A.E. Ext. 85-20
August 1985
~~,.,-
Stuart F. Smith Linda D. Putnam Department of Agricultural Economics New York State College of Agriculture and Life S~ie,;ces A Stolutory Colleg. of Ih. Siole Univ.rsity -
Cornell University, Ithaca, New York 14853
1984 EASTERN NEW YORK DAIRY FARM RENTER BUSINESS SUMMARY INTRODUCTION Dairy farmers throughout New York State submit business records for
summarization and analysis through Cooperative Extension's Farm Business
Management Program. Averages from a compilation of the individual farm
reports are published in 10 regional summaries and in one statewide
summary.
This special Eastern New York Dairy Summary is an average of 27 busi­
nesses that are renting substantially all of the farm real estate. The
farm income, financial summary, and business analysis sections of this
report include comparisons with average data on 177 owned dairy farms in
the region. This report is prepared in workbook form for farm renters to
use in the systematic study of their farm business operations.
LIST OF TABLES
Table
Management Systems, Production Technology, and Farm Size
Capital Investment - Farm Inventory
Inventory Accounting, Selected Changes
Farm Receipts
Farm Expenses
Farm Income Summary
Farm Family Financial Situation
Financial Measures and Debt Commitment
Measures of Size of Business
Crop Yields and Milk Sold Per Cow
Measures of Labor Efficiency
Measures of Capital Efficiency
Feed Costs and Related Measures
Machinery and Labor Costs
Other Cost and Receipt Measures
Yearly Cash Flow Planning and Analysis
Progress of the Farm Business
Page
2
2
3
3
4
5
6
7
8
8
9
9
9
10 10 11 12 Business records for 27 farms in Columbia, Delaware, Dutchess, Montgomery, Otsego, Rensselaer, Saratoga, Schoharie, Sullivan, and Washington Counties are summarized in this publication. The Eastern New York region consists of these counties plus Albany, Herkimer, Orange, and Ulster counties which do not have farms that classify as renters. The 177 owned dairy farms summarized in this publication include farms from the entire region. 2
SUMMARY OF THE FARM BUSINESS
Business Characteristics
The combination of resources and management techniques used to put
resources to work is an important part of planning. The tables below show
important farm business characteristics, the number of farms reporting
these characteristics, and the average level of resources used in
production.
MANAGEMENT SYSTEMS, PRODUCTION TECHNOLOGY, AND FARM SIZE
27 Eastern New York Dairy Farm Renters, 1984
Type of Business Number
Proprietorship
20
Partnership
6
1
Corporation
Barn Type
Stanchion
Freestall
Labor Force
Operator 1.
2.
3.
Fami ly paid
Family unpaid
Hired
Number
23
4
M:t Farm
mo.
mo.
mo.
mo.
mo.
mo.
Total
Business Records Number
13
Account Book
Agrifax
9
5
Other
Milking S~stem
Bucket &Carry
Dumping Station
Average
12
4
0
2
4
--.2
mo.
28
Dair:t RecQrds Number
D.H.I.C.
21
Owner Sampler
2
None
4
Number
4
18
~umber
1
4
Herringbone
Pipeline
Land Use
Total acres rented
Tillable acres rented
f:1~
Farm Average
278
169
Number of Cows
Beg. year (owned)
End year (owned &
leased)
Average for year
(owned &leased)
My Farm 8verage
55
59
58
Capital Investment - Farm Inventor~ represents the market value of
resources committed to the farm business at the beginning and end of the
year. Increases in inventory occurs with herd expansion, new machinery,
and building additions and appreciation of land, buildings, and livestock.
CAPITAL INVESTMENT - FARM INVENTORY 27 Eastern New York Dairy Farm Renters, 1984 My Farm
Item
Livestock
Feed & supplies
Machinery &equipment
Land & buildings
TOTAL
Average
1/1/84
1/1/85
1/1/84
1/1/85
$_--
$_--
$
$
$ 69,009
16,636
50,188
7,738
$143,571
$ 69,787
18,853
51,623
7,964
$148,227
3
INVENTORY ACCOUNTING, SELECTED CHANGES 27 Eastern New York Dairy Farm Renters, 1984 Average
My Farm
Item
Livestock Inventory:
Total Change
Appreciation 1
Net Change in Inventory2
Machinery & Equipment:
Depreciation
Appreciation 1,3
Real Estate:
Value added 4
Depreciation
Appreciation 1
$
$_-­
778
-1,568
2,346
7,489
2,726
474
617
369
lChange in inventory caused by inflation or deflation of prices.
2Change in inventory caused by change in herd size and/or quality.
3positive value indicates machinery depreciation charge exceeds actual
decline in market value.
4Cost of new real estate that can be added to value of new farm. Lost
capital has been deducted.
FARM RECEIPTS
27 Eastern New York Dairy Farm Renters, 1984
Item
CASH RECEIPTS
Milk sales
Crop sales
Dairy cattle sold
Calves & other livestock sales
Gas tax refund Government payments
Custom machine work Other Total Cash Receipts
NONCASH RECEIPTS
Increase in livestock inventory
Increase in feed & supplies
TOTAL FARM RECEIPTS EXCLUDING
APPRECIATION
Livestock appreciation Machinery appreciation
Real estate appreciation TOTAL FARM RECEIPTS
My Farm
Per Farm
Per Cow
$
---
$119,925
158
5,855
1,820
36
1,779
17
l i 027
$130,617
$2,068
3
101
31
1
30
<1
18
$2,252
2,346
2i 217
41
38
$135,180
$2,331
$_ __ $- - -
-
$
1,568
2,726
369
$136,707 27
47
6
$2,357 4
FARM EXPENSES 27 Eastern New York Dairy Farm Renters, 1984 My Farm
Item
Hired Labor
$_-­
Feed
--oiiry concentrate
Hay &other
Machinery
Machine hire
Machinery repairs
Auto expense (farm share)
Gas & oil
Livestock
Replacement livestock
Breeding fees
Veterinary &medicine
Milk marketing
Cattle lease
Other livestock expense
Crops
Fertilizer & lime
Seeds & plants
Spray, other crop expense
Real Estate
Land, building, fence repair
Taxes
Insurance
Rent
$_-­
Decrease in livestock and/or feed
Expansion livestock
Machinery depreciation
Building depreciation
Unpaid family labor @ $500/month
TOTAL FARM EXPENSES EXCLUDING
INTEREST ON EQUITY CAPITAL
$ 8,262
$ 142
34,103
4,096
588
1,313
5,147
288
3,962
23
89
1,121
1,806
2,189
11,159
644
5,383
19
31
38
192
11
93
4,434
1,286
851
76
22
15
1,322
1,667
10,160
23
16
29
175
448
2,975
6,295
1.394
51
109
24
$111,231
$1,918
o
o
321
7,489
$_ __ $
71
5
68
8
5
1.778
129
11
31
$121, 436
$2,094
5,489
94
$126,925
$2,188
617
Interest on equity capital @ 5%
TOTAL FARM EXPENSES
Per Cow
926
Other
Telephone (farm share)
Electricity (farm share)
Interest paid
Miscellaneous
Total Cash Expenses
Per Farm
5
Farm Business profitability
Four common ways to measure the returns from a farm business are
reported here.
Net cash farm income reflects the cash available from the year's
operation of the business. Labor and management income is the return to
the operator for his or her labor and management input into the business.
Labor, management. and ownership income per operator reflects the combined
return to the farmer for his/her triple role of worker-manager, financier,
and owner. Return on equity capital is computed with appreciation. To
compute the rate of return, divide return on equity capital by farm net
worth or equity capital.
FARM INCOME SUMMARY
Eastern New York Dairy Farm Renters and Owners, 1984
27 Dairy
Farm Renters
177 Dairy
Farm Owners
$130,617
11 L 231
$ 19,386
$185,408
153 2 702
$ 31,706
$135,180
lZ6 2 925
$ 8,255
$188,796
191 2 876
$ -3,080
1.33
1.30
$_ __
$ 6,207
$ -2,369
$
$136,707
$196,143
121.436
175,669
$ 15,271
$ 20,474
1.33
1.30
$
$ 11 ,482
$ 15,749
$
$ 15,271
$ 20,474
18 2 637
20 2 337
My Farm
Item
Cash farm receipts
Cash farm expenses
NET CASH FARM INCOME
Total farm receipts excluding
appreciation
Total farm expenses
LABOR &MANAGEMENT INCOME
$_-­
$_-­
$_-­
$_-­
Full-time operator-management equiv.
LABOR &MANAGEMENT INCOME PER
OPERATOR-MANAGER
Total farm receipts
Total farm expenses excluding
interest on equity capital
LABOR, MANAGEMENT, &OWNERSHIP
INCOME PER FARM
---
$
--­
Full-time operator-management equiv.
LABOR, MANAGEMENT, &OWNERSHIP
INCOME PER OPERATOR-MANAGER
Labor, management, &ownership
income per farm
Less value of operator's labor &
management*
Return on Equity Capital Including
Appreciation
RATE OF RETURN ON $_ _ _ EQU ITY
--­
---
$
--­
$ -3,366
-3.1%
*Value of operator's labor and management estimated by operators.
$
137
0.0%
6
Farm Family Financial Situation
The financial situation is an important part of the farm business
summary. It has a direct affect on current cash outflow and future capital
investment decisions. A farmer may have a good labor and management
income, but high debt payments may restrict management flexibility. Farm
net worth is total farm assets less total farm liabilities. Family net
worth is total assets less all liabilities reported.
FARM FAMILY FINANCIAL SITUATION Eastern New York Dairy Farm Renters and Owners, January 1, 1985 Item
My Farm
Assets
Livestock
(includes discounted lease pymts)
Feed &supplies
Machinery &equipment
(includes discounted lease pymts)
Land & buildings
(includes discounted lease pymts)
Co-op investments
Accounts receivable
Cash &checking accounts
Total Farm Assets
$
$
Savings accounts
Cash value life insurance
Stocks & bonds
Nonfarm real estate
Auto (personal share)
All other
27 Dairy
Farm Renters
177 Dairy
Farm Owners
$ 69,787
$103,020
(0)
(0)
18,853
36,502
52,078
91,389
(455)
(1,082)
8,096
240,895
(132)
(2,273)
7,435
9,958
11,792
15,018
12 697
3 2 344
$169,738
$500,126
5,743
1,011
850
5,926
1,861
42117
5,018
2,013
3,639
4,579
1,477
6 2 681
Total Nonfarm Assets
$
$ 19,508
$ 23,407
TOTAL ASSETS
$
$189,246
$523,533
$
$ 10,519
43,570
587
804
4,478
$102,113
59,924
3,355
3,839
6 2 751
$
$ 59,958
$175,982
22 997
508
$
$ 62,955
$176,490
FARM NET WORTH (EQUITY CAPITAL)
$
$109,780
$324,144
FAMILY NET WORTH
$
$126,291
$347,043
liabil ities
Long term
Intermediate
Financial lease
Short term
Other farm accounts
Total Farm Liabilities
Nonfarm Liabilities
TOTAL LIABILITIES
7
Payment ability is the most important consideration in determining if
and how proposed investment should be financed. The farm business must
produce sufficient cash income to meet operating expenses, to cover family
or personal living expenses, to make payments on debts, and to cover cash
purchases of capital items that occur during the year.
Payment ability is estimated in the following table. Interest paid and
income from off-farm work are added to net cash farm income because planned
or budgeted debt payments will include interest as well as principal.
Estimate family living expenses for your farm to calculate cash available
for debt payment and capital purchases made in cash.
Debt payments planned are the scheduled debt payments as of January.
Some farms in the group had scheduled debt payments exceeding 50 percent of
the milk receipts. Committing this much cash inflow to debt payments can
put a "big squeeze on cash available for operating the business and family
living.
II
FINANCIAL MEASURES AND DEBT COMMITMENT Eastern New York Dairy Farm Renters and Owners, January 1, 1985 27 Dairy
Farm Renters
177 Dairy
Farm Owners
$
$19,386
6,295
1,209
$31,706
16,447
2,101
$
--­
$26,890
19.721
$50,254
21, 586
$_ __
$ 7,169
\28,668
$_-­
$ 1,201
13,857
780
1,340
$17,178
$13,615
18,412
3,040
1,990
$37,057
$291
$457
14%
$1,016
67%
22%
$2,173
66%
Item
Payment Ability
Net cash farm income
Plus interest paid
Plus off-farm income
CASH AVAILABLE FOR DEBT SERVICE
& LIVING
Less family living expenses*
CASH AVAILABLE FOR DEBT PAYMENTS
& CAPITAL PURCHASES
Scheduled Annyal Debt Payments
Long term
Intermediate
Short term
Other farm accounts
TOTAL PAYMENTS PLANNED FOR 1985
Measures of Debt Commjtment &
Equity Position
Debt payments planned per cow
Debt payments planned as percent
of mil k sal es
Farm debt per cow
Percent equity (total)
My Farm
--­
$_-­
$
--_ _ _01
,/0
$
--- - -%
*Estimated at $10,900 per family plus four percent of cash receipts.
8
ANALYSIS OF THE FARM BUSINESS
In analyzing a farm business, a manager must consider measures or fac­
tors that reflect the performance of specified parts of the farm business.
One method of doing this is to look at factors of size, production, labor
efficiency, capital efficiency, and cost control. These factors are
considered on the following pages.
MEASURES OF SIZE OF BUSINESS Eastern New York Dairy Farm Renters and Owners, 1984 My Farm
Item
Number of cows
Number of heifers
Pounds of milk sold
Worker equivalent
Total work units
Total tillable acres
27 Dairy
Farm Renters
177 Dairy
Farm Owners
58
43
859,800
2.33
632
170
79
67
1,183,700
2.83
888
245
CROP YIELDS AND MILK SOLD PER COW 27 Eastern New York Dairy Farm Renters, 1984 Crop
Baled hay
Hay crop silage
Total Hay Crops
Corn silage
Other forage
Total Forage Crops
Grain corn
Oats
Other crops
Tillable pasture
Idle tillable pasture
My Farm
Acres
Yield
Average of Farms Reporting
Farms Acres Yield/Acre
24
14
25
24
3
25
6
2
3
4
4
(combined
below)
120 2.2 tons OM
47 11.9 tons
20
1.6 tons OM
168
2.6 tons OM
13 59.5 bushels
22 58.6 bushels
25
29
25
---------------------------------------------------------------------------
Milk sold per cow
14,824 pounds
1984 average yields for 177 dairy farm owners in Eastern New York included:
Milk sold per cow, 14,984 pounds
All hay crops, 2.6 tons dry matter per acre
Corn silage, 13.5 tons per acre
9
MEASURES OF LABOR EFFICIENCY Eastern New York Dairy Farm Renters and Owners, 1984 My Farm
Item
Cows per worker
Pounds of milk sold per worker
Work units per worker
27 Dairy
Farm Renters
177 Dairy
Farm Owners
25
369,013
28
418,269
314
271
MEASURES OF CAPITAL EFFICIENCY Eastern New York Dairy Farm Renters and Owners, 1984 Item
27 Dairy
Farm Renters
My Farm
Farm capital per worker
Farm capital per cow
Machinery investment per cow
Machinery per tillable acre
Capital turnover
$
$
$
$
$63,617
$2,512
$875
$304
years 1.1 years
177 Dairy
Farm Owners
$165,530
$5,783
$1,115
$369
2.4 years
FEED COSTS AND RELATED MEASURES Eastern New York Dairy Farm Renters and Owners, 1984 27 Dairy
Farm Renters
177 Dairy
Farm Owners
$588
$525
---
$3.97
$3.51
%
28%
$113
$5.21
7.7
2.9
2.9
$26
74%
25%
$166
$4.79
7.8
2.5
3.1
$34
85%
Item
Dairy concentrate purchased per cow
Dairy concentrate purchased per
cwt. of mi 1k sold
Percent dairy concentrate is of
milk receipts
Crop expense per cow
Feed & crop expense per cwt. milk
Forage dry matter harv./cow (tons)
Acres of forage per cow
Total tillable acres per cow
Fertilizer & lime per tillable acre
Heifers as percent of cow numbers
My Farm
$_ __
$
$
--­
$
---
$
--­
%
10
MACHINERY AND LABOR COSTS Eastern New York Dairy Farm Renters and Owners, 1984 My Farm
Item
Machinery: Depreciation 1
Interest 2
Operating expense3
Total Machinery
Per cow
Per cwt. of milk
Value of operators 4
Unpaid famil y5
Hired
Total Labor
Per cow
Per cwt. milk
Labor &machinery costs/cwt. milk
$_ __
$_-­
$_-­
$_-­
$_-­
$-~­
$_-­
$- - $_ __
27 Dairy
Farm Renters
177 Dairy
Farm Owners
$ 7,489
2,545
10 1 710
$20,744
$358
$2.41
$11,667
1,778
8 2 262
$21,707
$374
$2.52
$4.93
$13,401
4,439
16~397
$34,237
$433
$2.89
$11,597
1,325
15 2 781
$28,703
$363
$2.42
$5.31
lRegular depreciation from last year's tax plus 10 percent of new
purchases.
2Five percent of average machinery investment.
3Machine hire, repairs, farm share auto expense, and gas and oil.
4$750 per month.
5$500 per month.
OTHER COST AND RECEIPT MEASURES
Eastern New York Dairy Farm Renters and Owners, 1984
Item
Total livestock expense (excluding
replacements &overhead) per cow
Total real estate expenses per cow
Milk &cattle sales per cow
Average price per cwt. mil k sold
Total cash receipts per worker
My Farm
$- - ­
$- - ­
$
--­
$_ __
$_-­
27 Dairy
Farm Renters
$365
$243
$2,200
$13.95
$56,059
177 Dairy
Farm Owners
$349
$161
$2,250
$13.95
$65,515
11
YEARLY CASH FLOW PLANNING AND ANALYSIS
The worksheet below is a valuable tool in planning expansions and for
setting goals for improving the farm business. The average is from 27
Eastern New York dairy farm renters.
Item
My Farm,
Per Cow Total
Average
Per Cow
CASH RECEIPTS
$2,068
Milk sales
Crop sales
3
101
Dairy cattle
Calves & other livestock
31
Other
49
Total Cash Receipts
$2,252
CASH EXPENSES
Hired labor
$ 142
Dairy concentrate
588
Hay & other
71
Machine hire
23
Machine repair & auto expense
94
Gas & oil
68
Replacement livestock
19
Breeding fees
31
Vet &medicine
38
Milk marketing (ADA, Dues)
192
Other livestock expo (incl. $11 lease) 104
Fertilizer & lime
76
Seeds & plants
22
Spray &other
15
Land, building, fence repair
23
Taxes
16
Insurance
29
Rent
175
Telephone (farm share)
8
Electricity (farm share)
51
Miscellaneous
24
Total Cash Expenses l
$1,809
Total Cash Receipts
$2,252
l
Total Cash Expenses
-1.809
Net Cash Flow
$ 443
2
Cash Family Living Expense
- 340
Amount Left for Debt Service, Capital
Investment & Retained Earnings
$ 103
Scheduled Debt Service
- 291
Available for Capita; Investment
$ (188)
Planned Expansion Livestock Purch.
Planned Equipment Purchase
Borrowed or Equity Funds Needed
Cows
Goal
$_-- $_-- $_-­
$_-- $_-- $_-­
$
$
$_­
$_-- $_-- $_-­
$
$
$_­
$_-- $_-- $_-­
$_-- $_-- $_-­
$
$
$_-­
$_-- $ _ - - $ , - - ­
lInterest paid excluded for it is contained in Scheduled Debt Service.
2Estimated: $10,900 per family and four percent of cash farm receipts.
12
PROGRESS OF THE FARM BUSINESS
Comparing your
business checkup.
business with that
and to plan ahead,
business with that of other farmers is one part of a
It is equally important to compare your current year's
of earlier years to show the progress you are making,
by setting business targets or goals.
Item
SiZg of Business
Number of cows
Number of heifers
Pounds of milk sold
Worker equivalent
Total tillable acres Rates of PrQductiQn Pounds milk sold per cow
Tons hay dry matter per acre
Tons corn silage per acre
labgr Efficignc~
Cows per worker
Pounds milk sold per worker
Cost Control
Purchased feed as % milk sold
Feed &crop expense/cwt. milk
labor &machinery cost/cow
CaQital Efficignc~
Farm capital per cow
Capital turnover
Price
Price per cwt. milk
Financial Symmar~
Net cash farm income
labor &mgmt. income/operator
Farm net worth
Rate of return on equity
Percent equity
Farm debt per cow
1982
1983
1984
1985 Goal
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
%
%
%
%
%
%
%
%
$
$
$