1,463,816
$
506,561
+
*$22,344 land and $117,132 buildings and/or depreciable improvements.
13
Statement of Owner Equity
The Statement of Owner Equity has two purposes. It allows (1) verification that the accrual income
statement and market value balance sheet are interrelated and 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 eq­
uity was caused by (1) 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) and
(3) increases or decreases in the value (price) of assets owned by the business (called change in
valuation equity).
Retained earnings is an excellent indicator of farm generated financial progress.
STATEMENT OF OWNER EQUITY (RECONCILIATION)
32 Large Herd Dairy Farms, 1996
Average
Item
Beginning of year farm net worth
Net farm income w/o appreciation
+ Nonfarm cash income
- Personal withdrawals & family
expenditures excluding
nonfarm borrowings
Retained Earnings
Nonfarm noncash transfers to farm
+ Cash used in business from nonfarm
capital
- Note/mortgage from farm real estate
sold (nonfarm)
ContributedlWithdrawn Capital
Appreciation
- Lost capital
Change in Valuation Equity
My Farm
$ 1,777,202
$
+
262,588
7,999
$---­
$
+
94,064
+
176,523
+---­
$
0
$
+
3,547
+
1,563
+
$
1,984
28,514
45,642
+---­
$
+
ImbalancelError
-17,128
+----
2,127
End of year farm net worth*
Change in net worth w/apprec.
=$ l,936,454
$
159,252
=$---­
$---­
Change in Net Worth
Without appreciation
With appreciation
$
$
$
$
*May not add due to rounding.
130,738
159,252
-
14
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, in­
vesting 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 ac­
tivities should be zero. Any imbalance is the error from incorrect accounting of cash in­
flows/outflows.
ANNUAL CASH FLOW STATEMENT
32 Large Herd Dairy Fanns, 1996
Item
Cash Flow from Operating Activities
Cash fann receipts
- Cash fann expenses
= Net cash fann income
Personal withdrawals/family expenses including
nonfann 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 (inter. & long term)
+ Money borrowed (short-term)
+ Increase in operating debt
+ Cash from nonfarm cap. used in business
+ Money borrowed - nonfann
= Cash inflow from financing
Principal payments (inter. & long-term)
+ Principal payments (short-term)
+ Decrease in operating debt
- Cash outflow for financing
= Net Provided by Financing Activities
Cash Flow From Business
Beginning farm cash, checking & savings
- Ending fann cash, checking & savings
= Net Provided from Reserves
Imbalance (error)
Average
$ 2,111,259
1,824,674
$ 286,585
$
96,783
7,999
$
88,784
$ 197,801
$
8,812
6,013
1,519
$
34,895
126,565
139,476
12,803
$
16,344
$ 313,739
$ -297,365
$
224,715
12,994
19,970
3,547
2,719
$
147,025
14,393
0
$ 263,945
$
161,418
$ 102,527
$
13,120
13,924
$
$
-804
2,129
-
15
ANNUAL CASH FLOW STATEMENT
My Farm
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 stocklcert.
= Total asset sales
Capital purchases: expansion livestock
+ machinery
+ real estate
+ other stocklcert.
- Total invested in farm assets
= Net Provided by Investment Activities
Cash Flow From Financing Activities
Money borrowed (inter. & long term)
+ Money borrowed (short-term)
+ Increase in operating debt
+ Cash from nonfarm cap. used in business
+ Money borrowed - nonfarm
= Cash inflow from financing
Principal payments (inter. & long-term)
+ Principal payments (short-term)
+ Decrease in operating debt
Cash outflow for financing
$---­
$---­
$---­
$---­
$---­
$---­
$._--­
$---­
$---­
$---­
$---­
$---­
$---­
$---­
= Net Provided by Financing Activities
Cash Flow From Business
Beginning farm cash, checking & savings
- Ending farm cash, checking & savings
= Net Provided from Reserves
Imbalance (error)
$---­
$---­
$---­
$---­
-
16
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 performance of the business. However, the critical question to many farmers 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 compared to planned
1997 debt payments shown below.
FARM DEBT PAYMENTS PLANNED
Same 31 Large Herd Dairy Farms, 1995 & 1996
Average
MyFann
1996 Payments
Planned
1996 Payments
1997
Planned
Planned
Made
Made
Debt Payments
Long-tenn
Intennediate-term
Short-tenn
Operating (net
reduction)
Accounts payable
(net reduction)
Total
$ 90,596
199,494
16,380
$111,445
146,825
15,197
$ 118,304
177,248
3,579
0
0
2,787
0
$306,470
4,345
$277,812
3,439
$ 305,357
Per cow
Per cwt. 1996 milk
Percent of total
1996 receipts
Percent of 1996
milk receipts
$
$
497
2.28
$
$
450
2.06
14%
13%
15%
14%
Planned
1997
$
$
$
$
$
$
$
$
$
$
The cash flow coverage ratio measures the ability of the farm business to meet its planned debt pay­
ments schedule. The ratio shows the percentage of payments planned for 1996 (as of December 31,
1995) that could have been made with the amount available for debt service in 1996. Farmers who
did not participate in DFBS in 1995 have their 1996 cash flow coverage ratio based on planned debt
payments for 1997.
CASH FLOW COVERAGE RATIO
Same 31 Large Herd Dairy Farms, 1995 & 1996
Item
Average
My Fann
Cash fann receipts
$ 2,108,772
$
_
- Cash fann expenses
1,826,245
+ Interest paid
116,389
- Net personal withdrawals from fann**
88,040
(A)
= Amount Available for Debt Service
$
310,876
$
_
(B)
= Debt Payments Planned for 1996 (as of 12/31/95)
$
306,470
$
_
(A+B) = Cash Flow Coverage Ratio for 1996
1.01
**Personal withdrawals and family expenditures less nonfann income and nonfarm money borrowed. If
family withdrawals are excluded, or inaccurately included, the cash flow coverage ratio will be incorrect.
­
17
ANNUAL CASH FLOW WORKSHEET
32 Large Herd Dairy Fanns, 1996
Regional Average
Per Cow
Per Cwt.
619
134,737
Item
Number cows and cwt. milk
Accrual Operating Receipts
3,237
$14.87
$
Milk
203
0.93
Dairy cattle
15
0.07
Dairy calves
0.02
5
Other livestock
34
0.16
Crops
46
0.21
Misc. receipts
3,541
$16.27
$
Total
Accrual Operating Expenses
533
$2.45
$
Hired labor
981
4.51
Dairy grain & concentrate
14
0.07
Dairy roughage
0
0.00
Nondairy feed
65
Mach. hire/rent/lease
0.30
135
0.62
Mach. repair & fann vehicle expense
50
0.23
Fuel, oil & grease
32
0.15
Replacement livestock
27
0.12
Breeding
0.46
99
Vet & medicine
104
Milk marketing
0.48
46
0.21
Bedding
69
Milking supplies
0.32
11
0.05
Cattle lease
26
Custom boarding
0.12
Other livestock expense
84
0.39
51
Fertilizer & lime
0.24
38
0.17
Seeds & plants
44
0.20
Spray/other crop expenses
Land, building, fence repair
50
0.23
34
Taxes
0.16
Real estate rent/lease
56
0.26
Insurance
26
0.12
67
0.31
Utilities
32
Miscellaneous
0.14
2,675
Total Less Interest Paid
$12.29
$
Net Accrual Operating Income
(without interest paid)
$
865
$3.97
- Change in livestock/crop inventory*
118
0.54
12
- Change in accounts receivable
0.05
79
0.36
- Change in feed/supply inventory**
+ Change in accts. payable***
-5
-0.02
NET CASH FLOW
652
$
$3.00
- Net personal withdrawals from fann (see footnote on p. 16)
139
$
$0.64
Available for Fann Debt Payments & Investments
$
513
$2.36
- Fann debt payments
450
2.07
Available for Fann Investment
63
$
$0.29
- Capital purchases: cattle, machinery & improvements
$
507
$2.33
*Includes change in advance government receipts.
**Includes change in prepaid expenses.
***Excludes change in interest account payable.
Total
$ 2,003,638
125,383
9,575
3,216
21,269
28,553
$ 2,191,633
329,910
607,294
8,882
219
40,250
83,327
31,166
19,653
16,816
61,459
64,203
28,734
42,947
6,562
16,234
52,157
31,761
23,431
27,122
31,021
21,052
34,604
16,294
41,452
19,506
$ 1,656,055
$
$
$
$
$
$
$
535,578
73,074
7,300
48,736
-2,886
403,582
86,065
317,517
278,799
38,718
313,739
-
18
ANNUAL CASH FLOW WORKSHEET
Item
No. cows or cwt. milk
Accrual 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 & fann vehicle expense
Fuel, oil & grease
Replacement livestock
Breeding
Vet & medicine
Milk marketing
Bedding
Milking supplies
Cattle lease
Custom boarding
Other livestock expense
Fertilizer & lime
Seeds & plants
Spray/other crop expenses
Land, building, fence repair
Taxes
Real estate rentllease
Insurance
Utilities
Miscellaneous
Total Less Interest Paid
Net Accrual Operating Income
(without interest paid)
- Change in livestock/crop inventory*
- Change in accounts receivable
- Change in feed/supply inventory**
+ Change in accounts payable***
NET CASH FLOW
- Net personal withdrawals from farm(see footnote p.16)
Available for Fann Debt Payments & Investments
- Fann debt payments
Available for Fann Investment
- Capital purchases: cattle, machinery & improvements
Additional Capital Needed
*Inc1udes change in advance government receipts.
***Exc1udes change in interest account payable.
MyFann
Per Cow or
Expected
Per Cwt.
Change
1997
Projection
$._--­
$---­
$---­
$---­
$---­
$---­
$--­
$._--­
$---­
$--­
$--­
$---­
$---­
$--­
$---­
$---­
$--­
$---­
$---­
$---­
$---­
$---­
$---­
$---­
$---­
$--­
$
$._--­
$,---­
$
$---­
$---­
$
**Inc1udes change in prepaid expenses.
­
19
Cropping Analysis
The cropping program is an important part of the dairy farm business and often represents opportu­
nities for improved productivity and profitability. A complete evaluation of what the available land
resources are, how they are being used, how well crops are producing, and what it costs to produce
them is important to evaluating alternative cropping and feed purchasing alternatives.
LAND RESOURCES AND CROP PRODUCTION
32 Large Herd Dairy Farms, 1996
Item
Land
Tillable
Nontillable
Other nontillable
Total
Crop Yields
Hay crop
Com silage
Other forage
Total forage
Com grain
Oats
Wheat
Other crops
Tilllable pasture
Idle
Total Tillable Acres
Owned
632
56
206
895
Average
Rented
540
4
10
553
Fanus
32
32
2
32
17
3
6
16
8
9
32
Acres*
448
469
65
921
240
29
108
144
45
62
1,172
Total
1,172
60
216
1,448
MyFanu
Rented
Owned
Prod/Acre
3.22 tn OM
17.22 tn
2.29 tn OM
4.47 tn OM
112.44 bu
46.48 bu
50.50 bu
Acres
Total
Prod/Acre
tnOM
tn
tnOM
tnOM
bu
bu
bu
*This column represents the average acreage for the farms producing that crop. Average acreages including
those fanus not producing were com grain 128, oats 3, wheat 20, tillable pasture 11, and idle 17.
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 produc­
tion resources, and the dairy herd.
CROPIDAIRY RATIOS
32 Large Herd Dairy Farms, 1996
Item
Total tillable acres per cow
Total forage acres per cow
Harvested forage dry matter, tons per cow
Average
1.89
1.49
6.65
MyFanu
-
20
Cropping Analysis (continued)
A number of cooperators have allocated crop expenses among the hay crop, corn, and other crops
produced. Fertilizer and lime, seeds and plants, and spray and other crop expenses have been com­
puted per acre and per production unit for hay and corn. Additional expense items such as fuels, la­
bor, and machinery repairs are not included. Rotational grazing was not used on these farms.
CROP RELATED ACCRUAL EXPENSES
Large Herd Dairy Farms Reporting, 1996
Item
No. of farms reporting
Ave. number of acres
Fertilizernime
Seed/plants
Spray/other crop expo
TOTAL
My Farm:
Fertilizernime
Seeds/plants
Spray/other crop expo
TOTAL
Total
Per
Till. Acre
All
Com
Per Acre
32
1,172
$ 27.10
19.99
23.14
$ 70.23
9
574
$ 35.15
28.34
47.82
$ 111.31
$
$
Com Silage
Per
TonDM
Com Grain
Per Dry
Sh. Bu.
9
433
$ 12.82
11.72
3.52
$ 28.06
$ 3.85
3.52
1.06
$ 8.43
6.42
5.17
8.73
$ 20.32
$
$-­
$
$
$
$
$
$
$
$
$
$
$
0.31
0.25
0.43
0.99
Hay Crop
Per
Per Ton
Acre
DM
Most machinery costs are associated with crop production with crop production and should be ana­
lyzed with the crop enterprise. Total machinery expenses include the major fixed costs (interest and
depreciation), as well as the accrual operating costs. Although machinery costs have not been allo­
cated to individual crops, they are shown below per total tillable acre.
ACCRUAL MACHINERY EXPENSES
32 Large Herd Dairy Farms, 1996
Machinery
Expense Item
Fuel, oil & grease
Mach. repairs & farm veh. expo
Machine hire, rent & lease
Interest (5%)
Depreciation
Total
Average
Total
Per Till.
Expenses
Acre
$ 31,166
26.59
$
83,327
71.10
40,250
34.34
26,756
22.83
67,225
57.36
$ 248,724
$ 212.22
My Farm
Total
Per Till.
Expenses
Acre
$
$--­
$--­
$--­
21
Dairy Analysis
Analysis of the dairy enterprise can reveal a great deal about the 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 appreciation is attrib­
uted to physical changes in herd size and quality. Any change in inventory is included as an accrual
farm receipt when calculating all of the profitability measures on pages 7 and 8.
DAIRY HERD INVENTORY
32 Large Herd Dairy Farms, 1996
Dairy Cows
Item
Beginning year (owned)
+ Change wlo apprec.
+ Appreciation
End year (owned)
End including leased
Average number
My Farm:
Beginning year (owned)
+ Change wlo apprec.
+ Appreciation
End of year (owned)
End including leased
Average number
No.
589
614
631
619
Value
$ 587,952
25,345
737
$ 614,034
No.
165
186
Heifers
Open
No.
Value
147
$ 72,322
9,742
306
164
$ 82,370
Bred
Value
$ 139,514
23,921
19
$ 163,454
Calves
Value
$ 32,292
2,987
161
123
$ 35,440
No.
115
455 (all age groups)
$--­
$--­
$--­
$-­
$._­
$--­
$--­
$--­
_
(all age groups)
Total milk sold and milk sold per cow are extremely valuable measures of size and productivity, re­
spectively, 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
32 Large Herd Dairy Farms, 1996
Item
Total milk sold, lbs.
Milk sold per cow, lbs.
A verage milk plant test, percent butterfat
Average
13,473,657
21,756
3.59
My Farm
-
22
The cost of producing milk has been compiled using the whole farm method and is featured in the
following table. Accrual receipts from milk sales can be compared with the accrual costs of pro­
ducing milk per cow and per hundredweight of milk. Using the whole farm 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 pro­
ducing milk plus depreciation 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 AND COST OF PRODUCING MILK
32 Large Herd Dairy Farms, 1996
Average
My Farm
Total
Per Cow
Per Cwt.
Total
Per Cow
Per Cwt.
Item
Accrual Costs of
Producing Milk
Operating costs
$12.02
$
$ 1,619,098 $ 2,616
$
$
Purchased inputs costs
$ 1,741,050 $ 2,813
$12.92
$
$
$
$14.17
Total Costs
$ 1,909,142 $ 3,084
$
$
$
Accrual Receipts From
$14.87
$
$
$
Milk
$ 2,003,638 $ 3,237
Net Farm Income
$ 262,588 $ 424
$1.95
$
$
w/o apprec.
$
Net Farm Income
$2.16
$
with apprec.
$ 291,102 $ 470
$
$
The accrual operating expenses most commonly associated with the dairy enterprise are listed in the
table below. Evaluating these costs per unit of production enables an evaluation of the dairy enter­
prise.
Item
DAIRY RELATED ACCRUAL EXPENSES
32 Large Herd Dairy Farms, 1996
Average
Per Cow
Per Cwt.
Per Cow
Purchased dairy grain & cone.
Purchased dairy roughage
Total Purchased Dairy Feed
Purchased grain & cone. 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
Other livestock expenses
$ 981
14
$ 995
$4.51
0.07
$4.57
$
$5.18
$
$0.12
0.46
0.48
0.21
0.32
0.05
0.12
0.39
$
$
30%
$1,128
35%
$
27
99
104
46
69
11
26
84
-
23
Cost of Producing Milk
The cost of producing milk has been compiled below using the whole farm method. The following
steps are used in the calculations.
1. The cost of expansion livestock is added to total accrual operating expenses to offset any related
inventory increase included in accrual receipts.
2. Accrual milk sales are deducted form total accrual receipts to get total accrual nonmilk receipts
which are used to represent total nonmilk operating costs.
3. Total accrual nonmilk receipts are subtracted from total accrual operating expenses including ex­
pansion livestock to calculate the operating costs of producing milk.
4. Machinery depreciation and building depreciation are added to operating costs to determine the
purchased inputs cost of producing milk.
5. The opportunity costs of equity capital, operator's labor and operator's management and the value
of unpaid family labor are added to all other costs to obtain the total costs of producing milk.
This cost includes all the operating, depreciation, and imputed costs of producing milk.
Item
COST OF PRODUCING MILK WHOLE FARM METHOD CALCULATIONS
32 Large Herd Dairy Farms, 1996
Average 32 Farms
Total Accrual Operating Expenses
Expansion Livestock, Accrual
$
+
1,772,198
34,895
$
2,191,633
2,003,638
1. Total Accrual Operating Expenses, Including Expansion Livestock
Total Accrual Receipts
Milk Sales, Accrual
$
2. Total Accrual Nonmilk Receipts
3. Operating Costs of Producing Milk
Cwt. of Milk Sold
Operating Costs/Cwt.
Machinery Depreciation
Building Depreciation
4. Purchased Inputs Cost of Producing Milk
Cwt. of Milk Sold
Purchased Inputs Cost/Cwt.
Family Labor Unpaid ($1 ,500/month)
Real Interest on Equity Cap.
Value of Operating Labor & Management
5. Total Costs of Producing Milk
Cwt. Milk Sold
Total Costs/Cwt.
1,807,093
187,995
=
+
=
=
$
1,619,098
+
+
67,225
54,727
$
1,741,050
+
+
+
1,950
92,841
73,301
$
1,909,142
134,736.6
$12.02
134,736.6
$12.92
134,736.6
$14.17
­
24
Capital and Labor Efficiency Analysis
Capital efficiency factors measure how intensively the capital is being used in the farm business.
Measures of labor efficiency are key indicators of management's success in generating products per
unit of labor input.
CAPITAL EFFICIENCY
32 Large Herd Dairy Farms, 1996
Per
Per
Per Tillable
Worker
Cow
Acre
$ 267,918
$
5,575
2,944
$
2,324
41,547
865
457
0.64
Item
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
My Farm:
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
$._--­
$--­
Per Tillable
Acre Owned
$
5,460
2,276
$--­ $--­
LABOR FORCE INVENTORY AND ANALYSIS
32 Large Herd Dairy Farms, 1996
Months
13.5
6.7
4.5
0.7
6.6
1.3
121.2
154.5
Labor Force
Operator number 1
Operator number 2
Operator number 3
Operator number 4
Family paid
Family unpaid
Hired
Total
Value of
Labor & Mgmt.
$ 41,844
17,838
12,369
1,250
/ 12 = 12.88 Worker Equivalent
2.02 OperatorlManager Equivalent
/12 =
Worker Equivalent
OperatorlManager Equivalent
/ 12 =
Average
My Farm
Total
Per Worker
Total
Per Worker
619
48
13,473,657
1,046,091
1,172
91
6,028
468
My Farm: Total
Operator's
Labor
Efficiency
Cows, average number
Milk sold, pounds
Tillable acres
Work units
Labor Costs
Value of operator(s) labor
($1,500/mo.)
Family unpaid ($1 ,500/mo.)
Hired
Total Labor
Machinery Cost
Total Labor & Mach.
Years of
Education
15
14
14
14
Age
48
43
39
25
Total
$ 38,100
1,950
329,910
$ 369,960
248,724
$ 618,684
Average
Per Cow
$
$
$
62
3
533
598
402
999
PerCwt.
$0.28
0.01
2.45
$2.75
1.85
$4.59
Total
My Farm
Per Cow
Per Cwt.
$
$
$
$
$
$-­
$
$
$-­
-
25
CONDENSED SUMMARY & SELECTED BUSINESS FACTORS
CONDENSED FARM BUSINESS SUMMARY FOR TWO LARGE HERD GROUPS
32 Large Herd Dairy Fanus, 1996
16 Fanus with
16 Fanus with
300-500 Cows
>500 Cows
Per Cow
Per Cwt.
Per Cow
Per Cwt.
Item
ACCRUAL EXPENSES
$484
$2.31
$2.50
Hired labor
$553
951
4.53
4.50
Dairy grain & concentrate
993
23
0.11
0.05
Dairy roughage
11
0.00
0.01
Nondairy feed
1
o
Machine hire, rent & lease
0.15
0.36
31
80
158
0.56
0.75
Machine repairs & fanu vehicle expense
125
0.32
67
0.20
Fuel, oil & grease
43
21
Replacement livestock
0.10
0.16
36
35
0.17
24
Breeding
0.11
Veterinary & medicine
0.43
91
103
0.47
0.63
Milk marketing
133
91
0.41
Bedding
35
0.17
0.23
51
0.34
68
Milking supplies
0.31
72
6
0.03
12
Cattle lease & rent
0.06
20
0.10
29
Custom boarding
0.13
90
0.43
82
Other livestock expense
0.37
0.29
Fertilizer & lime
61
0.21
47
0.24
Seeds & plants
50
33
0.15
0.26
Spray & other crop expense
55
0.18
39
40
0.19
54
0.25
Land, building & fence repair
86
0.41
92
Taxes & rent
0.41
65
0.31
Utilities
68
0.31
193
0.95
0.84
Interest paid
185
Misc. (including insurance)
54
0.26
60
0.27
$2,822
$2,877
Total Operating Expenses
$13.46
$13.03
0.34
Expansion livestock
72
50
0.22
112
0.54
Machinery depreciation
107
0.48
91
0.43
Building depreciation
87
0.40
$3,097
Total Accrual Expenses
$3,121
$14.77
$14.13
ACCRUAL RECEIPTS
$3,120
Milk sales
$14.88
$3,283
$14.87
209
Dairy cattle
1.00
199
0.90
0.06
Dairy calves
13
17
0.08
0.06
Other livestock
13
2
0.01
0.33
Crops
68
20
0.09
Miscellaneous receipts
49
0.24
45
0.20
Total Accrual Receipts
$3,473
$3,565
$16.56
$16.15
PROFITABILITY ANALYSIS (Total)
Net farm income (without appreciation)
$138,466
$386,711
Net farm income (with appreciation)
$169,798
$412,409
Labor & management income
$73,039
$262,705
Number of operators
2.07
1.96
Labor & management income/operator
$35,285
$134,033
Rates of return on: Equity capital w/o apprec.
5.4%
12.5%
Equity capital w/ apprec.
7.9%
13.5%
All capital w/o apprec.
6.5%
9.8%
All capital w/ apprec.
8.0%
10.4%
-
26
SELECTED BUSINESS FACTORS FOR TWO LARGE HERD GROUPS
32 Large Herd Dairy Fanns, 1996
16 Farms with
16 Farms with
Item
300-500 Cows
> 500 Cows
Cropping Program Analysis
869
1,475
Total Tillable acres
414
666
Tillable acres rented*
357
539
Hay crop acres*
297
641
Corn silage acres*
3.0
3.4
Hay crop, tons DMiacre
16.2
17.7
Corn silage, tons/acre
7.2
Forage DM per cow, tons
6.4
1.7
Tillable acres/cow
2.4
$25.95
Fertilizer & lime expense/tillable acre
$27.78
Machinery cost/tillable acre
$176
$233
Dairy Analysis
369
870
Number of cows
280
629
Number of heifers
7,739,215
Milk sold, lbs.
19,208,099
Milk sold/cow, lbs.
20,970
22,089
$12.12
Operating cost of prod. milk/cwt.
$11.98
Total cost of prod. milk/cwt.
$14.81
$13.91
Price/cwt. milk sold
$14.88
$14.87
$1,003
Purchased dairy feed/cow
$974
$4.64
Purchased dairy feed/cwt. milk
$4.54
30%
30%
Purchased grain & concentrate as % of milk receipts
Purchased feed & crop expense/cwt. milk
$5.43
$5.08
Capital Efficiency
$234,904
$286,012
Fann capital/worker
5,806
Fann capital/cow
5,470
2,425
Real estate/cow
2,278
Machinery investment/cow
956
825
0.61
Asset turnover ratio
0.66
Labor Efficiency
Worker equivalent
9.12
16.64
Operator/manager equivalent
2.07
1.96
Milk sold/worker, lbs.
848,598
1,154,333
Cows/worker
40
52
Labor cost/cow
$599
$596
Financial Measures
Percent equity
59%
52%
Debt/asset ratio - long term
0.43
0.49
Debt/asset ratio - intennediate & current
0.40
0.47
$79,854
Change in net worth with appreciation
$238,647
Total fann debt per cow
$2,425
$2,658
Debt payments made per cow
$447
$454
Debt payments as % of milk sales
14%
14%
Amount available for debt service
$177,273
$453,385
Cash flow coverage ratio for 1996
1.07
1.17
*Average of all fanns, not only those reporting data.
-
27
INCOME AND EXPENSE PROFILE
Use the following two tables to make an income and expense profile for your dairy farm business.
The figures in the quintile columns represent the average of the top 20 percent to the bottom 20 per­
cent for each receipt and expenditure category. Each line is computed independently. The farms that
comprise the top 20 percent in milk sales do not necessarily make up the top 20 percent of any other
category. On each line circle the income and cost measures closest to the one for your farm. Then
draw a vertical line connecting your circles on each table. The strongest profile will be a relatively
straight line on the left side of the table.
RECEIPTS AND EXPENSES PER COW
32 Large Herd Dairy Farms, 1996
QUINTILE
1
2
3
4
5
Item
Accrual Operating Receipts
$3,609
$3,333
$3,251
$3,106
$2,826
Milk
482
252
141
Dairy cattle
197
69
25
18
14
12
Dairy calves
5
4
2
0
Other livestock
39
-6
206
71
Crops
28
0
-38
Misc. receipts
94
68
41
26
12
$4,021
$3,733
$3,546
Total Operating Receipts
$3,387
$3,137
Accrual Operating Expenses
$324
$454
$525
Hired labor
$596
$688
Dairy grain & concentrate
746
919
1,010
1,081
1,191
0
0
Dairy roughage
22
62
8
0
Nondairy feed
0
0
0
3
Mach. hire/rent/lease
2
31
16
204
59
117
Mach. repair & farm veh. expo
82
139
162
210
32
47
Fuel, oil & grease
58
66
85
0
Replacement livestock
0
4
32
124
Breeding
20
27
9
40
58
Vet & medicine
54
77
99
118
150
Milk marketing
70
102
113
122
176
12
Bedding
31
42
58
74
Milking supplies
39
55
69
80
110
0
Cattle lease
0
0
30
7
0
Custom boarding
0
0
14
144
Other livestock expense
21
68
93
113
165
Fertilizer & lime
22
39
59
76
91
Seeds & plants
24
35
41
49
63
Spray/other crop expenses
17
36
49
61
92
Land, building, fence repair
13
27
45
52
86
Taxes
26
17
32
39
64
Real estate rent/lease
19
35
47
64
112
Insurance
22
15
26
33
46
43
Utilities
58
68
81
100
104
Interest
171
204
232
265
Miscellaneous
12
21
28
42
54
$2,508
Total Operating Expenses
$2,772
$2,890
$3,001
$3,231
Expansion Livestock
0
0
0
55
338
Machinery Depreciation
65
89
105
123
184
Building Depreciation
49
68
86
101
166
Net Farm Income w/o Apprec.
$671
$545
$432
$337
$98
­
28
RECEIPTS AND EXPENSES PER CWT. OF MILK SOLD
32 Large Herd Dairy Fanns, 1996
QUINTILE
3
2
Item
4
5
Accrual Operating Receipts
Milk
Dairy cattle
Dairy calves
Other livestock
Crops
Misc. receipts
$15.50
2.29
.11
.21
.90
.45
$15.05
1.18
.09
.02
.32
.32
$14.82
.88
.07
.01
.14
.18
$14.72
.67
.05
.00
.00
.12
$14.27
.32
.03
-.03
-.18
.06
Total Operating Receipts
$17.84
$16.73
$16.32
$15.95
$15.50
$1.50
3.62
.00
.00
.01
.39
.15
.00
.04
.26
.32
.06
.19
.00
.00
.10
.10
.11
.08
.06
.08
.09
.07
.20
.47
.06
$2.12
4.17
.00
.00
.07
.52
.21
.00
.09
.35
.46
.14
.26
.00
.00
.34
.18
.16
.16
.13
.12
.16
.10
.27
.76
.10
$2.50
4.63
.04
.00
.14
.64
.27
.02
.12
.46
.54
.20
.31
.00
.00
.42
.27
.19
.23
.20
.15
.22
.13
.30
.94
.13
$2.71
4.96
.10
.00
.29
.77
.32
.15
.19
.56
.59
.26
.37
.04
.07
.51
.35
.22
.27
.25
.19
.30
.15
.37
1.10
.20
$3.14
5.52
.32
.02
.91
.98
.41
.58
.28
.69
.80
.33
.50
.14
.62
.73
.44
.31
.40
.39
.29
.52
.21
.46
1.31
.24
$12.21
$12.90
$13.28
$13.76
$14.45
.00
.31
.22
.00
.39
.32
.00
.50
.39
.25
.57
.51
1.64
.85
.75
$2.93
$2.52
$2.01
$1.55
$0.51
Accrual Operating Expenses
Hired labor
Dairy grain & concentrate
Dairy roughage
Nondairy feed
Mach. hire/rent/lease
Mach. repair & fann veh. expo
Fuel, oil & grease
Replacement livestock
Breeding
Vet & medicine
Milk marketing
Bedding
Milking supplies
Cattle lease
Custom boarding
Other livestock expense
Fertilizer & lime
Seeds & plants
Spray/other crop expenses
Land, building, fence repair
Taxes
Real estate rent/lease
Insurance
Utilities
Interest
Miscellaneous
Total Operating Expenses
Expansion Livestock
Machinery Depreciation
Building Depreciation
Net Farm Income w/o Apprec.
-
29
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 this summary. Each column of the chart is independent of the others.
The farrns which are in the top 20 percent for one factor would not necessarily be the same farrns
which make up the 20 percent for any other factor. Use this information to identify business areas
where more challenging goals are needed.
FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS
32 Large Herd Dairy Farms, 1996
Size of Business
Pounds
Number
of
Milk
Worker
Equivalent
Cows
Sold
(11)
(11)*
(11)
1,326
29,418,966
24.5
650
14,115,476
14.0
499
10,819,939
10.9
8,250,900
9.5
377
6,753,491
333
7.1
Rates of Production
Pounds
Tons Hay
Tons Com
Milk Sold
Crop
Silage Per
OM/Acre
Acre
Per Cow
(10)
(9)
(9)
24,440
4.9
20
22,718
19
3.7
21,722
18
3.2
20,700
2.6
16
19,088
2.3
13
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11)
(11)
89
1,894,905
50
1,075,001
46
981,941
40
903,326
736,784
37
Cost Control
Grain
Bought Per
Cow
(10)
$746
919
1,010
1,081
1,191
Per
Cwt.
(11)
$1.50
2.12
2.50
2.71
3.14
% Grain
Machinery
is of
Costs
Per
Cow
Milk Receipts
(11)
(10)
24%
$266
28
376
409
31
34
462
573
37
Hired Labor Expense
As %of
Per Hired
Milk Sales
Worker Eguiv.
(CALC)
(CALC)
$13,765
10%
20,243
14
23,939
17
26,556
19
49,027
21
Labor &
Machinery
Costs Per Cow
(11)
$789
932
1,002
1,064
1,290
Milk
Marketing
(10)
$0.32
0.46
0.54
0.59
0.80
Feed & Crop
Expenses
Per Cow
(10)
$943
1,077
1,139
1,249
1,351
Expenses Per Cwt.
Veterinary &
Medicine
(10)
$0.26
0.35
0.46
0.56
0.69
*( ) = page number of the participant's OFBS where factor is located.
CALC=Need to calculate for each farm; refer to the Glossary for definition.
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$4.49
4.90
5.40
5.74
6.18
Other
Livestock
(10)
$0.10
0.34
0.42
0.51
0.73
­
30
Cost Control (can't)
Operating Cost
Per
Per
Cow
Cwt.
(10)
(10)
Machinery & Crop Expense
Per Tillable
Per Ton
Acre
Dry Matter
(CALC)
(CALC)
$199
247
282
312
401
$53
69
84
97
117
$2,245
2,509
2,626
2,743
2,962
$10.86
11.71
12.13
12.54
13.33
Total Cost
Per
Cow
(10)
Per
Cwt.
(10)
$2,703
2,989
3,132
3,237
3,551
$13.06
13.71
14.28
15.58
15.97
Expense Ratios
Operating
(CALC)
Depreciation
(CALC)
Interest
(CALC)
72.0%
76.1
78.1
79.6
83.3
3.7%
4.5
5.4
6.7
9.0
2.9%
4.6
6.0
6.5
8.0
Income Generation
Milk Receipts
Per Cwt.
(10)
Net Milk Receipts
Per Cwt.
(CALC)
Milk Receipts
Per Cow
(10)
Dairy Cattle
Sales Per Cow
(10)
Dairy Calf Sales
Per Cow
(10)
$14.27
14.72
14.82
15.05
15.50
$14.81
14.57
14.37
14.19
13.75
$3,609
3,333
3,251
3,106
2,826
$482
252
197
141
69
$25
18
14
12
5
Debt Management
Farm Debt Per Cow
Intermediate &
Total
Long Term
(5)
$1,418
2,165
2,653
3,167
3,870
(5)
$970
1,621
2,123
2,570
3,383
Cost of
Borrowed
Capital
(CALC)
5.7%
7.8
8.2
8.8
9.8
Planned Debt Payments
Per
Per
Cow
Cwt.
(8)
$239
367
435
520
690
(8)
$1.08
1.69
2.06
2.37
3.35
-
31
Amount Available for Family
Living, Debt Service & Investment
Per Cow
Per Cwt.
(12)
(12)
$747
$3.54
581
2.70
498
2.34
425
2.00
323
1.41
Farm
Capital
Per Cow
(11)
$4,244
5,047
5,667
6,183
7,191
Percent
Equity
(5)
76%
61
54
47
36
Labor and
Mgmt. Income
Per Operator
(3)
$409,825
141,898
76,000
41,936
-13,743
Real Estate
Investment
Per Cow
(11)
$1,314
1,896
2,307
2,650
3,581
Leverage
Ratio
(CALC)
0.25
0.41
0.48
0.54
0.65
Cash Flow Analysis
Personal Withdrawals
& Family Expenditures
Per Cow
Per Cwt.
(CALC)
(CALC)
$336
$1.54
180
0.84
136
0.63
108
0.51
26
0.12
Capital Efficiency
Total Labor Cost
Machinery
Per Worker
Investment
Equivalent
Per Cow
(CALC)
(11)
$19,278
$586
24,863
788
27,462
919
29,247
1,039
51,356
1,262
Solvency
Debt to Asset Ratios
Total
Current/Intermed.
(5)
0.26
0.42
0.48
0.54
0.65
Profitability
Rate Return to Equity Capital
With
Without
Appreciation
Appreciation
(3)
21.8%
14.2
9.3
5.8
-2.3
Net Farm Income Without Appreciation
Per Cow
Per Cwt.
(10)
(10)
$671
$2.93
545
2.52
432
2.01
337
1.55
98
0.51
(3)
23.9%
17.0
10.7
6.8
0.6
(5)
0.22
0.35
0.45
0.56
0.70
Cash Flow
Coverage
Ratio
(8)
1.84
1.56
1.17
0.93
0.63
Asset
Turnover
Ratio
(11)
0.88
0.70
0.66
0.60
0.51
Long Term
(5)
0.11
0.35
0.49
0.61
0.93
Rate Return to All Capital
Without
With
Appreciation
Appreciation
(3)
(3)
14.4%
10.9
8.5
6.5
3.1
15.1%
12.2
9.7
7.1
4.3
Net Farm Income
From Operations
Ratio
(CALC)
17.6%
14.6
11.1
8.9
2.4
Net Income
Efficiency
Ratio
(CALC)
20.4%
14.1
9.5
6.7
4.2
-
32
IDENTIFY AND SET GOALS
IT businesses are to be successful, they must have direction. Written goals help provide businesses
with an identifiable 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 en­
sure that the business continues to move in the proper direction. Goals should be SMART:
1. Goals should be Specific.
2. Goals should be Measurable.
3. Goals should be Achievable but challenging.
4. Goals should be Rewarding.
5. Goals should designate a Time when each goal will be achieved.
Goal setting on a dairy farm does not have to be a complex process. In many cases it provides 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 pro­
gressing.
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
-
33
Worksheet for Setting Goals (Continued)
II. Goals
What
How
When
Who is Responsible
Summarize Your Business Performance
The Farm Business Charts on pages 29-31 can be used to help identify strengths and weaknesses of
your farm business. Identify three major strengths and three areas of your farm business that need
improvement.
Strengths:
_
Needs improvement
_
-
34
GLOSSARY AND LOCATION OF COMMON TERMS
Some of the following definitions include formulas for calculating the factor being described. Page
references to the individual Dairy Farm Business Summary are provided in parentheses for ease of
calculation for your farm.
Accounts Payable - Open accounts or bills owed to feed and supply firms, cattle dealers, veterinari­
ans and other providers 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 6)
Accrual Receipts - (defined on page 6)
Annual Cash Flow Statement - (defined on page 14)
Appreciation - (defined on page 7)
Asset Turnover Ratio - The ratio of total farm income to total farm assets, calculated by dividing
total accrual operating receipts plus appreciation by average total farm assets.
Balance Sheet - A "snapshot" of the business financial position at a given point in time, usually De­
cember 31. The balance sheet equates the value of assets to liabilities plus net worth.
Capital Efficiency - The amount of capital invested per production unit. Relatively high invest­
ments 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 Coverage Ratio - (defined on page 16)
Cash Paid - (defined on page 4)
Cash Receipts - (defined on page 6)
Change in Accounts Payable - (defined on page 6)
Change in Accounts Receivable - (defined on page 6)
Change in Inventory - (defined on page 4)
Cost of Borrowed Capital - A weighted average of the cost of borrowed capital to the farm. Cal­
culate by multiplying end of year principal of each loan that is borrowed by the interest rate for each
loan at that time. Add up each amount that is calculated for each loan and then divide by total
amount of borrowed funds. Do not include accounts payable. This information is found on pages 8
& 9 of the data entry form.
-
35
Current Portion - (defined on page 9)
Dairy (farm) - A farm business where dairy farming is the primary enterprise, operating and man­
aging this farm is a full-time occupation for one or more people and cropland is owned.
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)
Depreciation Expense Ratio - The percentage of Total Accrual Receipts that is charged to depre­
ciation expense. Machinery Depreciation (DFBS p. 2) plus Building Depreciation (p. 2) divided by
Total Accrual Receipts (p. 3) times 100.
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 farm operator/manager's owned capital or farm net worth.
Expansion Livestock - Purchased dairy cattle and other livestock that cause an increase in herd size
from the beginning to the end of the year.
Farm Debt Payments as Percent of Milk Sales - Amount of milk income committed to debt re­
payment, calculated by dividing planned debt payments by total milk receipts. A reliable measure of
repayment ability, see page 16.
Farm Debt Payments Per Cow - Planned or scheduled debt payments per cow represent the repay­
ment plan scheduled 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-term non-cancellable contract giving the leassee use of an asset in ex­
change for a series of lease payments. The term 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.
Hired Labor Expense per Hired Worker Equivalent - The total cost to the farm per hired worker
equivalent. Divide accrual hired labor expense (p. 2) by number of hired plus family paid worker
equivalent (p. 11).
Hired Labor Expense as % of Milk Sales - The percentage of the gross milk receipts that is used
for labor expense. Divide accrual hired labor expense (p. 2) by accrual milk sales (p. 3).
Income Statement - A complete and accurate account of farm business receipts and expenses used
to measure profitability over a period of time such as one year or one month.
Interest Expense Ratio - The percentage of Total Accrual Receipts that is used for interest expense.
Total Accrual Interest (p. 2) divided by Total Accrual Receipts (p. 3) times 100.
Labor and Management Income - (defined on page 8)
­
36
Labor and Management 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.
Leverage Ratio - Dollars of debt per dollar of equity, computed by dividing total liabilities by total
equity.
Liquidity - Ability of business to generate cash to make debt payments or to convert assets to cash.
Machinery & Crop Expenses per Tillable Acre - A measure of the cost to produce crops on a til­
lable acre basis. Add total crop expenses (p. 9) and total machinery expenses (p. 9), then divide by
number of tillable acres, owned & rented (p. 9).
Machinery & Crop Expense per Ton Dry Matter - A measure of the cost per ton of DM to pro­
duce a crop. It is not a measure of total costs to produce feed. Add total crop expenses (p. 9) and
total machinery expenses (p. 9), then divide by total forage, production, tons DM (p. 9).
Net Farm Income - (defined on page 7).
Net Farm Income from Operations Ratio - The percentage of each gross dollar that is generated
that is net farm income. Net Farm Income without Appreciation (p. 3) divided by Total Accrual Re­
ceipts (p. 3) times 100.
Net Farm Income without Appreciation per Cwt. - The amount of net farm income, without ap­
preciation, per cwt., that the farm generated. Divide net farm income without appreciation (p. 3) by
number of cwt. of milk sold, which is total milk sold (p. 10) divided by 100.
Net Farm Income without Appreciation per Cow - The amount of net farm income, without ap­
preciation, per cow that the farm generated. Divide net farm income without appreciation (p. 3) by
average number of cows for the year (p. 10).
Net Income Efficiency Ratio - A measure of how efficiently the business is in generating net in­
come, taking into account the differences in number of operators, debt levels, and amount of unpaid
family labor being used on a farm. Net farm income without appreciation minus unpaid family labor
charge (p. 3), plus Accrual Interest Paid (p. 2), divided by number of operators (p. 3), divided by
Total Accrual Receipts (p. 3) times 100.
Net Milk Receipts per Cwt. - The mail box price received by farmers before any farmer authorized
assignments or deductions. Accrual Receipts from milk, per cwt. (p. 10) minus accrual milk mar­
keting expense per cwt. (p. 10).
Net Worth - The value of assets less liabilities equal net worth. It is the equity the owner has in
owned assets.
Operating Costs of Producing Milk - (defined on page 22).
Operating Expense Ratio - The percentage of Total Accrual Receipts that is used for operating ex­
penses, excluding interest & depreciation. Total Accrual Expenses (p. 2) minus Machinery Depre­
ciation (p. 2), minus Building Depreciation (p. 2), minus Accrual Interest Expense (p. 2), divided by
Total Accrual Receipts (p. 3) times 100.
-
37
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 spe­
cific categories. Other livestock expenses include; bedding, DHIC, milk house and parlor supplies,
livestock board, registration fees and transfers.
Personal Withdrawals and Family Expenditures Including Nonfarm Debt Payments - All the
money removed from the farm business for personal or nonfarm use including family living ex­
penses, health and life insurance, income taxes, nonfarm debt payments, and investments.
Personal Withdrawals & Family Expenditures per Cwt. - The amount of money on a per cwt.
basis that the family uses for family living and personal expenses. This is the total amount, per cwt.,
used by the family, including farm and nonfarm income. Personal withdrawals/family expense, in­
cluding nonfarm debt payments (p. 7) divided by pounds milk sold (p. 10) times 100.
Personal Withdrawals & Family Expenditures per Cow - The amount of money on a per cow ba­
sis that the family used for family living and personal expenses. This is the total amount, per cow,
used by the family, including farm and nonfarm income. Personal withdrawals/family expense, in­
cluding nonfarm debt payments (p. 7) divided by average number of cows (p. 10).
Profitability - The return or net income the owner/manager recei ves 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 Producing Milk - (defined on page 22).
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 Equity Capital- (defined on page 9).
Return on Total Capital - (defined on page 9).
Solvency - The extent or ability of assets to cover or pay liabilities. Debt/asset and leverage ratios
are common measure of solvency.
Total Costs of Producing Milk - (defined on page 22).
Total Labor Costs per Worker Equivalent, All Labor - The average cost per worker equivalent
when considering all labor (hired, paid family, family non-paid, and operators) used on the farm and
total costs for this labor. Total Labor Cost (p. 11) divided by number of worker equivalents (p. 11).
Whole Farm Method - A procedure used to calculate costs of producing milk on dairy farms with­
out using enterprise cost accounts. All non-milk receipts are assigned a cost equal to their sale value
and deducted from total farm expenses to determine the costs of producing milk.
l
­
38
INDEX
Accounts Payable
Accounts Receivable
Accrual Expenses
Accrual Receipts
Acreage
Advanced Government Receipts
Age
Amount Available for Debt Service
Annual Cash Flow Statement..
Appreciation
Asset Turnover Ratio
Balance Sheet
Bam Type
Business Type
Capital Efficiency
Cash From Nonfarm Capital Used in
the Business
Cash Flow Coverage Ratio
Cash Paid
Cash Receipts
Change in Accounts Payable
Change in Accounts Receivable
Change in Inventory
Change in Net Worth
Crop Expenses
CroplDairy Ratios
Current Portion
Dairy (farm)
Dairy Cash-Crop (farm)
Debt per Cow
Debt to Asset Ratios
Deferred Taxes
Depreciation
Dry Matter
Education
Equity CapitaL
Expansion Livestock
Expenses
Farm Business Chart
Farm Debt Payments as Percent
of Milk Sales
Farm Debt Payments Per Cow
Financial Lease
Page(s)
5, 10
6, 10
5, 7
6, 7
19
9, 10
24
16
14
7,13,21
24
10
4
4
24
14
16
4
6, 14
5
6
4, 6
13
5,19
19
9, 10
4
4
12
12
11
5, 12
19
24
9
5, 14
5
29,30,31
16
16
10
Income Statement
Inflows
Labor & Mgmt. Income
Labor & Mgmt. Income Per Oper.
Labor Efficiency
Land Resources
Liquidity
Lost Capital
Machinery Expenses
Milking Frequency
Milk Production
Milking System
Money Borrowed
Net Farm Income
Net Investment
Net Worth
Number of Cows
Operating Costs of Producing Milk
Opportunity Cost
Other Livestock Expenses
Outflows
Part-Time Cash-Crop Dairy
Part-Time Dairy (farm)
Percent Equity
Personal Withdrawals and Family
Expenditures Including Nonfarm
Debt Payment
Principal Payments
Profitability
Purchased Inputs Cost
Receipts
Record System
Repayment Analysis
Replacement Livestock
Retained Earnings
Return on Equity CapitaL
Return on Total Capital
Solvency
Total Costs of Producing Milk
Whole Farm Method
Worker Equivalent
Yields Per Acre
Page(s)
4
14
8
8
24
19
12
12
5,20
4
21
4
14
7
12
10
21
22,23
9
5
14
4
4
11,12
14
14
7
22,23
6
4
16
5
13
9
9
12
22,23
22,23
24
19
-
(
~
OTHER A.R.M.E. EXTENSION BULLETIN)
TItle
Author(s)
97-07
Dairy Farm Business Summary, Southeastern New York
Region, 1996
Knoblauch, W A, L.D Putnam, S.E.
Hadcock, L R. Hulle, M. Kir Iy, C.A.
McKeon
97-06
Dairy Farm Business Summary, Western and Central
Plateau Region, 1996
Knoblauch, W.A., LD. Putnam,
C.A. Crispell, J.S. Petzen, J.W.
Grace, AN. Dufresne and G.
Albrecht
97-05
Dairy Farm Business Summary: Western and Central
Plain Region, 1996
Knoblauch, W.A., L.D. Putnam, J.
Karszes, M. Stratton, C. Mentis and
George Allhusen
97-04
Fruit Farm Business Summary, Lake Ont rio Region, New
York,1995
White, G.B., A. DeMarree and L.D.
Putnam
97-03
Labor Productivities and Costs in 35 of the Best Fluid Milk
Plants in the U.S.
Erba, EM., R.D. Aplin and M.W.
Stephenson
97-02
Micro DFBS: A Guide to Processing Dairy Farm Business
Summaries in County and Regional Extension Offices for
Micro DFBS Version 4.0
Putnam, L.D., W.A Knoblauch and
S.F. Smith
97-01
Changing Patterns of Fruit and Vegetable Production in
New York State, 1970-94
Park, K., E.W. McLaughlin and C.
Kreider
96-20
Supermarket Development in China
German, G., J. Wu and M.L. Chai
96-19
New York Economic Handbook: 1997 Agribusinss
Economic Outlook Conference
AR.M.E. Staff
96-18
Farm Income Tax M nagement and Reporting Reference
Manual
Smith, S. and C. Cuykendall
96-17
Income Tax Myths, Truths, and Examples Concerning
Farm Property Dispositions
Smith, S.
96-16
Dairy Farm Business Summary, Eastem New York Renter
Summary 1996
Smith, S.F. and L.D. Putnam
96-1
A Comparative Assessment of the Milk Hauling Sector In
the US and Argentina
de GUiguet, ED. and J.E. Pratt
96-14
Trade LIberalization and the U.S. and Canadian Dairy
Industries
Doyon, M.A. and A.M. Novakovic
96-13
Bibliography of Horticultural Product Marketing and Related
Topic Papers Third Edition
Figueroa, E.E