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E.B.94-11
WESTERN PLATEAU
REGION
1993
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Cattaraugus
hautauqua
Steuben
Allegany
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George L Casler
Andrew N. Dufresne
Joan S. Petzen
carl W. Albers
Stuart F. Smith
Linda D. Putnam
Department of Agricultural, Resource, Managerial and economics
College Of Agriculture and Life SCience.
Comell University. Ithaca. New York 14853-7801
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It ,. the Policy of
ComeII University IlCtIYeIy
to support equality of
educational and employment oppor1UnIty. No peraon ahall be denied'
edmlulon to MY
educatlonaI program or .etlvity or be denied
employment on the bMl. of MY leGally prohibited discrimination
IrwoMng, but not Umitld to, such factors .. race. ooIor. creed, religion.
ux, age or handicap. The University Is
committed to the malntenanct of affirmative action programs which win
aaaure the oontinuatlon of such ~ of opportunity.
national or ethnic origin,
. .'
1993 DAIRY FARM BUSINESS SUMMARY
WESTERN PLATEAU REGION
Table of Content.
~
INTRODUCTION . . . . . . .
1
Program Objectives
1
Format Features ..
1
SUMMARY AND ANALYSIS OF THE FARM BUSINESS
2
Business Characteristics
2
Income Statement . . . .
2
Profitability Analysis
4
Farm and Family Financial Status
7
Statement of OWner Equity.
11
Cash Flow Statement
12
Repayment Analysis
14
Cropping Analysis
16
Dairy Analysis
18
Capital and Labor Efficiency Analysis
20
COMPARATIVE ANALYSIS OF THE FARM BUSINESS
21
Progress of the Farm Business
21
Regional Farm Business Chart
22
New York State Farm Business Chart
23
Financial Analysis Chart ..
25
Comparisons by Type of Barn and Herd Size
26
Herd Size Comparisons
26
IDENTIFY AND SET GOALS
32
GLOSSARY AND LOCATION OF COMMON TERMS
34
INDEX
.. .. .. .. .. .. .. . ,. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..
37
-
1993 DAIRY FARM BUSINESS SUMMARY
WESTERN PLATEAU REGION*
INTRODUCTION
Dairy farmers throughout New York State have been participating in
Cornell Cooperative Extension's farm business summary and analysis program
since the early 1950's. Managers of each participating farm business
receive a comprehensive summary and analysis of the farm business. The
information in this report represents an average of the data submitted from
dairy farms in the Western Plateau Region for 1993.
Program Objectiy.
The primary objective of the dairy farm business summary, DFBS, is to
help farm managers improve the business and financial management of their
business through appropriate use of historical farm data and the
application of modern farm 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 identifies business and financial
information needed in identifying and evaluating strengths and weaknesses
of the farm business.
Format Feature.
This regional report follows the same general format as in the 1993
DFBS printout received by all participating dairy farmers.
The analysis
tables have an open column or section labeled My Farm.
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 farm 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.
.......
*This summary was prepared by George L. Casler, Department of
Agricultural, Resource, and Managerial Economics, College of Agriculture
and Life Science, Cornell University, in cooperation with Cooperative
Extension Agents Andrew Dufresne, Joan Petzen, and Carl Albers. Stuart
Smith was in charge of data collection in Steuben County. The Western
Plateau region is comprised of Allegany, Cattaraugus, Chautauqua, and
Steuben Counties. Linda Putnam was in charge of the data handling at
Cornell.
2
SlJIIKARY AND ANALYSIS OF THB FAlUI BUSIRBSS
BU'ine.. Characteri.tic.
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.
BUSIRBSS CHARACTERISTICS
37 Western Plateau Region Dairy Farms, 1993
Type of Farm
Number
37
Dairy
Part '-time dairy
0
Dairy cash-crop
0
Part-time cash-crop dairy
0
Type of Ownership
OWner
Renter
Number
36
1
Type of Business
Single proprietorship
Partnership
Corporation
Number
24
11
2
Business Record System
ELFAC I I
Account Book
Agrifax (mail-in only)
On-Farm Computer
Other
Number
2
16
6
9
4
Type of Barn
Stanchion/Tie-Stall
Freestall
Combination
Number
19
13
5
Milking System
Bucket & carry
Dumping station
Pipeline
Herringbone parlor
Other parlor
Number
Milking Frequency
2x/day
3x/day
Other
Number
32
3
2
Production Records
DHIC
OWner-Sampler
Other
None
Number
24
4
5
4
0
0
21
14
2
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,
partnerships, and corporations included in the average. Average data for
these specific types of farms are presented in the State Business Summary.
IDcQJM Statuwpt
In order for an income statement to accurately measure farm income, it
must include cash transactions and accrual adjustments (changes in accounts
payable, accounts receivable, inventories, and prepaid expenses) .
Cash paid is the actual cash outlay during the year and does not necessarily
represent the cost of goods and services actually used in 1993.
Change in inventory: Increases in inventories of supplies and other purchased
inputs are subtracted in computing accrual expenses because they represent
purchased inputs not actually used during the year. Decreases in purchased
inventories are added to expenses because they represent inputs purchased in a
prior year and used this year.
-
3
CASH AND ACCRUAL PAlUI BXPBHSBS
37 Western Plateau Region Dairy Farms, 1993
Expense Item
Hired Labor
Cash
Paid
$24,087
±
Change in
Inventory
or Prepaid
Expense
$0 «
±
Change in
Accounts
Payable
$92
Accrual
Expenses
411
0
0
65,022
2,641
0
$24,179
~
Dairy grain & conc.
Dairy roughage
Nondairy
Machinery
Mach. hire, rent/lease
Machinery repairs/parts
Auto expo (farm share)
Fuel, oil & grease
Liyestock
Replacement livestock
Breeding
Vet & medicine
Milk marketing
Cattle lease/rent
Other livestock expense
63,510
2,659
0
1,101
-18
0
2,587
14,212
1,501
5,826
0 «
5
0 «
-10
0
-162
0
45
2,587
14,055
1,501
5,861
2,627
3,554
5,326
11,996
132
10,383
0 «
-84
-11
0 «
0 «
31
0
19
-55
0
0
-93
2,627
3,489
5,260
11,996
132
10,321
5,052
3,211
2,505
261
58
27
302
32
-67
5,615
3,301
2,465
3,152
6,249
4,288
105
0 «
0 «
122
-228
143
3,379
6,021
4,431
«
«
«
«
141
0
0
0
78
$780
0
4,092
355
5,774
10,961
3,173
$199,238
2,507
13,257
6,443
$221. 445
~
Fertilizer & lime
Seeds & plants
Spray, other crop expo
Real Estate
Land/bldg./fence repair
Taxes
Rent & lease
~
Insurance
Telephone (farm share)
Electricity (farm share)
Interest paid
Miscellaneous
Total Operating
Expansion livestock
Machinery depreciation
Building depreciation
TOTAL ACCRUAL EXPENSES
3,951
355
5,774
10,961
3,004
$196,902
2,507
0
0
0
0
91
$1,556
0
«
Change in prepaid expenses (noted above by «) is a net change in non-inven­
tory expenses that have been paid in advance of their use.
If 1993 funds used
to prepay 1994 leases exceed the amount of 1993 leases prepaid in 1992, the
amount of this excess is entered as a negative number to exclude it from 1993
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.
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 1993 but not paid for. A decrease is
subtracted because the resource was used before 1993.
Accrual expenses are the costs of inputs actually used in this year's produc­
tion. They are the total of cash paid, as well as changes in inventory,
prepaid expenses, and accounts payable.
-
4
CASH AND ACCRUAL F.A1UI RECZIPTS
37 Western Plateau Region Dairy Farms, 1993
Change in
Cash
Change in
Accounts
Receipts ± Inyentory ± Receivable
Receipt Item
Milk sales
$206,596
$1,725
16,140
$4,988
Dairy cattle
o
Dairy calves
4,302
o
Other livestock
208
-231
o
Crops
3,975
786
o
Government receipts
5,411
0*
o
Custom machine work
579
5
Gas tax refund
583
o
3,825
Other
54
Less nonfarm noncash cap.**
( - ) _ _---=1~6
Tota,l Receipts
$238,430
$8,716
$1,784
Accrual
Receipts
$208,321
21,128
4,302
-23
4,761
5,411
584
583
3,879
(-)
16
$248,930
=
*Change in advanced government receipts.
**Gifts or inheritances of cattle or crops included in inventory.
Cash receipts include the gross value of milk checks received during the year
plus all other payments received from the sale of farm products, services, and
government programs. Nonfarm income is not included in calculating farm
profitability.
Changes in inventory of assets produced by the business are calculated by
subtracting beginning of year values from end of year values excluding appre­
ciation.
Increases in livestock inventory caused by herd growth and/or qual­
ity are added, and decreases caused by herd reduction and/or quality are
subtracted. 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 1993 for the 1994 crop year in excess
of funds earned for 1993. Likewise, a decrease is added to cash government
receipts because it represents funds earned for 1993 but received in 1992.
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 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 business during the year.
Profitability Analy.i.
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 corporation.
-
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 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 live­
stock, 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.
tmT PARK I:NCOIIB
37 Western Plateau Region Dairy Farms, 1993
Ayeraqe
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)
My Farm
$248,930
865
1,246
5,940
1,097
$258,078
- 221,445
$36,633
$27,485
$---­
$---­
$---­
$---­
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
37 Western Plateau Forms, 1993
0.9
D
0.8
0.7
D
D
0.6
D
D
D
D
D
0.5 [
D
::: ~
0.2
~
0.1
r­
...o
.
z
D
D
D
-0.1
1
r
-0.2
~
0
-0.3l'
-0.4
D
D
D
D
_ . ~_ _ .L-_-L_------'L1jI_ ...L
13
15
17
__------l­
~._-.l
19
(Thousands)
Pounds Milk Sold Per Cow
21
23
6
Return to operators' labor. management. and equity capital measures the total
net farm income for the farm operator(s).
It is calculated by deducting a
charge for unpaid family labor from net farm income. Operators' labor is not
included in unpaid family labor. Return to operators' labor, management, and
equity capital has been calculated both with and without appreciation.
Appreciation is an important part of the return to ownership of farm assets.
RB'l'tJRII TO OPBRATORS' LABOR, MANAGEMENT, AND EQUITY
37 Western Plateau Region Dairy Farms, 1993
Ayerage
With
Without
Aoorec.
Apprec.
Item
Net farm income
Family labor unpaid
Q $1,400 per month
Return to operators' labor,
management, & equity
$36,633
$27,485
- 3,444
- 3,444
$33,189
$24,041
My Farm
With
Apprec.
Without
Aporec.
$---­
$---­
$---­
$---­
Labor and management income is the return which farm operators receive for
their labor and management 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 the opportunity cost of
using equity capital, at a real interest rate of five percent, from the return
to operators' labor, management, and equity capital 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
1lANAGmmN'l' INCOKB
37 Western Plateau Region Farms, 1993
Item
Return to operators' labor, management,
& equity without appreciation
Real interest Q 5% on $368,353
average equity capital
Labor & Management Income
Labor & Management Income per
1.62 Operator/Manager
Ayerage
My Farm
$24,041
$---­
- 18,418
$5,623
$---­
$3,471
$---­
-
7
Return on equity capital measures the net return rema1n1ng 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. Return on total capital is calculated by adding
interest paid to the return on equity capital and then dividing by average
farm assets to calculate the rate of return on total capital.
RB'l'UlUf ON BQUI:TY CAPI:TAL AND RB'l'UlUf ON TOTAL CAPI:TAL
37 Western Plateau Region Dairy Farms, 1993
Ayerage
Item
Return to operators' labor, management,
& equity capital with appreciation
Value of operators' labor & management
Return on equity capital with appreciation
Interest paid
Return on total capital with appreciation
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
ra~
and
r~ily
$33,189
- 33,284
$-95
+10,961
$10,866
$-9,243
$1,718
My Farm
$
$
+
$
$
$
-.03%
-2.51%
..
1.97%
.31%
%
%
rinancial Statu.
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 payments is listed as a liability since the farmer is
committed to make the payments by signing the lease. The present value is also
listed as an asset, representing the future value the item has to the
business. For 1993, leases were discounted by 7.75 percent.
Advanced government receipts are included as current liabilities. Government
payments received in 1993 that are for participation in the 1994 program are
the end year balance and payments received in 1992 for participation in the
1993 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
1993 PARK BUSINESS. HOBl'ARK BALANCE SHEET
37 Western Plateau Region Dairy Farms, 1993
Farm Assets
Current
Farm cash, checking
& savings
Accounts rec.
Prepaid expo
Feed & supplies
Total
Jan. 1
pee. 31
$4,327
14,213
$3,638
15,998
o
o
36,708
39,126
$55,248
Intermediate
Dairy cows:
$96,137
owned
leased
190
48,297
Heifers
Bulls/other lvstk.
1,291
117,695
Mach./eq. owned
3,558
Mach./eq. leased
Farm Credit stock
2,426
Other stock/cert.
5,367
Total
Long-Term
Land/buildings:
owned
leased
$274,961
$58,762
$100,367
46
49,899
1,082
119,013
3,661
2,287
6,419
Farm Liabilities
& Net Worth
Jan. 1
Current
Accounts payable
$9,346
Operating debt
2,303
Short-term
1,561
Advanced govt. rec.
o
Current Portion:
Intermediate
o
Long Term
o
Total
$13,210
Intermediate
Structured debt
1-10 years
Financial lease
(cattle/mach. )
Farm Credit stock
Total
Dec. 31
$10,125
2,447
1,719
o
19,526
5.438
$39,255
$91,987
$69,247
3,748
2,426
3,707
2,287
$98,161
$75,241
$68,786
$70,109
65
o
$68,851
$70,109
$282,774
$210,931
65
$218,792
Total
$210,996
$218,792
Total Farm
Assets
$541,205
$560,328
o
Long Term
Structured debt
>10 yrs
Financial lease
(structures)
Total
Total Farm Liab.
FARM NET WORTH
$180,222
$360,983
$184,605
$375,723
Nonfarm Assets, Liabilities & Net Worth (Average of 24 farms reporting)
Liabilities
pee. 31
& Net Worth
Assets
Jan. 1
Jan. 1
Dec. 31
Personal cash, chkg.
Nonfarm Liab.
$1,988
$2,468
$5,986
$2,482
& savings
7,400
8,327
Cash value life ins.
8,125
7,917
Nonfarm real estate
2,867
3,237
Auto (personal sh.)
8,285
Stocks & bonds
4,713
Household furn.
9,470
9,804
3,375
3,820
All other
$42,172
$43,634
NONFARM NET WORTH $40,184
$41,166
Total Nonfarm
Farm & Nonfarm Assets. Liabilities. & Net werth*
Total Assets
Total Liabilities
TOTAL FARM & NONFARM NET WORTH
Jan. 1
$583,377
182,210
$401,167
pee. 31
$603,962
187,073
$416,889
*Assumes that average nonfarm assets and liabilities for the nonreporting
farms were the same as for those reporting.
-
9
The following condensed balance sheet, including deferred taxes, contains
average data from only those farmers who elected to provide the additional
information required to compute deferred taxes.
Referred 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 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.
CONDENSBD BALANCB SHEBT INCLUDING DBFBRRED TAXES
December 31, 1993
11 New York Dairy Farms, 1993
LIABILIT.ES & NET WORTH
ASSETS
Current debts & payables
Current deferred taxes
Total Current Assets
Total Inter. Assets
$
48,897
$ 191,334
Total Long Term Assets
$ 178,091
TOTAL FARM ASSETS
$ 418,322
Total Current Liabilities
$ 29,319
13,689
$ 43,008
Intermediate debts & leases
$ 71,566
Intermediate deferred taxes
51,440
Total Inter. Liabilities
$ 123,006
Long term debts & leases
$ 55,484
Long term deferred taxes
18,836
Total Long Term Liab.
$74,321
TOTAL FARM LIABILITIES
$240,335
Farm Net Worth
$177,987
Percent Equity (Farm)
Nonfarm debts
Nonfarm deferred taxes
43%
$4,767
6,087
S10,854
Total Nonfarm Assets
S 37.756
Total Nonfarm Liabilities
TOTAL ASSETS
$456,078
TOTAL LIABILITIES
$251,189
Total Net Worth
$204,889
Percent Equity (Total)
451
-
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 dividing 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 SHEE'!' ANALYSJ:S
37 Western Plateau Region Farms, 1993
Item
Average
Financial Ratios - Farm:
Percent equity
Debt/asset ratio: total
long-term
intermediate/current
67%
.33
.32
.34
---_%
5%
38%
62%
---_%
----_%
----_%
Farm Debt Analysis:
Accounts payable as % of total debt
Long-term liabilities as a % of total debt
Current & inter. liab. as a % of total debt
Farm Debt Leyels:
Total farm debt
Long-term debt
Intermediate & current debt
Per Tillable
Acre Owned
$1,067
405
662
Per Cow
$1,964
746
1,218
My Farm
Per Cow
$---
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
investment indicates whether the capital stock is being expanded (positive) or
depleted (negative).
PARK J:NVENTORY BALANCE
37 Western Plateau Region Dairy Farms, 1993
Item
Average of Region's Farms
Real Estate
Machinery & Equipment
$210,931
Value beg. of year
Purchases
Gift/inheritance
Lost capital
Sales
Depreciation
+
$11,422
1,081
1,988
2,150
6,443
$117,695
+
$13,636
259
566
13,257
Net investment
Appreciation
=
Value end of year
$218,792
+
1,922
5,940
*$3,073 land and $8,349 buildings and/or depreciable improvements.
+
72
1,246
$119,013
-
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 determine 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 owned
by the business (called change in valuation equity).
Retained earnings is an excellent indicator of farm generated financial
progress.
STATEMEH'l' OP OWNER EQUITY (RECONCILIATION)
37 Western Plateau Region Dairy Farms, 1993
Item
Beginning of year farm
net worth
Net farm income w/o apprec.
+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)
CONTRIBUTED/WITHDRAWN CAPITAL
Appreciation
-Lost capital
CHANGE IN VALUATION EQUITY
IMBALANCE/ERROR
End of year farm net worth*
Change in net worth w/apprec.
Change in Net werth
Without appreciation
With appreciation
*May not add due to rounding.
Average
My Farm
$360,983
$ 27,485
+ 5,099
$--­
$--­
+--­
- 28.584
+$
4,000
$--­
$
1,357
$--­
+
1,767
+--­
o
+$
$
3,123
9,148
1. 988
+$,---­
$--­
+$
7,160
-456
+$,---,--­
=$375,723
$ 14,740
=$--­
$ 5,592
$14,740
-$,--­
$,--­
$---­
$,----
­
12
Ca.h Ploy Statement
Completing an annual cash flow statement is an important step in
understanding the sources and uses of funds for the business. Understanding
last year's cash flow is the first step toward planning and managing cash flow
for the current and future years.
The annual cash flow statement is structured to show net cash provided
by operating activities, investing activities, financing activities and from
reserves. All cash inflows and outflows, including beginning and end
balances, are included. Therefore, the sum of net cash provided from all four
activities should be zero. Any imbalance is the error from incorrect
accounting of cash inflows/outflows.
ANNUAL CASH PLOW STATEMENT
37 Western Plateau Region Dairy Farms, 1993
I t ern
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 (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 Reserves
Beginning farm cash, checking & savings
Ending farm cash, checking & savings
= Net Provided from Reserves
Imbalance (error)
13
ANNUAL CASH PLOW STATEKEH'l'
Item
My Farm
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 Inyesting 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 - 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 Reserves
=
Beginning farm cash, checking & savings
Ending farm cash, checking & savings
Net Provided from Reserves
Imbalance (error)
$--­
$--­
$,--­
-
14
Repayment ADaly.i.
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 1994. The cash flow projection
worksheet on the next page can be used to estimate repayment ability, which
can then be compared to planned 1994 debt payments shown below.
PAlUI DEBT PAYKENTS PLANNED
Same 19 Western Plateau Region Dairy Farms, 1992 & 1993
Ayerage
1993 Payments
Planned
Made
Planned
1994
Long '-term
Intermediate-term
Short-term
Operating (net
reduction)
Accounts payable
(net reduction)
Total
$ 6,602
25,785
2,023
$ 8,649
29,557
1,553
$10,266
24,761
1,225
1,768
150
693
1,783
$37,962
0
$39,909
1,799
$38,744
Per cow
Per cwt. 1993 milk
Percent of total
1993 receipts
Percent of 1993
milk receipts
$
$
Debt Payments
404
2.19
$
$
425
2.30
14%
15%
17%
18%
My Farm
1993 Payments
Planned
Made
Planned
1994
$._-- $--- $--­
$
$
$
$
$
$
$
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 1993 (as of December 31, 1992) that could have been made
with the amount available for debt service in 1993. Farmers who did not
participate in DFBS in 1992 have their 1993 cash flow coverage ratio based on
planned debt payments for 1994.
CASH PLOW COVERAGE RATIO
Same 19 Western Plateau Region Dairy Farms, 1992 & 1993
Ayerage
Item
My Farm
Cash farm receipts
- Cash farm expenses
+ Interest paid
- Net personal withdrawals from farm*
$254,445
200,474
11,010
31,676
$----­
(A) = Amount Available for Debt Service
(B) = Debt Payments Planned for 1993
(as of December 31, 1992)
(A/B) = Cash Flow Coverage Ratio for 1993
$ 33,305
$----­
$ 37,962
.88
$----­
*Personal withdrawals and family expenditures less nonfarm income and nonfarm
money borrowed.
If family withdrawals are excluded, or inaccurately
included, the cash flow coverage ratio will be incorrect.
-
15
ANNUAL CASH PLOW WORKSHEET
My Farm
Regional Ayerage Per Cowl
Per Cow P~r Cwt, Per Cwt,
92,1
15,966
Item
No, cows and cwt, milk
Accrual Oper, Receipts
Milk
Dairy cattle
Dairy calves
Other livestock
Crops
Misc, receipts
Total
$2,261.90
229,40
46,71
-,25
51.69
113,56
$2,703,02
$13,05 $
1.32
,27
,00
,30
Accrual Oper, Expenses
Hired labor
Dairy grain & conc,
Dairy roughage
Nondairy feed
Mach, hire/rent/lease
Mach, rpr,/parts & auto
Fuel, oil & grease
Replacement lvstk,
Breeding
Vet & medicine
Milk marketing
Cattle lease
Other livestock exp,
Fertilizer & lime
Seeds & plants
Spray/other crop exp,
Land, bldg"fence repair
Taxes
Real estate rent/lease
Insurance
Utilities
Miscellaneous
Total Less Int, Paid
$262,53
705,99
28,68
0,00
28,09
168,90
63,64
28,52
37,88
57,11
130,25
1.43
112,06
60,97
35,84
26,75
36,68
65,37
48,11
44,43
66,55
34,45
$2,044,23
Net Accrual Operating Income
(without interest paid)
- Change in lvstk,/crop inv,*
- Change in accts. rec,
+ Change in feed/supply inv,**
+ Change in accts, payable***
NET CASH FLOW
- Net personal w/drawals from
farm (see footnote on pg, 14)
Available for Farm Debt
Payments & Investments
- Farm debt payments
Available for Farm Investment
- Capital purchases: cattle,
machinery & improvements
Additional Capital Needed
(Total)
$60,673
8,716
1,784
1,556
780
$52,509
Expected
1994
Change
Projection
_
$---­
$15,59 $
_
$---­
$1.51 $
4,07
,17
,00
,16
,97
,37
,16
,22
,33
,75
,01
,65
.35
,21
,15
,21
,38
,28
,26
,38
_
$---­
_
$---­
-----:...22
--a.2..Q.
$11,79 $
$--­
$---­
$--­
$,---­
$--­
$,---­
$--­
$,---­
$
$
$23,485
$29,024
36,055
$-7,031
$27,565
*Includes change in advance government receipts,
**Includes change in prepaid expenses,
***Excludes change in interest account payable,
-
16
Cropping Apaly.i.
The cropping program is an important part of the dairy farm business and
often represents opportunities 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.
LARD RESOURCBS AND CROP PRODUCTION
37 Western Plateau Region Oairy Farms, 1993
Ayerage
Item
I.IAw1
Croe Yields
Hay crop
Corn silage
Other forage
Total forage
Corn grain
Oats
Wheat
Other crops
Tillable pasture
Idle
Total Tillable Acres
Rented
104
12
9
125
Owned
173
62
113
348
Tillable
Nontillable
Other ·nontillable
Total
~
~*
37
34
171
70
8
37
10
3
1
2
11
12
37
22
240
60
46
6
32
32
My Farm
~
~
277
74
122
473
---
Prod/Acre
2.52 tn
13 .34 tn
4.60 tn
.98 tn
3.04 tn
96.28 bu
67.63 bu
50.00 bu
Rented
Total
--Prod/Acre
___ tn OM
___ tn
___ tn OM
___ tn OM
___ tn OM
bu
bu
bu
OM
OM
OM
OM
17
277
*This column represents the average acreage for the farms producing that crop.
Average acreages including those farms not producing were hay crop 171, corn
silage 64, corn grain 16, oats 4, tillable pasture 10, and idle 5.
Average crop acres and yields compiled for the region are for the farms
reporting each crop. Yields of forage crops have been converted to tons of
dry matter using dry matter coefficients reported by the farmers.
Grain
production has been converted to bushels of dry grain equivalent based on dry
matter information provided.
The following crop/dairy ratios indicate the relationship between forage
production, forage production resources, and the dairy herd.
CROP/DAIRY RATIOS
37 Western Plateau Region Farms, 1993
"
Item
Total tillable acres per cow
Total forage acres per cow
Harvested forage dry matter, tons per cow
Ayerage
3.01
2.61
7.93
My Farm
­
17
Cropping An_ly.i. (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 computed per acre and per production
unit for hay and corn. Additional expense items such as fuels, labor, and
machinery repairs are not included. Rotational grazing was used on eight
farms in the region.
CROP RELATBD ACCRUAL BXPBNSBS
37 Western Plateau Region Farms Reporting, 1993
Item
No. of farms
reporting
Ave.number
of acres
Fert./lime
Seeds/plants
Spray/other
crop expo
TOTAL
Total
Per
Till.
Acre
All
Corn
Per
Acre
Corn
Silage
Per
Ton PM
Corn
Grain
Per Dry
Sh.Bu.
Hav Crop
Per
Acre
37
10
277
$20.27
11.92
83
$35.29
24.69
$8.72
6.10
$.36
.25
~
23.01
$82.99
5.69
$20.51
-----..ll
~
$.84
$22.41
$41.09
Per
Ton DM
Pasture
Per
Per
Till.
Total
Acre
Acre
11
0
204
$15.62 $5.98
6.43
2.46
.14
$8.58
0
$.00
.00
0
$.00
.00
.00
$,00
,00
$.00
My Farm:
Fert./lime
Seeds/plants
Spray/other
crop expo
TOTAL
$,---
$,---
$--- $--- $-- $
$---
$---
$--- $--- $-- $-- $
$-- $,-­
$-­
Most machinery costs are associated with crop production and should be
analyzed with the crop enterprise. Total machinery expenses include the major
fixed costs (interest and depreciation), as well as the accrual operating
costs. Although machinery costs have not been allocated to individual crops,
they are shown below per total tillable acre.
ACCRUAL MACHINERY EXPBNSBS
37 Western Plateau Region Farms, 1993
Machinery
Expense Item
Ayerage
Total
Per Till.
Expenses
Acre
Fuel, oil & grease
Machinery repairs & parts
Machine hire, rent & lease
Auto expense (farm share)
Interest (5%)
Depreciation
Total
$5,861
14,055
2,587
1,501
5,918
13,257
$43,179
$21.16
50.74
9.34
5.42
21.36
47.86
$155.88
My Farm
Total
Expenses
Per Till,
Acre
$----
$---­
$----
$---­
-
18
Dairy An.ly.i.
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 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.
"
DAJ:RY HERD J:HVENTORY
37 Western Plateau Region Dairy Farms, 1993
Dairy Cows
Item
Beg. year (owned)
No.
Ya1ue
91
$96,137
+ Change w/o apprec.
+ Appreciation
End year (owned)
94
End incl. leased
94
Average number
92
My
Bred
No. Yalue
Heifers
Open
No· value
No·
32
26
26
$26,062
$14,343
Calves
value
$7,892
4,109
1,272
-287
-107
121
580
-39
184
$100,367
34
$27,914
25
$14,017
26
$7,969
85 (all age groups)
Farm:
Beg. of year (owned)
_
$--
$--
$--
$-­
$--
$--
$--
$-­
+ Change w/o apprec.
+ Appreciation
End of year (owned)
End including leased
_____ (all age groups)
Average number
Total milk sold and milk sold per cow are extremely valuable measures of
size and productivity, respectively, on the dairy farm. These measures of
milk output are based on pounds of milk marketed during the year. Farm
managers on DHI should compare milk sold per cow with their rolling herd
average on the test date nearest December 31 to see how close the DHI estimate
of milk produced is to actual milk sales.
IIJ:LK PRODUCTJ:OR
37 Western Plateau Region Dairy Farms, 1993
Item
Total milk sold, lbs.
Milk sold per cow, lbs.
Average milk plant test, percent butterfat
Average
1,596,599
17,334
3.67
My Farm
-
19
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 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 producing 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.
ACCRUAL RJl:CBIPTS PROII DAIRY AND COST OP PRODUCING IIILlt
37 Western Plateau Region Dairy Farms, 1993
Item
Accrual Costs of
Producing Milk
Operating costs
Purchased inputs
costs
Total Costs
Accrual Receipts
From Milk
Ayerage
Per Cow
Total
Farm
Per Cow
Per Cwt.
My
Per Cwt.
Total
$161,136
$1,750
$10.09
$
$
$
$180,836
$235,982
$1,966
$2,562
$11. 33
$14.78
$
$
$
$
$
$
$208,321
$2,262
$13 .05
$
$
$
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
37 Western Plateau Region Farms, 1993
Ayerage
Item
Purchased dairy grain
& concentrates
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
Cattle lease
Other livestock expense
My Farm
Per Cow
Per Cwt.
$706
29
$4.07
.17
$
$
$735
$4.24
$
$
$4.95
$
$.22
.33
.75
.01
.65
$
Per Cow
31%
$858
38%
$38
57
130
1
112
Per Cwt.
- -%
- -%
$
$
-
20
Capital
and Labor Ifficiency Analy.i.
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 IPPICIENCY
37 Western Plateau Region Farms, 1993
Per
Worker
Item
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
$184,718
40,904
Per
Cow
Per Tillable
Acre
Per Tillable
Acre Owned
$5,980
2,333
1,324
$1,988
$3,184
1,242
440
.47
My Farm:
Farm capital
Real estate
Machinery & equipment
Asset turnover ratio
$
$
$
$
LABOR PORCS INVENTORY AND ANALYSIS
37 Western Plateau Region Farms, 1993
Months
Labor Force
Operator number 1
Operator number 2
Operator number 3
Family paid
Family unpaid
Hired
Total
My
11.89
5.68
1.84
4.00
2.46
.2......22.
35.78
/ 12
Labor
Efficiency
Labor
Costs
Value of operator(s)
labor ($1,400/mo. )
Family unpaid
($1, 400/mo.)
Hired
Total Labor
Machinery Cost
Total Labor & Mach.
Years
of Educ.
46
44
53
13
13
13
Value of
Labor & Mgmt,
$20,838
9,243
3,203
= 2.98
Worker Equivalent
1.62 Operator/Manager Equiv.
/ 12 = ______ Worker Equivalent
Operator/Manager Equiv.
/ 12 =
Farm: Total
Operator's
Cows, average number
Milk sold, pounds
Tillable acres
Work units
Age
Total
Ayerage
Per WOrker
My Farm
Per Worker
31
535,472
93
332
92
1,596,599
277
989
Total
Total
Ayerage
Per
Cow
My Farm
Per
Cwt.
$27,160
$295
$1. 70
3,444
24.179
$54,783
$43,179
$97,962
37
.22
....2.il
~
$595
$469
$1,064
$3.43
$2.70
$6.13
Per
Cow
Total
Per
Cwt.
$
$
$
$
$
$
$
$
$
$
$
$
-
21
COMPARATIVE ANALYSIS OP THB PARK BUSINESS
Proare.. of the PArm Bu.ine ••
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 OP THE PARK BUSINESS
Same 19 Western Plateau Region Dairy Farms, 1992 & 1993
Selected Factors
Ayerage of 19 Farms*
1992
1993
Size of Business
95
Average number of cows
94
83
88
Average number of heifers
1,700,514 1,734,425
Milk sold, lbs.
3.07
Worker equivalent
3.22
246
Total tillable acres
247
Rates of Production
17,950
18,400
Milk sold per cow, lbs.
Hay OM per acre, tons
2.70
2.67
Corn silage per acre, tons
13
14
Labor Efficiency
Cows per worker
29
31
528,241
564,224
Milk sold/worker, lbs.
Cost Control
Grain & conc. purchased
30%
30%
as % of milk sales
Dairy feed & crop expo
$4.83
per cwt. milk
$5.13
$1,040
$1,041
Labor & mach. costs/cow
Operating cost of producing
$10.66
$9.82
cwt. of milk
Capital Efficiency**
$5,631
$5,893
Farm capital per cow
$1,141
$1,203
Mach. & equip. per cow
.51
.49
Asset turnover ratio
Profitability
$28,332
$35,764
Net farm inc. w/o apprec.
$41,894
$45,993
Net farm inc. w/apprec.
Labor & mgt. income
$4,660
$7,369
per oper./manager
Rate of return on eq.
capital w/apprec.
1%
1%
Rate of return on all
3%
3%
capital w/apprec.
Financial Summary
$384,398 $398,479
Farm net worth, end year
.29
.30
Debt to asset ratio
$1,675
$1,732
Farm debt per cow
My Farm
1993
1992
%
Goal
%
%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
%
%
%
%
%
%
$
$
$
$
$
$
*Farms participating both years.**Average for the year.
-
22
Regional Parm BUlinesl Chart
The Farm Business Chart is a tool which can be used in analyzing your
business. Compare your business by drawing a line through or near the figure in
each column which represents your current level of performance. The five
figures in each column represent the average of each 20 percent or quintile of
farms included in the regional summary. Use this information to identify
business areas where more challenging goals are needed.
PARK BUSINESS CHART POR PARK KANAGEKENT COOPERATORS
37 Western Plateau Region Dairy Farms, 1993
Size of Business
Worker
No.
Pounds
of
EquivMilk
alent
Cows
Sold
(11) *
5.0
3.4
2.7
2.0
1.4
(11 )
162
109
80
59
39
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
Per Cow
DM/Acre Per Acre
(10)
(9 )
(9 )
(11)
20,901
18,720
17,027
15,344
13,989
3.8
3.2
2.5
1.9
1.3
18
16
14
12
7
40
35
30
27
21
730,870
606,038
524,280
439,974
344,986
Feed & Crop
Expenses
Per Cow
(10)
Feed & Crop
Expenses Per
Cwt. Milk
(10)
(11)
2,808,464
1,935,573
1,365,036
1,033,476
618,898
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11)
Cost Control
Grain
Bought
Per Cow
(10)
$497
644
721
767
868
% Grain is
of Milk
Receipts
(10)
Machinery
Costs
Per Cow
(11)
$320
414
441
520
647
22%
29
31
35
39
Value and Cost of Production
Total Cost
Oper. Cost
Milk
Production
Receipts
Milk
Per Cwt.
Per CWt.
Per Cow
(10)
$2,712
2,451
2,207
1,972
1,809
Labor &
Machinery
Costs Per Cow
( 11)
$ 830
963
1,085
1,153
1,306
Net Farm
Income
w/Apprec.
$ 618
759
874
950
1,073
$3.80
4.55
4.96
5.44
6.05
Profitability
Net Farm
Labor &
Inc. w/o
Mgt. Inc.
Apprec.
Per Oper.
Change in
Net Worth
w/Apprec.
(10)
(10)
(3 )
(3 )
(3 )
(6 )
$ 8.08
9.08
9.59
10.49
11.72
$12.95
13.98
14.73
15.53
17.15
$70,473
48,068
34,805
24,828
-1,471
$61,448
33,460
22,093
16,920
-2,196
$18,849
9,330
1,588
-4,651
-19,887
$44,325
22,081
11,385
4,068
-13,440
*Page number of the participant's DFBS where the factor is located.
-
23
Mew
york Stat.
Pa~
Bu,in.,. Chart.
The Farm Business Chart is a tool which can be used in analyzing a business
by drawing a line through the figure in each column which represents the current
level of management performance. The figure at the top of each column is the
average of the top 10 percent of the 357 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 ~ 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.
PAlUI BUSIRBSS CHART POR PAlUI KANAGDEN'l' CooPBRATORS
357 New York Dairy Farms, 1992
Size of Business
Worker
Pounds
No.
Equivof
Milk
alent
Cows
Sold
(11 )
(11 )
(11) *
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
Per Cow
OM/Acre Per Acre
(9 )
(10)
(9)
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
( 11)
(11 )
428
8,455,437
22,613
4.8
22
52
959,379
10.0
3,511,396
21,180
3.7
18
43
797,982
5.4
184
2,551,838
20,249
3.2
38
136
17
715,818
4.1
19,582
1,971,002
3.0
16
3.4
107
34
640,614
89
1,660,762
18,753
2.7
15
587,553
3.0
32
----------------------------------------------------------1,366,246
18,065
2.5
29
534,745
15
2.6
76
17,445
2.3
1,149,820
13
27
477,585
64
2.4
16,486
2.1
12
432,399
2.1
57
964,766
25
792,337
15,085
10
48
1.8
23
389,221
1.8
12,400
578,602
1.4
6
18
296,180
1.2
37
Grain
Bought
Per Cow
(10)
% Grain is
of Milk
Receipts
(10)
$348
484
556
618
665
16%
21
24
26
27
712
763
826
896
1,030
29
31
32
35
42
Cost Control
Machinery
Labor &
Machinery
Costs
Per Cow
Costs Per Cow
(11)
(11 )
Feed & Crop
Expenses
Per Cow
(10)
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$250
325
379
414
442
$675
803
867
926
993
$497
649
716
783
832
$3.23
3.77
4.09
4.36
4.55
478
512
548
608
796
1,058
1,114
1,180
1,274
1,563
892
943
1,004
1,071
1,232
4.76
4.99
5.27
5.70
6.76
*Page number of the participant's DFBS where the factor is located.
-
24
PARK BUSINESS CHART POR PARK
KANAGEKENT CooPBRATORS
357 New York Dairy Farms, 1992
Milk
Receipts
Per Cow
(10)
Milk
Receipts
Per Cwt.
(10)
Oper. Cost
Milk
Per Cow
(10)
Oper. Cost
Milk
Per Cwt.
(10)
Total Cost
Production
Per Cow
(10)
Total Cost
Production
Per Cwt.
(10)
$3,086
2,861
2,732
2,638
2,527
$14.64
14.02
13.77
13.60
13 .46
$1,068
1,419
1,575
1,706
1,845
$ 6.84
8.27
8.96
9.62
10.15
$1,952
2,312
2,452
2,567
2,691
$11.79
13.00
13 .60
14.12
14.75
2,434
2,340
2,199
2,023
1,684
13 .38
13 .27
13 .15
13.02
12.56
1,954
2,051
2,163
2,357
2,636
10.67
11.07
11.51
12.18
14.08
2,792
2,934
3,091
3,241
3,666
15.44
16.01
16.59
17 .54
21.09
Profitability
Net Farm Income
Without
With
Appreciation
Appreciation
(3 )
(3 )
Return to Operator's Labor,
Manaqement. & Equity Caoital
With
Without
Appreciation
Appreciation
(3)
(3)
Labor &
Manaqement Income
Per
Per
Farm
Operator
(3 )
(3 )
$275,597
99,964
71,930
55,060
44,009
$218,659
79,562
55,878
42,428
32,527
$272,714
97,288
68,243
52,537
39,218
$216,089
77,148
53,019
38,519
27,999
$152,525
46,635
28,823
18,603
9,260
$111,774
33,282
20,747
12,977
6,723
33,724
26,725
18,592
8,916
-16,432
23,687
16,924
9,627
353
-31,254
29,676
22,688
14,777
5,299
-20,794
19,523
12,394
5,882
-4,196
-34,417
1,980
-4,505
-13,845
-23,769
-61,040
1,639
-3,779
-11,067
-21,005
-53,650
Farm Business Charts for farms with freestall barns and 120 cows or less and
more than 120 cows, and farms with conventional barns with 60 cows or less and more
than 60 cows are shown on pages 28-31.
pip.psial lp'lywia
Chart
The farm financial analysis chart on page 25 is designed just like the Farm
Business Chart and may be used to assess the financial health of the farm business.
Host of the financial measures used in the chart are defined on pages 6, 10, 14 and
20 of this publication. References to DFBS output page numbers for participating
dairy farmers are provided in the table headings.
­
25
FINANCIAL ANALYSIS CHART
357 New York Dairy Farms, 1992
Planned Debt
Payments
Per Cow
(8)*
Available for
Debt Service
Per Cow
(12)
$ 46
0.02
0.11
0.24
0.35
0.48
0.58
0.74
0.95
1.29
3.20
Asset
Turnover
(ratio)
Debt Payments
as Percent
of Milk Sales
(8)
(8)
4.11
1. 75
1.37
1.14
0.98
0.86
0.73
0.60
0.29
-0.14
5%
9
13
15
17
19
22
25
30
38
$840
663
579
494
440
401
339
274
181
-22
191
276
362
411
458
501
584
677
885
Leverage
Ratio"
Liquidity (repayment)
Cash Flow
Coverage
Ratio
Solvency
Debt/Asset Ratio
Percent
Current &
Long
Equity
Intermediate
Term
Debt
Per Cow
(5 )
$
Profitabil ity
Percent Rate of Return with
appreciation oni
Equity
Inyestment***
(5 )
(5 )
(5 )
(3)
(3)
98%
90
81
73
68
63
57
52
44
29
0.01
0.08
0.14
0.21
0.29
0.35
0.39
0.46
0.55
0.77
0.00
0.00
0.04
0.18
0.28
0.38
0.48
0.57
0.70
1.04
22%
11
8
5
3
1
-1
16%
10
8
6
4
3
1
-1
-2
-7
Efficiency (Capital)
Real Estate
Machinery
Investment
Investment
Per Cow
Per Cow
(11 )
( 11)
.71
.57
.52
.48
.45
.42
.39
.35
.31
.24
$1,327
2,044
2,372
2,667
2,967
3,279
3,663
4,188
4,861
7,201
(11)
$
545
792
942
1,054
1,194
1,358
1,520
1,753
2,008
2,722
116
754
1,302
1,781
2,160
2,521
2,882
3,243
3,735
5,214
-4
-8
-26
Total Farm
Assets
Per Cow
Change in
Net Worth
w/Appreciation
(11 )
(11 )
$ 4,339
5,156
5,727
6,243
6,680
7,120
7,621
8,236
9,100
12,014
$185,910
59,227
40,515
28,384
19,748
13,025
5,269
-2,230
-10,422
-50,747
*Page number of the participant's DFBS where the factor is located.
**Dollars of debt per dollar of equity, computed by dividing total liabilities by
total equity.
***Return on all farm capital (no deduction for interest paid) divided by total
farm assets.
-
26
Comparl.oD by Type of BArn and Herd Slze
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. Conventional housing includes stanchion and
tiestall barns. Within each group, is a further classification by size of the
dairy herd.
The table on page 27 includes the average values for the resulting four
groups of dairy farms. The average size of farms in the four groups ranges from 47
cows on the small conventional farms to 250 cows on the large freestall farms. The
large conventional farms and small freestall farms averaged approximately the same
herd size and rates of milk output per cow.
The large freestall farms averaged the highest milk output per cow and per
worker, the lowest total costs of production and investment per cow, and the
greatest returns to labor, management and capital. The large conventional farms
showed average profits somewhat higher than the small freestall operations. Total
costs of production averaged substantially less on the large conventional farms.
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 Slze ComRArl,oD'
A detailed comparison of profitability, financial situation and business
analysis factors across herd sizes is contained on pages 40-49 of the 1992 State
Summary*. As herd size increases, the average profitability generally increases
(pages 42-43). Net farm income without appreciation was $252,256 per farm for the
300 or more herd size group and $4,790 per farm for those with less than 40 cows.
This relationship generally holds for all measures of profitability including rate
of return on capital. However, the 200 to 299 herd size group showed a lower level
of profitability in 1992 than the farms with 150-199 cows.
Farm net worth increases rapidly as herd size increases (pages 44-47), even
though percent equity was higher on the smaller farms. The 85 to 99 cow group and
the group with more than 300 cows demonstrated the strongest ability to make debt
payments.
Crop yields showed little relationship to herd size, but fertilizer and lime
expenses, and machinery cost per tillable acre generally increased as herd size
increased (pages 48-49)*. Milk sold per cow increased as herd size increased,
ranging from 17.208 pounds on the farms with less than 40 cows to 19,795 pounds on
farms with 300 or more cows. Farm capital per worker increased, and farm capital
per cow decreased as herd size increased. Milk sold per worker increased
dramatically as herd ~ize increased, ranging from 369,797 pounds at the lowest herd
size category up to 923,495 pounds at the largest size category.
* smith. Stuart F •• Wayne A. Knoblauch, and Linda D. Putnam, Dairy Farm Management
Business Summary. New York, 1992, Department of Agricultural, Resource, and
Managerial Economics. Cornell University, A.E. Res. 93-11, August 1993.
.........
27
SELECTED BUSIHBSS FACTORS BY TYPE OF BARN AND BERD SIZB
328 New York Dairy Farms, 1992
Farms with:
Item
Number of farms
Cropping Program Analysis
Total Tillable acres
Tillable acres rented*
Hay crop acres·
Corn silage acres·
Hay crop, tons OM/acre
Corn silage, tons/acre
Oats, bushels/acre
Forage OM per cow, tons
Tillable acres/cow
Fert. & lime exp./til. acre
Total machinery costs
Machinery cost/tillable acre
Conventional
>60 Cows
<- 60 Cows
99
86
59
84
156
53
100
29
2.3
13.4
57.0
7.6
3.3
$17.79
$22,434
$144
276
90
165
52
2.6
15.1
68.8
7.9
3.1
$ 21.31
$39,496
$
143
301
126
154
75
2.8
13.3
60.3
8.7
3.5
$ 24.95
$46,959
$
156
675
280
268
248
3.1
14.9
67.6
7.2
2.4
$ 28.81
$114,680
$
170
pairy Analysis
Number of cows
48
Number of heifers
37
828,310
Milk sold, lbs.
Milk sold/cow, lbs.
17,337
Operating cost of prod. milk/cwt.
$10.09
$16.41
Total cost of prod. milk/cwt.
Price/cwt. milk sold
$13.35
Purchased dairy feed/cow
$713
Purchased dairy feed/cwt. milk
$4.11
29%
Purc. grain & conc. as % milk rec.
Purc. feed & crop exp./cwt. milk
$4.81
Capital Efficiency
Farm capital/worker
Farm capital/cow
Farm capital/til. acre owned
Real estate/cow
Machinery investment/cow
Asset turnover ratio
Labor Efficiency
Worker equivalent
Operator/manager equivalent
Milk sold/worker, lbs.
Cows/worker
Labor cost/cow
Labor cost/tillable acre
Freestall
120
Cows >120 Cows
<=
89
70
1,617,663
18,131
$10.12
$14.54
$13 .41
$727
$4.01
29%
$4.73
87
73
1,566,899
18,042
$10.54
$15.70
$13.67
$714
$3.95
28%
$4.98
279
213
5,421,782
19,469
$10.61
$13.59
$13.68
$750
$3.85
27%
$4.62
$193,685
$7,641
$3,546
$3,991
$1,420
0.37
$212,649
$7,032
$3,373
$3,269
$1,401
0.41
$225,584
$7,534
$3,758
$3,458
$1,589
0.42
$245,237
$6,012
$4,249
$2,654
$997
0.54
1.89
1.15
439,237
25
$610
$187
2.95
1.41
548,374
30
$526
$170
2.90
1.38
540,489
30
$563
$162
6.83
1. 71
794,151
41
$546
$225
$35,087
$7,912
4.2%
$2,174
69%
$26,671
$-70
4.3%
$2,482
67%
$105,301
$31,312
7.9%
$2,462
58%
Profitability & Balance Sheet Analysis
Net farm income (w/o apprec.)
$15,377
Labor & mgmt. income/operator
$-1,752
Return on all capital w/apprec.
1.1%
Farm debt/cow
$2,353
70%
Percent equity
*Average of all farms, not only those reporting data.
-
28
I'AJUI BUSINESS CHART POR SHALL CONVENTIONAL STALL DAIRY PARKS
99 Conventional Stall Dairy Farms with 60 or Less Cows, New York, 1992
Size of Business
No.
Pounds
Worker
Milk
Equivof
Sold
alent
Cows
( 11)
(
11)
(11) *
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
OM/Acre Per Acre
Per Cow
(10)
(9 )
(9 )
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11 )
( 11)
2.9
2.5
2.3
2.1
2.0
60
59
56
52
50
1,216,307
1,056,041
971,222
904,369
833,676
21,382
19,969
19,389
18,540
18,160
3.1
3.1
2.9
2.6
2.4
22
18
16
15
15
46
36
30
27
26
760,933
627,590
540,690
492,638
454,994
1.8
1.6
1.4
1.2
1.0
47
44
42
38
29
784,602
741,239
663,822
614,828
460,178
17,523
16,512
15,520
14,121
11,563
2.2
2.1
1.9
1.6
1.2
13
12
12
10
4
24
23
22
20
16
427,601
400,809
369,048
323,957
241,563
Grain
Bought
Per Cow
(10)
$324
454
531
602
650
% Grain is
of Milk
Receipts
(10)
17%
23
25
26
28
Cost Control
Labor &
Machinery
Costs Per Cow
(11 )
Machinery
Costs
Per Cow
( 11)
$251
304
352
396
437
Feed & Crop
Expenses
Per Cow
(10)
Feed & Crop
Expenses Per
Cwt. Milk
(10)
$451
582
671
724
783
$666
810
917
977
1,049
$3.20
3.78
4.12
4.34
4.52
----------------------------------------------------------29
470
690
506
31
729
545
796
33
874
35
599
1.068
43
867
Value and Cost of Production
Total Cost
Oper. Cost
Milk
Production
Receipts
Milk
Per Cwt.
Per Cow
Per Cwt.
1,108
849
1,159
913
1,212
967
1,316
1,054
1. 680
1. 302
Profitability
Net Farm
Net Farm
Labor &
Inc. w/o
Mgt. Inc.
Income
Apprec.
w/Apprec.
Per Dper.
Change in
Net Worth
w/Apprec.
(3 )
(6 )
(3 )
(3 )
4.73
4.95
5.33
5.90
6.88
(10)
(10)
(10)
$2,911
2,698
2,574
2,497
2,422
$6.56
8.05
8.52
9.30
9.88
$12.90
14.03
14.70
15.40
16.05
$63,046
45,628
36,269
28,971
24,643
$44,806
34,597
27,896
22,714
17,420
$23,678
14,168
9,493
4,888
1,521
$59,924
35,056
22,019
16,391
12,621
2,322
2,178
2,049
1,882
1.468
10.38
10.84
11.31
12.23
13.66
16.43
16.83
17.59
19.38
23.90
18,479
14,042
8,645
3,338
-9,920
12,690
8,549
2,239
-3,095
-17,335
-2,983
-7,798
-13,240
-19,918
-38,585
6,278
119
-4,219
-9,925
-20,443
"Page number of the participant's DFBS where the factor is located.
-
29
PARK BUS:InSS CHAR'!' POR LARGE COHVBN'l':IOHAL S'!'ALL DA.:IRY PARKS
86 Conventional Stall Dairy Farms with More Than 60 Cows, New York, 1992
Size of Business
Worker
No.
Pounds
EquivMilk
of
Cows
Sold
alent
(11) *
( 11)
(11)
4.9
3.7
3.3
3.1
2.9
153
115
101
90
83
2,798,611
2,136,428
1,839,098
1,662,293
1,550,272
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
pM/Acre Per Acre
Per Cow
(10)
(9)
(9)
22,871
20,905
20,106
19,342
18,385
5.0
3.6
3.2
2.9
2.7
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
( 11)
( 11)
48
37
34
32
31
23
19
17
17
16
876,546
724,109
641,723
592,104
563,811
----------------------------------------------------------2.6
2.5
2.3
2.1
1.8
Grain
Bought
Per Cow
(10)
$
311
411
506
568
636
710
807
870
925
1. 054
77
70
67
65
62
1,423,737
1,333,387
1,236,304
1,104,978
878,461
% Grain is
of Milk
Receipts
(10)
17,845
17,054
16,373
15,006
12,535
2.5
2.2
2.0
1.8
1.4
15
13
12
10
7
Cost Control
Machinery
Labor &
Machinery
Costs
Per Cow
Costs Per Cow
(11)
(11)
14%
20
22
24
26
$223
316
369
412
426
28
31
34
37
42
447
489
523
563
718
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Production
Receipts
Milk
Per Cow
Per Cwt.
Per Cwt.
(10)
(10)
(10)
$
620
747
824
887
945
29
27
25
24
21
Feed & Crop
Expenses
Per Cow
(10)
$
1,014
1,075
1,122
1,197
1.372
512,314
467,326
430,539
397,414
352,630
Feed & Crop
Expenses Per
Cwt. Milk
(10)
442
580
656
707
811
875
953
1,004
1,058
1. 245
Profitability
Net Farm Income
Labor &.
With
Without
Mgrnt. Inc.
Apprec.
Per Oper,
Apprec.
(3 )
(3 )
(3 )
$3.02
3.60
3.79
4.04
4.41
4.64
4.93
5.19
5.60
6.51
Change in
Net Worth
w/Apprec.
(6)
$3,093
2,821
2,690
2,590
2,465
$ 6.72
7.90
8.52
9.10
9.66
$11. 87
12.73
13.29
13.68
14.21
$108,267
74,747
62,248
53,294
45,675
$91,353
65,766
55,029
43,685
37,569
$43,558
28,599
23,048
18,555
9,783
$82,187
41,744
32,305
25,438
15,961
2,394
2,265
2,159
2,013
1,699
10.37
10.88
11.34
11. 76
12.91
14.75
15.42
15.91
16.56
18.29
34,976
27,816
19,825
11,517
-9,556
28,776
19,963
12,165
2,831
-20,251
4,808
-1,813
-7,608
-17,446
-43,084
8,831
4,654
-157
-6,447
-39.646
*Page number of the participant's DFBS where the factor is located.
­
30
PARK BUSINESS CHART POR SHALL PREESTALL DAIRY PARKS
59 Freestall Barn Dairy Farms with 120 or Less Cows, New York, 1992
Size of Business
Worker
No.
Pounds
of
Equiv­
Milk
Cows
alent
Sold
(11)
(11)
(11) *
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
Per Cow
pM/Acre Per Acre
(9 )
(10)
(9)
4.5
3.7
3.4
3.3
3.1
118
108
104
97
91
2,318,393
2,025,486
1,905,776
1,812,755
1,697,486
23,226
20,742
20,075
19,485
18,584
2.7
2.5
2.2
2.0
1.4
86
80
72
62
45
1,557,311
1,351,124
1,173,922
1,022,537
651.669
18,036
17,504
16,043
13,200
11.685
Grain
Bought
Per Cow
(10)
$ 374
488
551
605
658
705
749
827
900
974
% Grain is
of Milk
Receipts
(10)
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11)
(11)
53
42
37
34
32
872,689
770,827
688,683
603,386
571,158
2.6
14
29
2.3
12
27
2.0
10
25
1.8
8
23
1.3
3
15
Cost Control
Machinery
.Labor &
Feed & Crop
Expenses
Costs
Machinery
Per Cow
Per Cow
Costs Per Cow
(10)
(11)
(11)
538,989
488,313
433,176
360,361
270,409
16%
20
23
26
28
$264
376
406
448
490
30
31
33
35
39
538
592
644
692
875
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Milk
Production
Receipts
Per Gwt.
Per ewt.
Per Cow
(10)
(10)
(10)
5.7
3.9
3.4
3.2
2.9
$
679
810
872
933
1,011
21
19
18
16
15
$
1,097
1,183
1,290
1,449
1.741
Feed & Crop
Expenses Per
Cwt. Milk
(10)
529
653
708
803
864
$3.36
3.83
4.24
4.50
4.83
924
998
1,066
1,109
1.186
5.10
5.26
5.56
6.29
Profitability
Net Farm Income
Labor &.
With
Without
Mgmt. Inc.
Apprec.
Apprec.
Per Oper.
(3)
(3)
(3)
$3,115
2,801
2,718
2,626
2,534
$ 6.33
8.39
9.37
9.78
10.13
$11.89
13 .23
14.13
14.97
15.66
$179,031
79,233
63,081
51,912
41,056
$86,712
61,053
48,995
36,234
25,578
$51,557
22,625
10,907
6,110
1,978
2,451
2,353
2,186
1,895
1. 694
10.57
11.17
11.72
12.99
14.79
16.07
16.67
17.68
18.98
20.47
34,711
28,891
22,662
7,870
-22.606
18,848
15,569
9,092
- 9,009
-36.917
689
- 4,932
-15,149
-26,857
-65.994
*Page number of the participant's DFBS where the factor is located.
6.91
Change in
Net Worth
w/Apprec.
(6 )
$133,449
55,877
38,686
27,392
19,985
13,594
5,705
-4,431
-13,164
-46.141
-
31
PARK BUSI:NBSS CHART POR LARGB PRBBSTALL DAI:RY PARKS
84 Freesta11 Barn Dairy Farms with More Than 120 Cows, New York, 1992
Size of Business
Worker
No.
Pounds
Equivof
Milk
Sold
alent
Cows
(11) *
(11)
(11)
17.8
8.4
7.3
6.2
5.8
827
370
280
234
205
16,288,987
7,526,000
5,563,510
4,442,314
3,922,439
Rates of Production
Pounds
Tons
Tons Corn
Milk Sold Hay Crop Silage
Per Cow
DM/Acre Per Acre
(9 )
(10)
(9)
22,717
21,818
21,355
20,495
19,777
5.0
4.1
3.6
3.3
3.0
Labor Efficiency
Cows
Pounds
Per
Milk Sold
Worker
Per Worker
(11)
( 11)
21
18
17
16
16
1,138,851
899,158
845,337
805,033
760,845
60
47
44
42
40
----------------------------------------------------------5.2
4.8
4.3
3.8
3,2
Grain
Bought
Per Cow
(10)
$
190
173
158
145
128
3,626,910
3,324,340
3,036,766
2,675,565
2,294,285
% Grain is
of Milk
Receipts
(10 )
411
556
618
667
701
15%
21
24
25
27
728
768
804
861
960
28
30
31
33
38
19,160
18,228
17,535
16,783
14,619
2.8
2.6
2.4
2.2
1.8
15
14
13
11
7
Cost Control
Machinery
Labor &
Costs
Machinery
Per Cow
Costs Per Cow
( 11)
(11)
$259
320
366
397
421
441
479
513
553
691
Value and Cost of Production
Oper. Cost
Total Cost
Milk
Production
Receipts
Milk
Per Cwt,
Per Cwt.
Per Cow
(10 )
(10)
(10)
$
713
810
850
879
924
37
35
33
31
27
Feed & Crop
Expenses
Per Cow
(10)
$
1,001
1,037
1,099
1,185
1. 339
731,079
690,044
647,088
598,697
492,796
Feed & Crop
Expenses Per
Cwt. Milk
(10)
644
765
803
819
873
$3.19
3.86
4.17
4.41
4.55
910
937
982
1,038
1,141
4.70
4.90
5.12
5.44
6.23
Profitability
Net Farm Income
Labor &.
With
Without
Mgmt. Inc.
Apprec,
Apprec,
Per Oper.
(3)
(3)
(3)
Change in
Net Worth
w/Apprec.
(6)
$3,137
2,978
2,893
2,792
2,701
$ 7.56
8.92
9.56
10.27
10.82
$11. 30
12.22
12.99
13.36
13.66
$556,579
219,914
152,924
117,022
100,788
$437,174
202,962
127,718
95,001
79,566
$266,126
78,676
43,360
33,386
21,848
$368,663
133,568
85,566
57,664
41,655
2,597
2,486
2,365
2,297
2,024
11.10
11.30
11.65
12.24
13.58
13 .92
14.55
15.37
16.26
17.28
85,282
53,580
35,584
22,661
-29,806
55,575
37,649
19,581
-954
-56,453
10,659
-1,813
-12,922
-34,149
-79,753
25,685
16,246
-1,307
-34,827
-96,233
*Page number of the participant's DFBS where the factor is located.
-
32
IDENTIFY AND SET GOALS
If 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 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 Achieyable but challenging.
4.
Goals should be Rewarding.
5.
You should designate a
~
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 progressing.
It is important to identify both objectives (long-range) and goals
(short-range) when looking at the future of your farm business.
A suggested format for writing out your goals is as follows:
a.
Begin with a mission statement which describes why the
business exists based on the preferences and values of the
owners.
b.
Identify 4-6 objectives.
c.
Identify SMART goals.
Worksheet for Setting Goals
I.
Mission and Objectives
-
33
Worksheet for Setting Goals (continued)
II.
Goals
What
How
When
Who is Responsible
Summarize Your Business Performance
The Farm Business and Financial Analysis Charts on pages 22-25 and
28-31 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 OP CODON TBRHS
acCOunt. PaYable - Open accounts or bills owed to feed and supply firms, cattle
dealers, veterinarians and other providers of farm services and supplies.
Accounts Receiyable - Outstanding receipts from items sold or sales proceeds not yet
received, such as the payment for December milk sales received in January.
Accrual Bzpense. -
(defined on page 3)
Accrual Receipt. -
(defined on page 4)
Annual Ca.h Plow Statement Appreciation -
(defined on page 12)
(defined on page 5)
Asset TUrnOVer Batio - 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 December 31. The balance sheet equates the value of assets to
liabilities plus net worth.
Capital Bfficiency - The amount of capital invested per production unit.
Relatively
high investments per worker with low to moderate investments per cow imply efficient
use of capital.
Ca.h Prom Uonfarm Capital Osed in the Busin.ss - 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 Plow Coyeraae Ratio Ca.h Paid -
(defined on page 14)
(defined on page 2)
Cash Receipt. -
(defined on page 4)
Chanae in AcCOunts Payable -
(defined on page 3)
Chapge ip AcCOunt. ReceiYable Chapge ip Ipyeptory CUrrent Portiop -
(defined on page 4)
(defined on page 2)
(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 (fara) - 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 a..et Batio. Deterred Taxes -
(defined on page 10)
(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.
Bquity Capital - The farm operator/manager's owned capital or farm net worth.
-
35
Brpansion Liyestock - purchased dairy cattle and other livestock that cause an
increase in herd size from the beginning to the end of the year.
Fara 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.
Fara Debt Payments
the repayment plan
number of cows for
Financial Analysis
Per Cow ­ Planned or scheduled debt payments per cow represent
scheduled at the beginning of the year divided by the average
the year.
This measure of repayment ability is used in the
Chart.
Pinancial Lease - A long-term non-cancellable contract
asset in exchange for a series of lease payments.
The
usually covers a major portion of the economic life of
substitute for purchase.
The lessor retains ownership
giving the lessee use of an
term of a financial lease
the asset.
The lease is a
of the asset.
Incgme 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.
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 Fara Income -
(defined on page 5)
Net Worth - The value of assets less liabilities equal net worth.
the owner has in owned assets.
Operating Costs of Producing Kilk -
It is the equity
(defined on page 19)
Opportunity Cost, - 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 Liye,tock Brpense, - All other dairy herd and livestock expenses not included
in more specific categories. Other livestock expenses include;
bedding, DHIC, milk
house and parlor supplies, livestock board, registration fees and transfers.
Part-Time Cash-Crop Dairy (fara) - 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 (fara) - 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.
Per,onal WithdrAWAl, and Family Brpepditures Including Nonfara Debt Payments - All
the money removed from the farm business for personal or nonfarm use including
family living expenses, health and life insurance, income 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.
P~rcha,ed
Inputs Cost of Producing Kilk -
(defined on page 19)
........
36
Repayment Analysis - An evaluation of the business' ability to make planned debt
payments.
Replacement Liyestock - Dairy cattle and other livestock purchased to replace those
that were culled or sold from the herd during the year.
Return on Bquity Capital Return on Total CApital -
(defined on page 7)
(defined on page 7)
RetUrn to Operators' Labor. Hanaaement. and Bquity Capital -
(defined on page 6)
Solvency - The extent or ability of assets to cover or pay liabilities.
and leverage ratios are common measures of solvency.
Total COltl of Producing Kilk -
Debt/asset
(defined on page 19)
Whole Para Method - A procedure used to calculate costs of producing milk on dairy
farms without using enterprise cost accounts. All non-milk receipts are assigned a
cost equal to their sale value and deducted from total farm expenses to determine
the costs of producing milk.
.........
37
INDEX
Pagers}
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
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
Crop/Dairy 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
.
3,8 .
4,8
3,5
4,5
16
7,8
20
14
12
5,11,18
20
8
2
2
20
12
14
2
4,12
3
4
2,3
11
3,17
16
7,8
2
2
10
10
9
3,10
16
20
7
3,12
3
22,23,
.24,25,28
.29,30,31
13
13
Pagers)
Financial Analysis Chart
Financial Lease
Income Statement
.
Inflows
.
Labor and Management
Income
.
Labor and Management
Income Per Operator
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 (farm)
Part-Time Dairy (farm)
Percent Equity
.
Personal Withdrawals and
Family Expenditures
Including Nonfarm
Debt Payments ..
Principal Payments
Profitability
Receipts
.
Record System
.
Repayment Analysis
Replacement Livestock
Retained Earnings. . . .
Return on Equity Capital
Return on Total Capital
Return to Operator's
Labor, Management,
and Equity Capital
Solvency
.
Total Costs of
Producing Milk
Whole Farm Method
Worker Equivalent
Yields Per Acre
25
8
2
12
6
6
20
16
10
10
3,17
2
18
2
12
5
10
8
18
19
6
3
12
2
2
9,10
12
12
4
4
2
14
3
11
7
7
6
10
19
19
20
16
OTHER A.R.M.E. EXTENSIqN BULLETINS
(Formerly A.E. Extension Publications)
No. 94-02
Micro DFBS, A Guide to Processing
Dairy Farm Business Summaries in
county and Regional Extension
Offices for Micro DFBS Version 3.0
Linda D. Putnam
Wayne A. Knoblauch
Stuart F. smith
No. 94-03
Dairy Farm' Cash Flow, Debt
Repayment Ability and Financial
Analysis
George L. Casler
No. 94-04
The Cornell Program on Dairy
Markets and'Policy
Summary of Activities, 1989 to 1993
Andrew M. Novakovic
No. 94-05
Bibliography of Horticultural
Product Marketing and Related Topic
Papers, Second Edition
Enrique E. Figueroa
No. 94-06
DFBS Expert system For Analyzing
Dairy Farm Businesses Users' Guide
for Version 4.0
Linda D. Putnam
Stuart F. smith
No. 94-07
Dairy Farm Business Summary
western Plain Region 1993
Stuart F. smith
Linda D. Putnam
Jason Karszes
Michael Stratton
David Thorp
No. 94-08
Dairy Replacement Programs: Costs
& Analysis western New York, 1993
Jason Karszes
No. 94-09
Dairy Farm Business Summary
Northern New York Region 1993
Stuart F. smith
Linda D. Putnam
George Allhusen
Patricia Beyer
German Davalos
Anita Deming
Gleason Wally·
George Yarnall,
No. 94-10
Dairy Farm Business Summary
Central New York and Central Plain
Regions 1993
Wayne A.Knoblauch
Linda D. Putnam
James A. Hilson
A. Edward Staehr
Michael L. Stratton
-