Document 11949830

1995 DAIRY FARM BUSINESS SUMMARY

Central Valleys Region

Table of Contents

INTRODUCfION

Program Objectives

FOfDlat Features

SUMMARY AND ANALYSIS OF TIlE FARM BUSINESS

Business Characteristics

Income Statement.

Profitability Analysis

FafDl and Family Financial Status

Statement of Owner Equity

Cash Flow Statement.

Repayment Analysis

Cropping Analysis

Dairy Analysis

Capital and Labor Efficiency Analysis

COMPARATIVE ANALYSIS OF TIlE FARM BUSINESS

Progress of the Fann Business

Regional Fann Business Chart

New York State FafDl Business Chart

. Financial Analysis Chart

Comparisons by Type of Barn and Herd Size

Herd Size Comparisons

IDENTIFY AND SET GOALS

GLOSSARY AND LOCATION OF COMMON TERMS

INDEX

:

;

23

25

26

26

20

21

21

22

32

34

37

4

7

11

12

14

16

18

1

1

1

2

2

2

-

1995 DAIRY FARM BUSINESS SU~RY

CENTRAL VALLEYS REGION

INTRODUCTION

Dairy fanners throughout New York State have been participating in Cornell Cooperative Extension's fann busi ness summary and analysis program since the early 1950's. Managers of each participating fann business receive a com prehensive summary and analysis of the fann business. The information in this report represents an average of the data submitted from dairy fanns in the Central Valleys Region for 1995.

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 business through appropriate use of historical fann data and the application of modem fann business analysis techniques. This information can also be used to establish goals that will enable the business to better meet its objectives. In short, DFBS provides business and financial information needed in identifying and evaluat ing strengths and weaknesses of the farm business.

Format Features

This regional report follows the same general format as in the 1995 DFBS individual farm report received by all participating dairy farmers. 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 Form 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 Oneida, Schoharie, Madison, Chenango, Otsego, Oswego, Montgomery, Onondaga and Herkimer Counties. This publication includes the following number of fanns by county: Oneida 18, Schoharie 11,

Madison 10, Chenango 9, Otsego 6, Oswego 5, Montgomery 3, Onondaga 2, and Herkimer 1. This summary was pre pared by Eddy L. LaDue, Department of Agricultural, Resource, and Managerial Economics, College of Agriculture and

Life Sciences, Cornell University. The farm business data were collected by Karen Livingston and Jacqueline M. Hilts,

Cooperative Extension Agents, Oneida and Madison Counties; James A. Hilson, Cooperative Extension Agent, Oswego

County; Thomas Weeks, temporary Cooperative Extension Agent, Chenango and Montgomery Counties; A. Edward

Staehr, Cooperative Extension AgentlWhole-Farm Planner, Skaneateles Lake Watershed Program; and Charles Z.

Radick, Farm Accountant/Consultant, Herkimer, Otsego, Schoharie and Montgomery Counties. Stuart F. Smith and

Cathy Wickswat assisted with the data collection process. Analysis and data management assistance were provided by

Linda D. Putnam. Melody Clark prepared the publication.

-

2

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 techniques are used by the dairy farmers in this region. The following table shows important farm business characteristics and the number of farms with each characteristic.

BUSINESS CHARACTERISTICS

65 Central Valleys Region Dairy Farms, 1995

Type of Farm

Dairy

Part-time dairy

Dairy cash-crop

Part-time cash-crop dairy

Type of Ownership

Owner

Renter

Trpe of Business

Single Proprietorship

Partnership

Corporation

TrpeofBarn

Stanchion or Tie-Stall

Freestall

Combination

Milking Frequency

2 times per day

3 times per day

Other

Number

63

0

2

0

Number

59

6

Number

39

25

1

Number

42

18

5

Number

60

5

0

Milking System

Bocket & carry

Dumping station

Pipeline

Herringbone parlor

Other parlor

Production Records

DIllC

Owner-Sampler

Other

None bST Usage

Used on <25% of herd

Used on 25-75% of herd

Used on >75% of herd

Stopped using in 1995

Not used in 1995

Business Record System

Account Book

Agrifax (mail-in only)

On-farm computer

Other

Number

1

0

45

13

6

Number

48

4

4

9

Number

5

11

1

4

44

Number

12

10

25

18

The averages used in this report were compiled using data from all the participating dairy farms in this region unless noted otherwise. There are full-time dairy farms, part-time farms, dairy cash-crop farms, farm renters, partner ships, 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 ac crual 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 ac tually used in 1995.

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.

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

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

Cash

Paid

$ 22,178

65,485

2,745

366

3,043

15,753

5,938

3,132

3,648

5,996

14,468

1,697

7,595

14

91

3,541

8,094

4,330

3,704

3,328

6,938

7,211

4,016

9,231

18,108

2,743

Total Operating

Expansion livestock

Machinery depreciation

Building depreciation

TOTAL ACCRUAL EXPENSES

$ 223,393

$ 2,573

3

CASH AND ACCRUAL FARM EXPENSES


$

Change in

Inventory or Prepaid

Expense

0

1,473

61

2 o «

-17

13 o «

-81

-6 o «

66

49 o

« o

«

22

«

+

126

268

2

7 o

« o

« o « o

« o

«

-8

$ 1,977 o

«

-111

49

-3

-8 o

-55 o o

-17

-119

-114

53

Change in

Accounts

Payable

$ -84

=

Accrual

Expenses

$ 22,094

802

-51 o

-24

245

30

64,814

2,633

364

3,019

16,015

5,955

-25

165

176

9

65

205

-40

3,021

3,778

5,999

14,460

1,631

7,491

14

91

3,502

7,849

3,948

3,755

3,296

7,103

7,387

4,025

9,296

18,313

2,711

$ 1,148 o

$ 222,564

2,573

14,805

6,227

$ 246,169

Change in prepaid expenses (noted above by «) is a net change in non-inventory expenses that have been paid in ad vance of their use. For example, prepaid lease expense on the beginning of year balance sheet represents last year's pay ment for use of the asset during this year. End of year prepaid expenses 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 accrual expenses because these expenses were incurred (resources used) in 1995 but not paid for. A decrease is subtracted because it represents payment for resources used before 1995.

Accrual expenses are the costs of inputs actually used in this year's production. They are the cash paid, less changes in inventory and prepaid expenses, plus accounts payable.

4

CASH AND ACCRUAL FARM RECEIYfS


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

$ 245,886

10,896

2,331

97

3,100

4,186

666

216

2,150

$ 269,528

+

(-)

$

Change in

Inventory

6,762

-109

-575

-1

0

$ 6,077

+

Change in

Accounts

Receivable

$ 1,726

-41

1

0

28

91

77

10

66

$ 1,958

= Accrual

Receipts

(-)

$

$

247,612

17,617

2,332

-12

2,553

4,276

743

226

2,216

0

277,563

*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 profit ability.

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 in cluded. An increase in advanced government receipts is subtracted from cash income because it represents income re ceived in 1995 for the 1996 crop year in excess of funds earned for 1995. Likewise, a decrease is added to cash govern ment receipts because it represents funds earned for 1995 but received in 1994.

Changes in accounts receivable are calculated by subtracting beginning year balances from end year balances. The Janu ary milk check for this December's marketings compared with the previous January's check is included as a change in accounts receivable.

Accrual receipts represent the value of all farm commodities produced and services actually generated by the farm busi ness during the year.

ProfitabiUty 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.

* 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 corpo ration.

,

-

<

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, financing, and owning the farm busi ness. This is not a measure of cash available from the year's business operation. Cash flow is evaluated later in this re port.

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


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 (without appreciation)

Total

Average

Per Cow

$

-

$

$

$ 277,563

-3,566

617

3,898

4

278,516

246.169

32,347

31,394

$

$

323

313

Total

My Farm

Per Cow

$ - -

$ - -

$ - -

$ - -

$ - -

$ - -

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 and Milk/Cow

65 Central Valleys Region Farms, 1995

1200

c 1000

'.::l

.S u c..

800

~

~

'-"

600

~

~

0 u

400

]

0

.....

200

...

II)

Z

0

-200

{,II}

[]

-400

10000 12000

[]

[]

[][]

[] dl

dl

[] []

[]

[]

[]

[]

QJ[]

[]

I:h

[]

[]

[] ac[]

[]

~

[]

[]

~

[]

[]

[] []

Ell

[] [] []

8J[]

[]

[][] []

[]

[ ] [ ]

[]

[]

[]

[]

[]

14000 16000 18000 20000

Pounds Milk Sold Per Cow

22000 24000 26000

6

Labor and management income is the return which farm operators receive for their labor and management used in operat ing 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 de ducting a charge for family labor unpaid and the opportunity cost of using equity capital, at a real interest rate of five per cent, from net farm income excluding appreciation. The interest charge of five percent reflects the long-term average rate of return above inflation that a farmer might expect to earn in comparable risk investments.

LABOR AND MANAGEMENT INCOME


Average Item

Net farm income without appreciation

Family labor unpaid @ $1,450 per month

Interest on $415,449 average equity capital @ 5% real rate

Labor & Management Income per farm (1.60 Operators/farm)

Labor & Management Income per OperatorlManager

$31,394

- 3,263

-20,772

$ 7,359

$ 4,599

My Farm

$ - - -

$ - - -

$ - - -

Labor and management income per operator averaged $4,599 on these 65 farms in 1995. The range in labor and management income per operator was from less than $-74,000 to more than $59,000. Returns to labor and management were negative on 48% of the farms. Labor and mangement income per operator ranged from $0 to $20,000 on 37% of the farms while 15% showed labor and management incomes of $20,000 or more per operator.

25

Distribution of Labor & Management Incomes per Operator

65 Central Valleys Region

Dairy

Fanns, 1995

23

20

~ '"

15

0

....

...

8

10

5

0

<-30 -30 to -10 -10 to 0 o to 10

Income (thousand dollars)

10 to 20 20 to 30 >30

-

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. Rcturn on total capital is calculated by adding inter est 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


Item

Net farm income with appreciation

Family labor unpaid @$1,450 per month

Value of operators' labor & management

Return on equity capital with appreciation

Interest paid

Return on total capital with appreciation

Average

$

+

$

$ 32,347

3,263

35,111

-6,027

18,313

12,286

My Farm

$ - - -

$ - - -

+ - - -

$ - - -

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

$

$

-6,980

11,333

-1.45%

-1.68%

1.86%

1.72% .

$ - - -

$ - - -

- - - - _ %

- - - - _ %

- - - _ %

- - - _ %

Farm and Family Financial Status

The fIrst step in evaluating the financial position of the farm is to construct a balance shect 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 payments is listed as a liabil ity 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 1995, 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 1995 that are for participation in the 1996 program are the end year balance and payments received in 1994 for participation in the 1995 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.

8

1995 FARM BUSINESS & NONFARM BALANCE SHEET


Farm Assets

Current

Farm cash, checking

& savings

Accounts receivable

Prepaid expenses

Feed

Land

&

& 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

Long Term owned leased buildings:

Total Long Term

$

$

$ 102,963

0

43,003

1,013

130,847

$ 106,223

0

43,017

826

136,374

2,021

675

2,453

808

3,350 3,262

$ 283,872 $ 292,963

$ 292,314

$ 292,715

$

Jan. 1

2,672

19,616

0

51,687

73,975

401

650,562

$

$

Dec. 31

3,638

21,574

0

53,087

78,299

$ 298,502

321

$ 298,823

$ 670,085

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

Structured debt

>10 years

Financial lease

(structures)

Total Long Term

Total Farm Liab.

FARM NET WORTH

$

Jan. 1

8,235

8,483

4,747

4

17,332

4,293

$ 43,094

$101,753

$ 90,693

401

$ 91,094

Total Farm Assets

$238,637

$411,925

Nonfarm Assets, Liabilities & Net Worth (Average of 38 farms reporting)

Assets Jan. 1

Personal cash, checking

& savings

Cash value life insurance

$ 3,659

17,120

Nonfarm real estate

Auto (personal share)

Stocks & bonds

Household furnishings

15,071

4,316

5,391

7,276

All other nonfarm assets 3,545

Total Nonfarm Assets $ 56,379

$

Dec. 31

3,972

18,923

19,545

3,757

7,330

7,405

5,305

$ 66,237

Liabilities & Net Worth

Nonfarm Liabilities

NONFARM NET WOR1H

$

Jan. 1

5,232

$ 51,147

Dec. 31

$ 9,383

10,388

3,210

5

22,091

5,192

$ 50,269

$ 104,017

2,021 2,453

675 808

$104,449 $ 107,278

$ 93,245

321

$ 93,566

$ 251,113

$ 418,972

$

Dec. 31

6,273

$ 59,964

Farm & Nonfarm Assets, Liabilities, and Net Worth* Jan. 1 Dec. 31

Total Assets

Total Liabilities

TOTAL FARM & NONFARM NET WORTH

$ 706,941

243,869

$463,072

$ 736,322

257,386

$ 478,936

*Assumes that average nonfarm assets and liabilities for the nonreporting farms were the same as for those reporting.

-

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 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. However, they could be important

Assets

Total Current Assets

Total Inter. Assets

Total Long Term Assets

TOTAL FARM ASSETS

CONDENSED BALANCE SHEET INCLUDING DEFERRED TAXES

December 31, 1995

11 New York Dairy Farms, 1995

$

$

128,267

470,522

Liabilities & Net Worth

Current debts & payables

Current deferred taxes

Total Current Liabilities

Intermediate debts & leases

Intermediate deferred taxes

Total Intermediate Liabilities

Long tenn debts & leases

Long tenn deferred taxes

Total Long Term Liab. $ 427,795

$ 1,026,584 TOTAL FARM LIABILITIES

Farm Net Worth

Percent Equity (Farm)

$

$

$

$

$

$

$

$

95,207

76,367

171,574

132,835

124,500

257,335

142,392

68.412

210,804

639,713

386,871

38%

Total Nonfarm Assets

TOTAL ASSETS

$

$

49,423

1,076,007

Nonfarm debts

Nonfarm deferred taxes

Total Nonfarm Liabilities

TOTAL LIABILITIES

Total Net Worth

Percent Equity (Total)

$

$

555

12,287

12,842

$

$

652,555

423,452

39%

-

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


Average Item

Financial Ratios - Farm:

Percent equity

Debt/asset ratio: total long-term intermediate/current

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

63%

0.37

0.31

0.42

Farm Debt Levels:

Total farm debt

Long-term debt

Intermediate & long term

Intermediate & current debt

$

Per Cow

2,415

900

1,931

1,515

4%

37%

63%

$

Per Tillable

Acre Owned

1,579

588

1,263

991

Per Cow

$ - -

My Farm

%

Per Tillable

Acre Owned

$ - -

%

%

%

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 invesunent indi cates whether the capital stock is being expanded (positive) or depleted (negative).

FARM INVENTORY BALANCE


Item

Value beginning of year

Purchases

Gift & inheritance

Lost capital

Sales

Depreciation

Net investtnent

Appreciation

Value end of year

$

+

13,004*

2,855

°

1,632

6,227

Average of Region's Farms

Real Estate

$ 292,314

Machinery & Equipment

$ 130,847

$ 20,529

+

°

814

14,805

=

+

$

2,290

3,898

298,502

*$2,411 land and $10,593 buildings and/or depreciable improvements.

=

+

4,910

617

$ 136,374

-

11

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 de termine to what degree the change in equity 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 awned by the business (called change in valuation equity).

Retained earnings is an excellent indicator of farm generated financial progress.

STATEMENT OF OWNER EQUITY (RECONCILIATION)


Item

Beginning of year farm net worth

Net farm income w/o appreciation

+Nonfarm cash income

-Personal withdrawals & family expenditures excluding nonfarm borrowings

RET AINED EARNINGS

Nonfarm noncash transfers to farm

+Cash used in business from nonfarm capital

-Note or mortgage from farm real estate sold (nonfarm)

CONTRIBUTEDIWITHDRAWN CAPITAL

Appreciation

-Lost capital

CHANGE IN VALUATION EQUITY

IMBALANCFlERROR

End of year net worth*

$ 31,394

+ 5,518

Average

$ 411,925

31.994

+$ 4,918

$ 0

+ 4,652

820

+$ 3,833

$ 953

2,855

+$ -1,902

- $ -202

= $418,972

My Farm

$ - -

$ - -

+ - -

$ - -

+ - -

$ - -

+ $ - -

+ $ - -

+ $ - -

- $ - -

= $ - -

Change in Net Worth

Without appreciation

With appreciation

*May not add due to rounding.

$

$

6,094

7,047

$ - - - -

$ - - - - -

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 fmt 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 activi ties, 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


Average Item

Cash Flow from Operating Activities

Cash farm receipts

Cash farm expenses

= Net cash farm income

Nonfarm income

Personal withdrawals & family expenses including nonfarm debt payments

+ Net cash nonfarm income

= 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)

$ 269,528

223,393

$

$

$

$

5,518

33,133

814

812

207

2,573

20,529

13,004

115

$ 44,108

1,559

1,905

4,652

1,139

33,634

3,096

0

$

$

$

$

$

$

$

46,134

-27,615

1,833

36,221

53,363

36,730

2,672

3,638

$

$

$

$

$

18,519

-34,388

16,633

-966

-202 l

I

'

I

,

-

13

ANNUAL CASH FLOW STATEMENT

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 performance of the business. However, the critical question to many farmers and lenders is whether planned payments can be made in 1996.

The cash flow projection worksheet on the next page can be used to estimate repayment ability, which can then be com pared to planned 1996 debt payments shown below.

FARM DEBT PAYMENTS PLANNED

Same 53 Central Valleys Region Dairy Farms, 1994 & 1995

Debt Payments

Long term

Intermediate term

Short term

Operating (net reduction)

Accounts payable

(net reduction)

Total

Per cow

Per cwt 1995 milk

Percent of total

1995 farm receipts

Percent of 1995 milk receipts

Average

1995 Payments

Planned Made

$ 11,929

28,098

1,934

$ 14,837

36,790

3,028

1,393

915

$ 44,268

0

0

$ 54,655

$ 447

$ 2.37

16%

18%

$

$

552

2.93

20%

22%

Planned

1996

$ 13,217

32,201

962

1,535

2,037

$ 49,952

My Farm

1995 Payments

Planned Made

$ - -

$ - - -

$ - - -

$ - - -

$ - -

$ - -

$ - -

$ - -

Planned

1996

$ - -

$ - -

The cash flow coverage ratio measures the ability of the farm business to meet its planned debt payment schedule.

The ratio shows the percentage of payments planned for 1995 (as of December 31, 1994) that could have been made with the amount available for debt service in 1995. Farmers who did not participate in DFBS in 1994 have their 1995 cash flow coverage ratio based on planned debt payments for 1996.

CASH FLOW COVERAGE RATIO


Item Average My Farm

.Cash farm receipts

Cash farm expenses

+ Interest paid

Net personal withdrawals from farm*

(A)

(B)

=

Amount Available for Debt Service

= Debt Payments Planned for 1995

(AlB)

(as of December 31, 1994)

=

Cash Flow Coverage Ratio for 1995

$ 267,761

219,964

17,925

27,004

$ 38,718

$ 44,268

0.87

$

$

$

*Personal withdrawals and family expenditures less nonfarm income and nonfarm money borrowed. If family withdraw als are excluded, or inaccurately included, the cash flow coverage ratio will be incorrect.

-

Item

Average no. of cows

Total cwt of milk sold

Accrual Oper. Receipts

Milk

Dairy cattle

Dairy calves

Other livestock

Crops

Misc. Receipts

Total

15

ANNUAL CASH FLOW WORKSHEET

Regional Average

Per Cow

100.2

PerCwt

18,867.5

My Farm

Per Cowl

PerCwt

$ 2,471.18 $ 13.12 $

175.82

23.27

0.93

0.12

-0.12

25.48

74.46

0.00

0.14

0.40

$ 2,770.10 $ 14.71 $

Expected

Change

$

$

1996

Projection

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

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

$ 220.50 $ 1.17 $

646.85 3.44

26.28

3.63

30.13

159.83

59.43

30.15

37.70

59.87

144.31

16.28

74.76

0.14

0.91

34.95

78.34

39.40

37.48

32.89

70.88

73.72

40.17

92.77

0.20

0.17

0.38

0.39

0.21

0.49

27.07 0.14

$ 2,038.48 $ 10.83 $

0.77

0.09

0.40

0.00

0.00

0.19

0.42

0.21

0.14

0.02

0.16

0.85

0.31

0.16

0.20

0.32

$

$

Net Accrual Operating Income

(without interest paid)

Total

$ 73,308

6,077

$ $

- Change in livestock & crop invent.*

- Change in accounts receivable

- Change in feed & supply inventory**

+ Change in accounts payable***

1,958

1,977

943

NEf CASH FLOW

- Net family withdrawals

Available for Farm

- Farm debt payments

Available for Farm Invesbnent

$ 64,239

$ 26.476

$ 37,763

53,943

$ -16,180

$ 36,221

$

$

$

$

$

- Capital purchases

Additional Capital Needed $ $

*Includes change in advance government receipts. **Includes change in prepaid expenses. ***Excludes change in interest account payable.

-

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. 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


Item

Land

Tillable

Nontillable

Other nontillable

Total

Crop Yields

Hay crop

Corn silage

Other forage

Total forage

Corn grain

Oats

Wheat

Other crops

Tillable pasture

Idle

Total Tillable Acres

Average

4

63

27

12

4

8

24

12

65

Owned

159

46

82

287

Farms

62

61

Rented

138

17

13

168

Acres*

165

77

38

239

89

28

25

16

30

32

297

Total

297

63

95

455

Prod/Acre

2.71 to DM

13.09 tn

4.57 to DM

1.46 to DM

3.19 to DM

102.4 bu

71.3 bu

85.1 bu

Acres

My Farm

Prod/Acre toDM tn toDM toDM toDM 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 157, corn silage 72, corn grain 37, oats 5, tillable pasture 11, and idle 6.

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 infonnation provided.

The following crop/dairy ratios indicate the relationship between forage production, forage production resources, and the dairy herd.

CROPIDAIRY RATIOS


Item

Total tillable acres per cow

Total forage acres per cow

Harvested forage dry matter, tons per cow

Average

2.93

2.31

7.37

My Farm

-

17

Cropping Analysis (continued)

Eighteen cooperators have allocated crop expenses among the hay crop, com, and other crops produced. Fertil izer and lime, seeds and plants, and spray and other crop expenses have been computed per acre and per production unit for hay and com. Additional expense items such as fuels, labor, and machinery repairs are not included. Rotational grazing was used on 18 farms in. the region.

CROP RELATED ACCRUAL EXPENSES

Central Valleys Region Dairy Farms Reporting, 1995

Item

Total

Per

TilL

Acre

All

Com

Per

Acre

Com

Silage

Per

TonDM

Com

Grain

Per Dry

Sh. Bu.

Per

Hay Crop

Acre

Per

TonDM

Per

Till

Acre

Pasture

Per

Total

.Acre

No. of farms reporting

Ave. number of acres

Fert. & lime

Seeds & plants


TOTAL

65

297

$ 26.70

13.43

12.77

$ 52.90

My Farm

17

125

$ 40.23

24.28

$ 8.12

4.90

34.26

$ 98.77

6.91

$ 19.93

Fert. & lime

Seeds & plants


TOTAL

$ -

- -

$ -

$ -

$

$ - $

$

$

$

$

16

$ 0.37

0.22

158

$ 15.73 $ 5.83

6.11 2.26

0.31

$ 0.90

2.75 1.02

$ 24.59 $ 9.11

$

$

$

$

3

11

$ 22.09

0.76

43

$ 5.61

0.19

0.00

$ 22.85

0.00

$ 5.80

$

$

Most machinery costs are associated with crop production and should be analyzed with the crop enterprise. Total machinery expenses include the major ftxed costs (interest and depreciation), as well 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


Machinery

Expense

Fuel, oil & grease

Mach. repair & vehicle expo

Machine hire, rent & lease

Interest (5%)

Depreciation

Total

Total

Expenses

Average

Per Till.

Acre

$ 5,955

16,015

3,019

6,681

14,805

$ 46,475

$ 20.26

54.47 to.27

22.72

50.36

$ 158.08

$

$

Total

Expenses

My Farm

Per Till.

Acre

$

$

18

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 Dill and other dairy production information.

Changes in dairy herd size and ~arket values that occur during the year are identified in the table below. The change in inventory value without appreciation is attributed 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 6 and 7.

DAIRY HERD INVENTORY


Item

+

+

Beg. year (owned)

Change w/o apprec.

Appreciation

End year (owned)

Average number

Dairy Cows

No. Value

99 $102,963

5,499

-2,239

104 $106,223

End including leased 104

100

My Farm:

Beg. year (owned)

+ Change w/o apprec.

+ Appreciation

End year (owned)

End including leased

Average number

_ _ $_ _

_ _ $_ _

No.

Bred

Value

26 $ 22,970

775

-637

27 $ 23,108

77 (all age groups)

No.

Heifer

Open

Value

26 $ 13,961

666

-458

28 $ 14,169

- - $ - - - $ - -

- - $ - -

_ _ (all age groups)

- - $ - -

No.

Calves

Value

23 $ 6,072

-178

-154

23 $ 5,740

- - $ -

- - $ -

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

Dill should compare milk sold per cow with their rolling herd average on the test date nearest December 31 to see how close the Dill estimate of milk produced is to actual milk sales.

MILK PRODUCTION


Item My Farm

Total milk sold, lbs.

Milk sold per cow, lbs.

Average milk plant test, percent butterfat

Average

1,886,750

18,830

3.66%

-

19

The cost of producing milk has been compiled using the whole farm method and is featured in the following table. Ac crual receipts from milk sales can be compared with the accrual costs of producing 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 produc ing milk are the operating costs plus depreciation. Total costs of producing milk include the operating costs of producing 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.

Item

Accrual Cost of

Producing Milk

Operating costs

Purchased inputs costs

Total Costs

Accrual Receipts

From Milk

Net Farm Income without Apprec.

Net Farm Income with Apprec.

ACCRUAL RECEIPTS FROM DAIRY, COSTS OF PRODUCING MILK,

AND PROFITABILITY


Total

Average

Per Cow PerCwl Total

My Farm

Per Cow

$ 195,187 $

$ 216,219 $ 2,158 $ 11.46

$ 275,365 $ 2,748 $ 14.59

$ 247,612 $ 2,471 $ 13.12

$ 31,394 $ 313 $ 1.66

$ 32,347 $

1,948

323

$

$

10.35

1.71

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

PerCwl

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 enterprise.

DAIRY RELATED ACCRUAL EXPENSES


Per Cow

Average

PerCwl Per Cow

My Farm

PerCwt. 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

Other livestock expense

$

$

$

$

647

26

$

673 $

828

26%

$

38

60

144

16

75

0

1

35

34%

$

3.44

0.14

3.58

4.40

0.20

0.32

0.77

0.09

0.40

0.00

0.00

0.19

$

$

$

$

$

$

%

$

%

$

20

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


Item

Farm capital

Real estate

Machinery & equipment

Asset turnover ratio

My Farm

Farm capital

Real estate

Machinery & equipment


$

$

Per

Worker

201,918 $

41,540

0.42

$

Per

Cow

6,590

2,952

1,356

$

Per Tillable

Acre

2,246

462

$

$

Per Tillable

Acre Owned

4,153

1,860

$

Labor Force

Operator number 1

Operator number 2

Operator number 3

Family paid

Family unpaid

Hired

Total

My Farm: Total

Operator's

Labor

Efficiency

Cows, average number

Milk sold, pounds

Tillable acres

Work units

Labor Costs

Value of operator(s) labor ($1,450/mo.)

Family unpaid

($1,450/mo.)

Hired

Total Labor

Machinery Cost

Total Labor & Mach.

LABOR FORCE INVENTORY AND ANALYSIS


Months

14.00

5.55

2.30

3.44

2.25

11.70

39.24

Age

47

38

35

Years of Educ.

14

14

14

Value of

Labor & Mgmt.

$ 21,415

9,111

4,585

/12 = 3.27 Worker Equivalent

1.60 OperatorlManager Equivalent

Total

100

1,886,750

294

1,039

112 = _ _ Worker Equivalent

112=

Average

OperatorlManager Equivalent

My Farm

Total Per Worker Per Worker

31

576,942

90

318

Average

Per

Cow Total

$ 31,683

3,263

22,094

$ 57,039

$ 46,475

$ 103,514

$ 316

$

$

$

33

220

569

464

1,033

$

$

$

$

Per

Cwt.

1.68

0.17

1.17

3.02

2.46

5.48

Total

$ . _ - -

$ . _ - -

$ - -

$

$

My Farm

Per

Cow

$ -

$

$

$

$

$

$

Per

Cwt.

-

21

COMPARATIVE ANALYSIS OF THE FARM BUSINESS

Pr02ress of the Farm Business

Comparing your business with average data from regional DFBS cooperators 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


Selected Factors

Average of 53 Farms*

1994 1995 1994

My Farm

1995 Goal

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, Ibs.

Cost Control

Grain & cone. purchased as % of milk sales

Dairy feed & crop expo per cwt. milk

Labor & mach. costs/cow

Operating cost of producing cwt. of milk

Capital Efficiency**

Farm capital per cow

Mach. & equip. per cow


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

96

72

1,772,724

2.84

282

$

$

$

$

$

18,553

2.93

16

34

624,683

26%

$ 4.56

$ 1,012

$ 10.51

6,709

1,357

0.44

33,985

40,749

7,190

1.60%

3.42%

$ 414,481

$

0.36

2,421

$

$

$

$

$

99

76

1,864,671

3.10

288

$ 30,896

$ 31,236

$

18,914

2.51

13

32

601,487

26%

4.33

1,040

10.33

6,713

1,405

0.41

4,332

-1.13%

2.03%

$ 420,755

0.37

$ 2,449

$ - - -

$ - - -

$ - - -

$ - - -

$ - - -

$ - - -

$ - - -

%

$

$

$ - - -

%

$

$ - - -

$ - - -

%

$

$

$

$

$

$

$

%

$

$

- - _ %

$

$

$

$

$

$

%

%

$

$

- - _ %

- - _ %

*Farms participating both years.

**Average for the year.

-

22

Regional Fann Business Chart

The Fann 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 fanns 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

65 Central Valleys Region Dairy Fanns, 1995

Worker

Equiv alent

(11)*

5.81

3.72

2.91

2.24

1.67

Size of Business

No. of

Cows

(11)

203

109

79

64

45

Pounds

Milk

Sold

(11)

4,047,382

2,104,777

1,437,662

1,122,565

721,365

Pounds

Milk Sold

Per Cow

(10)

21,523

19,469

18,454

16,943

14,598

Rate of Production

Tons

Hay Crop

DM/Acre

(9)

4.33

2.95

2.40

2.02

1.49

Tons Com

Silage

Per Acre

(9)

17.62

14.57

13.22

11.62

9.04

Labor Efficiency

Cows

Per

Worker

Pounds

Milk Sold

Per Worker

(11) (11)

47

34

29

25

19

871,405

618,544

534,584

451,225

313,686

Grain

Bought

Per Cow

(10)

$362

526

620

730

895

% Grain is of Milk

Receipts

(10)

16%

22

27

30

36

Value and Cost of Production

Milk

Receipts

Per Cow

Oper. Cost

Milk

PerCwt

Total Cost

Production

PerCwt

(10) (10) (10)

$2,819

2,554

2,417

2,208

1,875

7.97

9.47

10.28

11.46

12.77

$12.56

13.60

14.68

16.21

18.93

Machinery

Costs

Per Cow

(11)

$264

381

433

507

736

Cost Control

Labor &

Machinery

Costs per Cow

(11)

$763

958

1,068

1,173

1,428

NetFann

Income w/Apprec.

(3)

$103,431

41,993

23,099

4,919

-11,729

Feed & Crop

Expenses

Per Cow

(10)

$494

659

789

916

1,127

Profitability

NetFann

Inc. wlo

Apprec.

(3)

$103,225

39,877

20,711

5,649

-12,511

Labor &

Mgt. Inc.

Per Oper.

(3)

$28,907

13,967

2,862

-10,008

-35,117

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$3.04

3.75

4.18

4.87

5.96

Change in

NetWortb w/Apprec.

(6)

$57,895

18,392

4,141

-9,885

-35,297

*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 fig ure 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 321 farms for that factor. The other figures in each column are the average for the second 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 factor.

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


Worker

Equivalent

(11)*

Size of Business

No. of

Cows

(11)

Pounds

Milk

Sold

(11)

12.0

5.9

4.5

3.7

3.2

560

222

159

125

109

12,116,804

4,628,175

3,097,796

2,407,393

2,051,070

2.8

2.5

2.2

1.9

1.4

93

75

63

51

40

1,715,708

1,352,622

1,137,044

888,899

655,673

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DMJAcre

(9)

Tons Com

Silage

Per Acre

(9)

23,770

21,769

20,968

20,229

19,422

18,856

18,020

17,044

15,864

13,700

5.2

4.0

3.6

3.2

3.0

2.8

2.5

2.1

1.9

1.4

23

20

18

18

16

16

15

14

13

10

56

46

41

37

34

32

30

27

24

2Q

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

1,112,817

898,663

805,930

717,932

652,910

603,031

552,825

491,227

433,739

335,490

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Cost Control

Machinery

Costs

Per Cow

(11)

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses per

Cwt. Milk

(10)

$390

525

16%

22

$268

326

$677

814

$557

686

$3.27

3.86

577

646

700

24

26

28

362

401

436

878

938

998

747

800

851

4.12

4.35

4.53

----------------------------------------.------------.--------------------------------------------------------------------------------------------------

740 29 471

786

846

918

1,030

31

32

35

40

508

548

618

762

1,062

1,119

1,192

1,295

1,536

898

955

1,016

1,092

1,239

4.72

4.90

5.17

5.46

6.35


Milk

Receipts

Per Cow

(10)

$3,237

2,932

2,800

2,7fYJ

2,612

2,514

2,408

2,285

2,101

1,823

Milk

Receipts

PerCwt

(10)

$14.37

14.01

13.73

13.53

13.41

13.28

13.15

13.06

12.96

12.52

24

FARM BUSINESS CHART FOR

FARM MANAGEMENT COOPERATORS


Oper. Cost

Milk

Per Cow

(10)

$1,157

1,490

1,658

1,777

1,878

1,999

2,123

2,233

2,414

2,676

Oper. Cost

Milk

PerCwt

(10)

$6.99

8.63

9.22

9.68

10.00

10.47

10.82

11.28

11.86

13.34

Total Cost

Production

Per Cow

(10)

$2,036

2,332

2,505

2,639

2,765

2,859

2,948

3,063

3,186

3,584

Total

(3)

$239,265

92,824

69,505

53,962

40,913

31,fYJ3

23,412

16,656

6,546

-19,060

Net Farm Income

Without Appreciation

Per

Cow

(10)

As % of Total

Accrual Receipts

(3)

$933

674

562

477

407

351

280

198

74

-207

30.1%

21.6

18.6

16.2

14.0

12.0

9.4

7.0

2.6

-9.3

Profitability

Net Farm Income

With Appreciation

Total

(3)

Per

Cow

(10)

$279,148

110,046

79,444

63,874

51,lfYJ

$1,059

776

649

566

486

38,382

29,118

21,263

11,292

-13,065

428

349

244

143

-137

Labor &

Management Income

Per

Fann

Per

Operator

(3) (3)

$161,912

52,012

34,836

22,844

14,533

7,210

-687

-8,059

-19,089

-49,541

$117,425

32,058

21,472

15,807

10,440

5,358

-562

-6,460

-16,158

-43,229

Total Cost

Production

PerCwt

(10)

$11.93

12.83

13.49

13.96

14.33

14.71

15.18

15.84

16.85

19.32

Farm Business Charts for farms with freestall barns and 180 cows or less and more than 180 cows, and farms with conventional barns with 60 cows or less and more than 60 cows are shown on pages 28-31.

Financial Analysis Chart

The farm financial analysis chart on page 25 is designed just like the Fann 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 fanners are provided in the table headings.

-

Planned Debt

Payments

Per Cow

(8)*

$43

204

283

332

396

Available for

Debt Service

Per Cow

. (12)

25

FINANCIAL ANAYLSIS CHART


Liquidity (repayment)

Cash Flow

Coverage

Ratio

(8)

Debt Payments as Percent of Milk Sales

(8)

$804

615

538

475

424

4.63

1.66

1.35

1.15

1.00

5%

9

12

14

16

Debt

Per Cow

(5)

$74

669

1,191

1,727

2,069

Leverge

Ratio**

0.01

0.10

0.22

0.34

0.45

452

507

562

636

796

387

322

243

189

0

Percent

Equity

(5)

Solvency

DebtJAsset Ratio

Current

(5)

&

Intennediate

Long

Tenn

(5)

99%

91

82

74

69

0.01

0.10

0.17

0.24

0.30

0.87

0.74

0.61

0.41

-0.08

0.00

0.00

0.01

0.12

0.23

0.58

0.74

0.92

1.20

3.54

Asset

Turnover

(ratio)

(11)

.75

.60

.55

.50

.47

64

57

53

45

31

0.37

0.43

0.49

0.58

0.81

0.33

0.41

0.52

0.64

0.91

Efficiency (Capital)

Real Estate

Invesunent

Machinery

Invesunent

Per Cow

(11)

Per Cow

(11)

$1,152

1,924

2,232

2,491

2,764

$571

751

902

1,040

1,167

Total Fann

Assets

Per Cow

(11)

$4,262

5,128

5,569

5,948

6,368

.43

.39

.36

.32

.25

3,033

3,377

4,026

4,698

6,692

1,290

1,443

1,683

1,969

2,703

6,842

7,447

8,055

8,891

11,657


**Dollars of debt per dollar of equity, computed by dividing total liabilities by total equity.

18

20

23

26

35

1

0

-2

-6

-22

2,387

2,694

3,015

3,510

4,398

Profitability

Percent Rate of Return with appreciation on:

Equity Total Capital

(3) (3)

21%

10

8

5

3

13%

9

7

6

4

3

2

0

-1

-6

Change in

Net Worth wI Appreciation

(6)

$182,925

63,674

41,117

29,544

20,624

14,936

8,501

1,168

-10,157

-40,417

-

26

Comparison by Type of Barn and Herd Size

When analyzing a dairy farm business by comparing it to a group of farms, it is important that the group of farms have used as many of the same physical characteristics as possible as the farm being analyzed. To assist in this endeavor, dairy farms in the summary have been divided into those with freestall and those with conventional housing. Conven tional 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 four groups of dairy farms. The average size of farms in the four groups ranges fiom 48 cows on the small conventional farms to 397 cows on the large freestall farms.

The large freestall farms averaged the highest milk output per cow and per worker, the lowest total costs of pro duction and investment per cow, and the greatest returns to labor, management and capital. The small freestall farms showed average profits somewhat higher than the large conventional farm businesses.

Farm business charts have been computed for each of the four housing and herd size categories and are on pages

28-31. By comparing the farm's performance on the most appropriate business chart, a farm 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 42-51 of the 1994 State Summary*. As herd size increases, the average profitability generally increases

(pages 44-45). Net farm income without appreciation was $216,491 per farm for the 300 or more herd size group and

$13,630 per farm for those with less than 40 cows. This relationship generally holds for all measures of profitability in cluding rate of return on capital.

Farm net worth increases rapidly as herd size increases (pages 46-49)*, even though percent equity was higher on the smaller farms. The group with less than 40 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 tilla ble acre generally increased as herd size increased (pages 50-51)*. The farms with 300 and more cows per farm averaged

23 percent more milk sold per cow than the smallest farms. All of the groups with 85 or more cows averaged above

19,000 pounds of milk sold per cow while the farms smaller than 85 cows averaged 17,700 pounds of milk sold per cow.

Farm capital per worker increased, and farm capital per cow decreased as herd size increased. Milk sold per worker in creased dramatically as herd size increased, ranging from 335,069 pounds at the lowest herd size category up to 1,023,849 pounds at the largest size category.

*Smith, Stuart F., Wayne A. Knoblauch, and Linda D. Putnam, Dairy Farm Managment Business Summary, New York,

1994, Department of Agricultural, Resource, and Managerial Economics, Cornell University, R.B. 95-03, August 1995.

-

Item

27

SELECTED BUSINESS FACTORS BY TYPE OF BARN AND HERD SIZE


Farms with: Conventional

<=60 Cows >60 Cows

Freestall

<=180 Cows >180 Cows

Number of farms

Cropping Program Analysis

Total Tillable acres

Tillable acres rented*

Hay crop acres*

Com silage acres*

Hay crop, tons DM/acre

Com 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

Dairy Analysis

Number of cows

Number of heifers

Milk sold, lbs.

Milk sold/cow, lbs.

Operating cost of prod. milk/cwt

Total cost of prod. milk/cwt

Price/cwt milk sold

Purchased dairy feed/cow

Purchased dairy feed/cwt. milk

Purchased grain & conc. as % of milk receipts

Purc. feed & crop exp.lcwt. milk

69

168

63

109

26

2.3

15.3

93

8.1

3.5

$17.07

$22,500

$134

48

38

830,876

17,389

$9.79

$15.99

$13.33

$682

$3.92

28%

$4.64

71

279

105

156

56

2.8

15.9

63

8.6

3.2

$23.51

$40,129

$144

87

69

1,574,371

18,208

$10.26

$14.91

$13.39

$704

$3.87

28%

$4.69

96

368

149

185

87

2.8

16.2

44

8.5

3.1

$23.47

$57,579

$156

117

94

2,248,212

19,173

$10.40

$14.58

$13.43

$746

$3.89

28%

$4.72

63

816

347

350

309

3.5

16.6

74

7.3

2.1

$29.43

$158,497

$194

397

296

8,485,502

21,367

$10.67

$13.19

$13.48

$824

$3.86

28%

$4.51

Capital Efficiency

Farm capital/worker

Farm capital/cow

Farm capital/tillable acre owned

Real estate/cow

Machinery investment/cow


$200,704

$7,801

$3,518

$3,937

$1,517

0.35

Labor Efficiency

Worker equivalent

Operator/manager equivalent

Milk sold/worker, lbs.

Cows/worker

Labor cost/cow

Labor cost/tillable acre

Profitability & Balance Sheet Analysis

Net farm income (without appreciation)

Labor & mgmt. income/operator

Return on all capital with appreciation

Farm debt/cow

Percent equity

*Average of all farms, not only those reporting data.

1.86

1.19

447,198

26

$663

$189

$18,839

$574

0.4%

$2,025

74%

$213,506

$6,977

$3,449

$3,229

$1,359

0.41

2.83

1.39

556,953

30

$553

$171

$31,295

$4,422

2.6%

$1,952

72%

$246;293

$7,050

$3,776

$3,144

$1,411

0.44

3.36

1.53

669,602

35

$536

$171

$41,444

$6,083

3.8%

$2,286

67%

$260,060

$5,774

$4,889

$2,533

$916

0.58

8.82

1.74

962,391

45

$556

$271

$146,748

$46,382

8.3%

$2,502

56%

28

FARM BUSINESS CHART FOR SMALL CONVENTIONAL STALL DAIRY FARMS

69 Conventional Stall Dairy Farms with 60 or Less Cows, New York, 1994

Worker

Equivalent

(11)*

Size of Business

No. of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DMlAcre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

2.87

2.45

60

57

1,207,610

1,041,959

21,897

20,349

4.3

3.6

23

20

43

35

722,584

626,587

2.08 54 956,111 19,576 3.2 18 31 568,551

2.00

1.97

51

49

878,296

842,902

18,797

17,788

2.8

2.4

18

16

29

27

494,509

460,752

-------------------------------------_ ..

---------------------------------....

-------------------------------------------------------------------------

1.73

1.52

1.43

1.30

1.12

46

44

42

40

33

786,474

724,587

682,846

629,613

512,941

17,019

16,251

15,493

14,166

11,923

2.1

2.0

1.9

1.6

1.2

15

14

13

11

8

25

23

22

20

16

445,006

416,992

376,560

321,752

250,079

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)

$371

472

526

558

594

649

707

756

840

977

28

30

33

36

42

16%

21

24

25

27

$278

318

366

414

443

475

505

539

591

831

$715

853

935

1,025

1,082

1,132

1,200

1,298

1,401

1,817

$506

618

667

701

747

792

837

900

1,021

1,214

$3.17

3.74

3.96

4.14

4.36

4.60

4.94

5.30

5.57

6.50


Milk

Receipts

Oper. Cost

Milk

Total Cost

Production

Per Cow

(10)

PerCwt

(10)

PerCwt

(10)

$2,925

2,714

2,610

2,522

2,390

2,246

2,141

2,056

1,895

1,594

$5.82

7.67

8.60

9.14

9.43

9.84

10.65

11.13

11.63

13.63

$12.53

13.97

14.47

14.89

15.36

15.86

16.51

17.33

18.26

23.01


$48,399

37,980

28,428

23,201

20,798

16,706

13,819

8,453

52

-14,172

Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

$1,005

790

623

480

413

363

296

166

1

-335

Labor &

Mgmt. Inc.

Per Oper.

(3)

$25,239

14,750

10,716

5,469

1,841

-1,561

-4,656

-8,365

-18,289

-31,199

Change in

New Worth w/Apprec.

(6)

$43,090

26,488

19,929

16,186

12,027

8,102

2,548

-93

-7,737

-13,856

29

FARM BUSINESS CHART FOR LARGE CONVENTIONAL STALL DAIRY FARMS

71 Conventional Stall Dairy Farms with More Than 60 Cows, New York, 1994

Worker

Equivalent

(11)*

Size of Business

No. of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DMlAcre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pound..

Milk Sold

Per Worker

(11)

4.69

3.57

133

108

2,488,241

2,024,167

22,189

20,323

5.1

3.9

24

20

48

39

916,052

693,816

3.10 97 1,858,587 19,731 3.5 18 36 651,968

2.84

2.65

91

81

1,640,996

1,514,509

19,070

18,843

3.1

2.9

17

16

33

32

615,426

582,121

----------------------------------------------------

...

------------------------------------------------------------------------------------------------

2.53

2.48

2.28

2.08

1.78

77

72

68

66

63

1,367,445

1,283,594

1,234,765

1,155,076

1,045,775

18,327

17,406

16,563

15,388

13,835

2.7

2.4

2.2

2.0

1.5

15

15

13

12

9

30

28

26

24

21

532,500

500,895

455,380

424,899

375,069

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)

$301 14% $272 $725 $467 $2.89

462

546

624

672

19

22

26

28

331

367

397

425

831

877

945

978

651

713

762

819

3.66

4.01

4.32

4.55

--------------------------------------------------------------------------------------------------------------------------..

-------------------------

734

760

824

907

1,028

30

32

33

36

41

459

494

539

624

710

1,031

1,077

1,142

1,264

1,386

876

925

978

1,077

1,224

4.78

4.99

5.20

5.52

6.59

$3,018

2,742

2,643

2,563

2,517

2,445

2,350

2,210

2,016

1,816


Milk

Receipts

Oper. Cost

Milk

Total Cost

Production

Per Cow

(10)

PerCwt

(10)

PerCwt.

(10)

$6.59

8.57

8.99

9.61

10.09

10.55

10.89

11.22

11.76

13.36

$12.25

13.35

13.79

14.19

14.64

15.00

15.37

15.92

16.80

18.03


$79,785

56,214

45,816

37,113

31,998

27,327

23,653

20,396

6,705

-22,986

Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

Labor &

Mgmt. Inc.

PerOper.

(3)

$963

662

538

469

401

341

247

203

91

-271

$28,947

20,229

16,010

12,516

7,265

3,312

-3,056

-10,172

-16,348

-40,921

Change in

New Worth w/Apprec.

(6)

$70,776

33,799

21,384

16,067

12,983

7,707

3,124

-5,502

-16,437

-39,771

30

FARM BUSINESS CHART FOR SMALL FREESTALL DAIRY FARMS

96 Freestall Bam Dairy Farms with 180 or Less Cows, New York, 1994

Worker

Equivalent

(11)*

Size of Business

No. of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DMJAcre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

5.37

4.44

4.01

174

157

138

3,614,047

3,072,976

2,638,806

23,575

21,582

20,823

5.5

3.8

3.5

24

20

18

55

49

42

1,012,453

857,659

803,445

3.58 125 2,446,302 19,939 3.1 17 38 738,212

3.38 119 2,258,914 19,272 2.9 16 35 680,046

-------------------------------------------------------------------------------------------------------------------------------------------------------

2,092,444 2.8 3.11

2.90

2.51

2.23

1.63

112

105

96

78

55

1,936,985

1,767,311

1,390,495

971,149

18,731

17,842

17,144

16,361

14,507

2.5

2.1

1.8

1.4

15

15

14

13

11

33

31

29

27

22

624,360

592,821

561,754

513,673

405,611

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)

$409

535

16%

21

$277

335

$673

771

$610

718

$3.25

3.83

565

633

23

26

374

415

855

908

762

799

4.12

4.35

681 28 456 969 830 4.55

-----------------------------------------------------------------_._----------------------------------------------------------------------------------

708

761

828

931

1,036

29

31

32

35

39

485

528

592

670

799

1,052

1,139

1,196

1,299

1,521

870

933

1,011

1,090

1,212

4.73

4.95

5.20

5.42

6.21


Milk

Receipts

Oper. Cost

Milk

Total Cost

Production

Per Cow

(10)

PerCwt.

(10)

PerCwt

(10)

Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

$3,179

2,893

2,777

2,695

2,589

2,478

2,388

2,321

2,201

1,927

$7.55

8.72

9.29

9.69

9.86

10.21

10.55

11.24

11.94

13.53

$11.98

12.70

13.30

13.69

14.10

14.58

15.18

15.91

16.77

18.49


$106,326

75,881

67,616

55,575

47,285

34,062

24,908

14,979

1,574

-29,062

$891

674

586

512

410

303

228

134

15

-226

Labor &

Mgmt. Inc.

PerOper.

(3)

$51,358

30,690

22,390

16,320

9,432

2,313

-3,360

-11,679

-19,757

-55,063

Change in

New Worth w/Apprec.

(6)

$82,133

60,699

46,520

37,968

28,369

19,485

11,255

1,005

-17,501

-53,185

31

FARM BUSINESS CHART FOR LARGE FREESTALL DAIRY FARMS

63 Freestall Bam Dairy Farms with More Than 180 Cows, New York, 1994

Worker

Equivalent

(11)*

Size of Business

No. of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DMlAere

(9)

Tons Com

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

20.63

11.96

1,088

539

23,351,762

11,657,338

24,801

23,472

5.5

4.4

22

20

65

53

1,306,713

1,093,175

10.13 420 9,575,213 22,655 4.1 19 47 1,011,822

8.52 365 7,921,542 21,928 3.7 18 46 964,401

7.38 311 6,515,416 21,395 3.5 16 44 933,249

--------------------------------------_ ...

-------.....

_-------------------------------------------------------------------------------------------------

6.76

6.03

5.39

4.88

3.79

243

234

225

213

192

5,612,972

4,922,221

4,551,060

4,167,979

3,391,553

20,967

20,780

20,134

18,893

15,710

3.2

3.1

2.8

2.4

1.6

15

15

15

14

12

42

40

37

35

30

901,922

850,753

813,336

717,586

616,668

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)

$535

688

728

750

782

21%

24

25

27

27

$233

295

330

357

386

$606

755

858

895

943

$706

871

895

917

954

$3.84

4.05

4.24

4.40

4.51

-------------------------------------------------------------------------------------------------------------------------------------------------------

804

847

881

928

1,012

28

29

31

32

35

426

468

514

547

614

982

1,039

1,110

1,158

1,324

986

1,019

1,053

1,102

1,208

4.65

4.74

4.85

5.12

5.62


Milk

Receipts

Oper. Cost

Milk

Total Cost

Production

Per Cow

(10)

PerCwt.

(10)

PerCwt

(10)

$3,443

3,188

3,073

2,969

2,889

2,831

2,760

2,676

2,529

2,109

$8.83

9.72

10.00

10.33

10.66

10.84

11.10

11.58

11.96

12.82

$11.90

12.25

12.51

12.91

13.38

13.84

14.02

14.30

14.62

15.69


Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

$507,138

230,200

159,773

126,018

112,980

98,201

82,247

65,473

21,692

-12,379

$668

548

448

405

373

335

312

236

90

-58

$289,802

99,946

68,360

44,867

28,779

19,135

13,143

4,724

-8,715

-50,954

Change in

New Worth w/Apprec.

(6)

$432,825

135,938

103,969

73,654

59,734

37,055

23,094

10,247

-13,935

-49,453

32

IDENTIFY AND SET GOALS

If businesses are to be successful, they must have direction. Written goals help provide businesses with an iden tifiable direction over both the long and short term. Goal setting is as important on a dairy fann as it is in other busi nesses. Written goals are a tool which fann operators can use to ensure 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 fann 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 fann business, the goals should be reworked to accommodate that change. Refer to your goals as often as necessary to keep the fann business progressing.

It is important to identify both objectives (long-range) and goals (short-range) when looking at the future of your fann business.

A suggested format for writing out your goals is as follows: a. b. c.

Begin with a mission statement which describes why the business exists based on the preferences and values of the owners.

Identify 4-6 objectives.

Identify SMART goals.

Worksheet for Setting Goals

I. Mission and Objectives

-

II. Goals

What How

33

Worksheet for Setting Goals (Continued)

When Who is Responsible

Summarize Your Business Performance

The Farm Business and Financial Analysis Charts on pages 22-25 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 im provement

Strengths: _ Needs improvement _

-

34

GLOSSARY AND LOCATION OF COMMON TERMS

Accounts Payable - Open accounts or bills owed to feed and supply fmns, cattle dealers, veterinarians 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 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 op erating receipts plus appreciation by average total farm 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.

Capital Efficiency - The amount of capital invested per production unit. Relatively high investments per worl<er 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 14)

Cash Paid - (defined on page 2)

Cash Receipts - (defined on page 4)

Change in Accounts Payable - (defined on page 3)

Change in Accounts Receivable - (defined on page 4)

Change 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 farm 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 farm operator/manager's owned capital or farm net worth.

-

35

Expansion Livestock - Purchased dairy cattle and other livestock that cause an increase in herd size from the be ginning 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-term non-cancellable contract giving the lessee use of an asset in exchange 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

Income Statement - A complete and accurate account of farm business receipts and expenses used to measure profit ability over a period of time such as one year or one month.

Labor and Management Income - (defined on page 6)

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.

Liquidity - 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 worth. It is the equity the owner has in owned assets.

Operating Costs of Producing 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 Cash-Crop Dairy (farm) - Operating and managing this farm is not a full-time occupation, crop sales exceed 10 percent of accrual milk receipts and cropland is owned.

Part-Time Dairy (farm) - Dairy farming is the primary enterprise, cropland is owned but operating and managing this farm is not a full-time occupation for one or more people.

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 expenses, health and life insurance, in come taxes, nonfarm 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 Producing Milk - (defined on page 19)

Repayment Analysis An evaluation of the business' ability to make planned debt payments.

-

36

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 7)

Return on Total Capital - (defined on page 7)

Solvency - The extent or ability of assets to cover or pay liabilities. Debt/asset and leverage ratios are common measures 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 enter prise 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.

-

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.

Barn Type bST Usage

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

3,10

16

20

7

3,12

3

22-25,28-31

16

7,8

2

2

10

10

9

12

14

2

4,12

3

4

2,3

11

3,17

Page(s)

14

12

5, 11, 18

20

8

2

3,8

4,8

3,5

4,5

16

7,8

20

2

2

20

13

13

37

INDEX

Financial Analysis Chart

Financial Lease

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 Prod. Milk

Opportunity Cost

Other Livestock Expenses

Outflows

Part-Time Cash-Crop Dairy (farm)

Part-Time Dairy (farm)

Percent Equity

Personal Withdrawals and Family Expenditures

Including Nonfarm Debt Payments

Principal Payments

Profitability

Purchased Inputs Cost

12

12

4

22,23

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

19

19

20

16

4

2

14

3

11

7

7

10

19

6

3

12

2

2

9,10

Page(s)

25

8

2

12

10

10

3,17

2

6

6

20

16

18

2

12

5

10

8

18

-

38

NOTES

-

Document 11949830

dl

Distribution of Labor & Management Incomes per Operator

65 Central Valleys Region

Fanns, 1995

°

°

Cash Flow Statement

ANNUAL CASH FLOW STATEMENT

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Support

Document 11949830

dl

Distribution of Labor & Management Incomes per Operator

65 Central Valleys Region

Fanns, 1995

°

°

Cash Flow Statement

ANNUAL CASH FLOW STATEMENT

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