DAIRY FARM BUSINESS SUMMARY CENTRAL VALLEYS REGION

SEPTEMBER 2001 E.B. 2001-12

CENTRAL VALLEYS

REGION

2000

Eddy L. LaDue

Zaid Kurdieh

Carry Oostveen

A. Edward Staehr

Charles Z. Radick

Jackie Hilts

Karen Baase

Jason Karszes

Linda D. Putnam

Department of Applied Economics and Management

College of Agriculture and Life Sciences

Cornell University, Ithaca, New York 14853-7801

It is the Policy of Cornell University actively to support equality of educational and employment opportunity. No person shall be denied admission to any educational program or activity or be denied employment on the basis of any legally prohibited discrimination involving, but not limited to, such factors as race, color, creed, religion, national or ethnic origin, sex, age or handicap. The University is committed to the maintenance of affirmative action programs which will assure the continuation of such equality of opportunity.

This material is based upon work supported by Smith

Lever funds from the Cooperative State Research,

Education, and Extension Service, U.S. Department of

Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the

U.S. Department of Agriculture.

Publication Price Per Copy: $8.00

For additional copies, contact:

Faye Butts

Dept. of Applied Economics and Management

Agricultural Finance and Management Group

358 Warren Hall

Cornell University

Ithaca, New York 14853-7801

E-mail: fsb1@cornell.edu

Fax: 607-255-1589

Phone: 607-254-7412

2000 DAIRY FARM BUSINESS SUMMARY

Central Valleys Region

Table of Contents

Page

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................................................................................ 22

Progress of the Farm Business ................................................................................................................. 22

Regional Farm Business Chart ................................................................................................................. 24

Supplementary Information...................................................................................................................... 25

New York State Farm Business Chart...................................................................................................... 28

Financial Analysis Chart .......................................................................................................................... 30

Comparisons by Type of Barn and Herd Size .......................................................................................... 31

Herd Size Comparisons ............................................................................................................................ 31

IDENTIFY AND SET GOALS.............................................................................................................................. 38

GLOSSARY AND LOCATION OF COMMON TERMS .................................................................................... 40

INDEX .................................................................................................................................................................. 43

2000 DAIRY FARM BUSINESS SUMMARY

CENTRAL VALLEYS REGION *

INTRODUCTION

Dairy farm managers 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 their farm business. The information in this report represents averages of the data submitted from dairy farms in the Central Valleys Region for 2000.

Program Objective

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 data and the application of modern farm business analysis techniques. This information can also be used to establish goals that enable the business to better fulfill its mission. In short, DFBS provides business and financial information needed in identifying and evaluating strengths and weaknesses of the farm business.

Format Features

This regional report follows the same general format as the 2000 DFBS individual farm report received by 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. The individual farm data, the regional averages and other data can then be used to establish goals for the business. 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;

(7) a capital and labor efficiency analysis; and

(8) progress of the farm business over the past two years.

* The Central Valleys Region includes Chenango, Herkimer, Madison, Montgomery, Oneida, Onondaga, Oswego, Otsego, and Schoharie Counties. This publication includes the following number of farms by county: Oneida 10, Schoharie 6,

Madison 4, Montgomery 4, Otsego 4, Chenango 2, Herkimer 2, Onondaga 2, Oswego 1, and Fulton 1. This summary was prepared by Eddy L. LaDue, Department of Applied Economics and Management, College of Agriculture and Life Sciences, Cornell University. The farm business data were collected by Jackie Hilts, Cooperative Extension Educator, Oneida

County; Carry Oostveen, Cooperative Extension Educator, Cayuga County; Zaid Kurdieh, Cooperative Extension Educator, Chenango, Herkimer, Otsego, Fulton and Montgomery Counties; A. Edward Staehr, Cooperative Extension Educator,

Onondaga County; and Karen Baase, Cooperative Extension Educator, Madison County. Jason Karszes assisted with the data collection process. Analysis and data management assistance were provided by Linda D. Putnam. Faye Butts and

Carol Fisher prepared the publication.

2

SUMMARY AND ANALYSIS OF THE FARM BUSINESS

Business Characteristics

Planning optimal management strategies is a crucial component of operating a successful farm. Various combinations of farm resources, enterprises, business arrangements, and management techniques are used by the dairy farmers in this region. The following table shows important farm business characteristics and the number of farms with each characteristic.

BUSINESS CHARACTERISTICS

36 Central Valleys Region Dairy Farms, 2000

Type of Farm

Dairy

Part-time dairy

Dairy cash-crop

Certified organic milk producer

Rotational grazing farm

Type of Ownership

Owner

Renter

Number

36

0

0

1

13

Number

34

2

Milking System

Bucket & carry

Dumping station

Pipeline

Herringbone conventional exit

Herringbone rapid exit

Parallel

Parabone

Rotary

Other

Number

22

4

1

1

0

3

0

1

4

Type of Business

Sole Proprietorship

Partnership

Limited Liability Corporation

Subchapter S Corporation

Subchapter C Corporation

Number

18

12

3

2

1

Production Records

Testing Service

On Farm System

Other

None

Number

24

2

2

8

Type of Barn

Stanchion or Tie-Stall

Freestall

Combination

Number

23

10

3 bST Usage

Used on <25% of herd

Used on 25-75% of herd

Used on >75% of herd

Stopped using in 2000

Not used in 2000

Number

2

0

23

7

4

Milking Frequency

2 times per day

3 times per day

Other

Number

30

5

1

Business Record System

Account Book

Accounting Service

On-farm computer

Other

Number

18

4

7

7

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.

Income Statement

In order for an income statement to accurately measure farm income, it must include cash transactions and accrual adjustments (changes in accounts payable, accounts receivable, inventories, and prepaid expenses).

Cash paid is the actual cash outlay during the year and does not necessarily represent the cost of goods and services actually used in 2000.

Change in inventory: Increases in inventories of supplies and other purchased inputs are subtracted in computing accrual expenses because they represent purchased inputs not actually used during the year. Decreases in purchased inventories are added to expenses because they represent inputs purchased in a prior year and used this year.

3

CASH AND ACCRUAL FARM EXPENSES


Expense Item

Hired Labor

Feed

Dairy grain & concentrate

Dairy roughage

Nondairy

Machinery

Machinery hire, rent & lease

Machinery repairs & farm vehicle exp.

Fuel, oil & grease

Livestock

Replacement livestock

Breeding

Veterinary & medicine

Milk marketing

Bedding

Milking supplies

Cattle lease & rent

Custom boarding bST

Other livestock expense

Crops

Fertilizer & lime

Seeds & plants

Spray, other crop expense

Real Estate

Land, building & fence repair

Taxes

Rent & lease

Other

Insurance

Utilities (farm share)

Interest paid

Miscellaneous

$

Cash

Paid

53,530

106,079

5,965

63

8,502

23,353

11,743

15,362

5,295

14,942

31,296

4,593

13,160

8

6,569

6,941

4,054

9,494

5,129

8,902

7,343

9,653

12,519

6,707

11,364

32,690

7,436

-

$

Change in

Inventory or Prepaid

Expense

0

-5,719

152

-7

0

117

-26

0

-155

37

14

350

21

0

0

146

-18

-1,207

-298

-291

48

2

0

0

-56

0

0

<<

<<

<<

<<

<<

<<

<<

<<

<<

<<

<<

+

$

Change in

Accounts

Payable

22

938

300

0

-7

482

5

1,404

16

14

0

26

111

0

0

-11

0

-3

233

0

379

172

86

66

65

0

-75

=

$

Accrual

Expenses

53,552

112,736

6,114

70

8,495

23,719

11,774

16,767

5,467

14,919

31,282

4,268

13,250

8

6,569

6,783

4,071

10,697

5,660

9,193

7,674

9,824

12,605

6,774

11,429

32,690

7,416

Total Operating

Expansion livestock

Machinery depreciation

Building depreciation

TOTAL ACCRUAL EXPENSES

$ 422,693

23,580

$ -6,889

0 <<

$ 4,225

0

$ 433,807

23,580

29,959

20,692

$ 508,038

Change in prepaid expenses (noted above by <<) is a net change in non-inventory expenses that have been paid in advance of their use. For example, prepaid lease expense on the beginning of year balance sheet represents last year’s payment for use of the asset during this year. End of year prepaid expense represents payments made this year for next year’s use of the asset. Adding payments made last year for this year’s use of the asset, and subtracting payments made this year for next year’s use of the asset is accomplished by subtracting the difference.

Change in accounts payable: An increase in accounts payable from beginning to end of year is added when calculating accrual expenses because these expenses were incurred (resources used) in 2000 but not paid for. A decrease is subtracted because it represents payment for resources used before 2000.

Accrual expenses are an estimate of the costs of inputs, except operator/family labor and equity capital, actually used in this year's production. They are the cash paid, less changes in inventory and prepaid expenses, plus accounts payable.

4

CASH AND ACCRUAL FARM RECEIPTS


Receipt Item

Milk sales

Dairy cattle

Dairy calves

Other livestock

Crops

Government receipts

Custom machine work

Gas tax refund

Other

Less nonfarm noncash capital**

Total Receipts

Cash

Receipts

$ 439,180

18,597

3,995

761

2,252

15,774

2,865

320

6,301

$ 490,046

+

$

Change in

Inventory

22,182

-216

3,487

0*

+

Change in

Accounts

Receivable

$ 8,515

0

0

0

26

3,724

-472

-1

-243

$ 11,548

= Accrual

Receipts

(-)

$ 447,695

40,779

3,995

545

5,765

19,498

2,392

319

6,058

0

$ 527,046

(-) 0

$ 25,453

*Change in advanced government receipts.

**Gifts or inheritances of cattle or crops included in inventory.

Cash receipts include the gross value of milk checks received during the year plus all other payments received from the sale of farm products, services, and government programs. Nonfarm income is not included in calculating farm profitability.

Changes in inventory of assets produced by the business are calculated by subtracting beginning of year values from end of year values excluding appreciation. Increases in livestock inventory caused by herd growth and/or quality are added, and decreases caused by herd reduction and/or quality are subtracted. Changes in inventories of crops grown are also included.

An increase in advanced government receipts is subtracted from cash income because it represents income received in 2000 for the 2001 crop year in excess of funds earned for 2000. Likewise, a decrease is added to cash government receipts because it represents funds earned for 2000 but received in 1999.

Changes in accounts receivable are calculated by subtracting beginning year balances from end year balances. Payments in

January 2001 for milk produced in December 2000 compared to January 2000 payments for milk produced in 1999 are included as a change in accounts receivable in determining accrual milk sales.

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

Profitability Analysis

Farm operators * contribute labor, management, and equity capital to their businesses and the combination of these resources, and the other resources used in the business, determines profitability. Farm profitability can be measured as the return to all family resources or as the return to one or more individual resources such as labor and management.

The return to any individual resource must be viewed as an estimate because the cost of other family resources must be approximated to calculate returns to the selected resource. For example, the costs of operator and family labor and management must be approximated to calculate the returns to equity capital.

* Operators are the individuals who are integrally involved in the operation and management of the farm business. They are not limited to those who are the owner of a sole proprietorship or are formally a member of the partnership or 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, and financing the farm business. This is not a measure of cash available from the year's business operation. Cash flow is evaluated later in this report.

Net farm income is computed both with and without appreciation. Appreciation represents the change in values caused by annual changes in prices of livestock, machinery, real estate inventory, and stocks and certificates (other than Farm Credit).

Appreciation is a major factor contributing to changes in farm net worth and must be included for a complete profitability analysis.

NET FARM INCOME


Item Total

Average

Per Cow Total

My Farm

Per Cow

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)

$ 527,046

16,607

5,829

5,336

-1,696

$ 553,122

- 508,038

$ 45,084 $ 287

$ 19,008 $ 121

$ _______

________

________

________

________

$ _______

- _______

$ _______ $_______

$ _______ $_______

The chart below shows the relationship between net farm income per cow (without 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


1000

750

500

250

0

-250

-500

-750

-1000

9000 12000 15000 18000

Pounds Milk Sold Per Cow

21000 24000 27000

6

Labor and management income is the return which farm operators receive for their labor and management used in the farm business. Appreciation is not included as part of the return to labor and management because it results from ownership of assets rather than management of the farm business. Labor and management income is calculated by deducting a charge for unpaid family labor and the opportunity cost of equity capital, at a real interest rate of five percent, from net farm income excluding appreciation. The interest charge of five percent reflects the long-term average rate of return above inflation that a farmer might expect to earn in comparable risk investments.

LABOR AND MANAGEMENT INCOME


Average Item

Net farm income without appreciation

Family labor unpaid @ $1,900 per month

Interest on $ 632,830 average equity capital @ 5% real rate

Labor & Management Income per farm (1.76 Operators/farm)

Labor & Management Income per Operator/Manager

$

-

19,008

4,560

- 31,642

$ -17,194

$ -9,769

My Farm

$ ___________

- ____________

- ____________

$ ___________

$ ___________

Labor and management income per operator averaged $-9,769 on these 36 farms in 2000. The range in labor and management income per operator was from less than $-240,000 to more than $106,000. Returns to labor and management were negative on 42% of the farms. Labor and management income per operator was between $0 and $20,000 on 42% of the farms while 16% showed labor and management incomes of $20,000 or more per operator.

30%

25%

20%

15%

10%

5%

0%

14%

DISTRIBUTION OF LABOR & MANAGEMENT INCOMES PER OPERATOR


28%

14% 14% 14%

< -20 -20 to -10 -10 to 0 0 to 10 10 to 20

Labor and Management Income Per Operator (thousand dollars)

16%

> 20

7

Return on equity capital measures the net return remaining for the farmer's equity or owned capital after a charge has been made for the owner-operator's labor and management. The earnings or amount of net farm income allocated to labor and management is the opportunity cost of operators' labor and management estimated by the cooperators. Return on equity capital is calculated with and without appreciation. The rate of return on equity capital is determined by dividing the amount returned by the average farm net worth or equity capital. Rate of return on total capital is calculated by adding interest paid to the return on equity capital and then dividing by average farm assets. Net farm income from operations ratio is net farm income (without appreciation) divided by total accrual receipts.

RETURN ON EQUITY CAPITAL AND RETURN ON TOTAL CAPITAL


Item

Net farm income with appreciation

Family labor unpaid @$1,900 per month

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

Net Farm Income from Operations Ratio

Average

-

$ 45,084

4,560

- 47,070

$ -6,546

+ 32,690

$ 26,144

$ -32,622

$ 68

-1.03%

-5.15%

2.44%

0.01%

0.04

Farm and Family Financial Status

The first step in evaluating the financial position of the farm is to construct a balance sheet which identifies and values all the assets and liabilities of the business. The second step is to evaluate the relationship between assets, liabilities, and net worth and changes that occurred during the year.

Financial lease obligations are included in the balance sheet. The present value of all future payments is listed as a liability since the farmer is committed to make the payments by signing the lease. The present value is also listed as an asset, representing the future value the item has to the business. For 2000, lease payments were discounted by 9.75 percent to obtain their present value.

Advanced government receipts are included as current liabilities. Government payments received in 2000 that are for participation in the 2001 program are the end year balance and payments received in 1999 for participation in the 2000 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.

My Farm

$ _________

- _________

- _________

$ _________

+ _________

$ _________

$ _________

$ _________

__________ %

__________%

__________ %

__________%

_________

8

2000 FARM BUSINESS & NONFARM BALANCE SHEET


Jan. 1 Dec. 31

Farm Liabilities

& Net Worth Farm Assets

Current

Farm cash, checking

& savings

Accounts receivable

Prepaid expenses

Feed & supplies

Total Current

Intermediate

Dairy cows:

owned

leased

Heifers

Bulls & other livestock

Mach. & equip. owned

Mach. & equip. leased

Farm Credit stock

Other stock/certificate

Total Intermediate

Long Term

Land & buildings:

owned

leased

Total Long Term

$ 8,163

26,605

111

88,761

________

$ 123,640

$ 155,821

8

73,282

1,167

196,165

4,387

1,712

6,619

$ 439,161

$ 477,934

244

$ 478,178

$ 4,060

38,153

127

85,343

_________

$ 127,683

$ 182,550

0

85,333

959

219,171

3,325

1,796

5,488

$ 498,622

$ 473,561

126

$ 473,687

Current

Accounts payable

Operating debt

Short Term

Advanced govt. receipts

Current Portion:

Intermediate

Long Term

Total Current

Intermediate

Structured debt

1-10 years

Financial lease

(cattle/machinery)

Farm Credit stock

Total Intermediate

Long Term

Structured debt

>10 years

Financial lease

(structures)

Total Long Term

Total Farm Liab.

FARM NET WORTH

Jan. 1

$ 2,977

13,098

321

0

18,517

15,487

$ 50,399

$ 88,931

4,395

1,712

$ 95,038

$ 268,071

244

$ 268,315

$ 413,752

$ 627,227 Total Farm Assets $1,040,979 $1,099,992

Nonfarm Assets, Liabilities & Net Worth (Average of 22 farms reporting)

Assets Jan. 1

Personal cash, checking

& savings

Cash value life insurance

Nonfarm real estate

Auto (personal share)

Stocks & bonds

Household furnishings

$ 1,593

16,580

16,450

4,432

9,254

6,577

All other nonfarm assets 2,843

Total Nonfarm Assets $ 57,729

$

$

Dec. 31

1,863

17,795

26,950

5,205

9,226

6,714

2,044

69,797

Liabilities & Net Worth

Nonfarm Liabilities

NONFARM NET WORTH

$

Jan. 1

1,893

$ 55,836

Dec. 31

$ 7,202

15,020

1,893

0

23,972

17,457

$ 65,545

$ 109,093

3,325

1,796

$ 114,214

$ 281,675

126

$ 281,801

$ 461,560

$ 638,432

Dec. 31

$ 1,521

$ 68,276

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

Total Assets

Total Liabilities

TOTAL FARM & NONFARM NET WORTH

$ 1,098,708

415,645

$ 683,063

$ 1,169,789

463,081

$ 706,708

*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. Deferred taxes represent an estimate of the taxes that would be paid if the farm were sold at year end fair market values on the date of the balance sheet. Accuracy is dependent on the accuracy of the market values and the tax basis data provided. Any tax liability for assets other than livestock, machinery, land, buildings and nonfarm assets is excluded. It is assumed that all gain on purchased livestock and machinery is ordinary gain and that listed market values are net of selling costs. The effects of investment tax credit carryover and recapture, carryover of operating losses, alternative minimum taxes and other than average exemptions and deductions are excluded because they have only minor influence on the taxes of most farms. The dramatic impact of including deferred taxes is clear. Total liabilities were increased 58 percent on these 5 farms by including deferred taxes.

Deferred taxes on these farms totaled an average of $214,846, roughly one-third of the pretax net worth. Percent equity decreased from 63 percent to 41 percent when deferred taxes are included on these farms. When examining net worth, especially as a source of cash for retirement or other purposes, deferred taxes become an important consideration. Deferred taxes in this calculation specify that all assets were sold during one tax year. Therefore, tax management strategies such as making sales in more than one year or installment sales warrant careful consideration to reduce income tax liabilities.

CONDENSED BALANCE SHEET INCLUDING DEFERRED TAXES

December 31, 2000

5 New York Dairy Farms, 2000

Assets

Total Current Assets

Total Inter. Assets

Total Long Term Assets

TOTAL FARM ASSETS

$

$

$

143,265

516,692

$ 329,731

989,687

Liabilities & Net Worth

Current debts & payables

Current deferred taxes

Total Current Liabilities

Intermediate debts & leases

Intermediate deferred taxes

Total Intermediate Liabilities

Long term debts & leases

Long term deferred taxes

Total Long Term Liabilities

TOTAL FARM LIABILITIES

Farm Net Worth

Percent Equity (Farm)

$ 76,572

43,331

$ 119,903

$ 215,235

120,386

$

$

$

$

335,621

$ 78,304

46,312

124,616

580,140

409,547

41%

Total Nonfarm Assets

TOTAL ASSETS

$

$

95,363

1,085,050

Nonfarm debts

Nonfarm deferred taxes

Total Nonfarm Liabilities

TOTAL LIABILITIES

Total Net Worth

Percent Equity (Total)

$

$

$

0

4,817

$ 4,817

584,957

500,093

46%

10

Balance sheet analysis involves examination of relative asset and debt levels for the business. Percent equity is calculated by dividing end of year net worth by end of year assets and multiplying by 100. The debt to asset ratio is compiled by dividing liabilities by assets. Low debt to asset ratios reflect business solvency and the potential capacity to borrow. The leverage ratio is the dollars of debt per dollar of equity, computed by dividing total farm liabilities by farm net worth. Debt levels per productive unit represent old standards that are still useful if used with measures of cash flow and repayment ability. A current ratio of less than 1.5 or that has been falling warrants additional evaluation. The amount of working capital that is adequate must be related to the size of the farm business.

BALANCE SHEET ANALYSIS


Item Average My Farm

Financial Ratios - Farm:

Percent equity

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

Leverage Ratio:

Current Ratio:

Working capital $62,138 As % of total expenses:

Farm Debt Analysis:

Accounts payable as % of total debt

Long-term liabilities as a % of total debt

Current & inter. liabilities as a % of total debt

Cost of term debt (weighted average)

Farm Debt Levels:

Total farm debt

Long-term debt

Intermediate & long term

Intermediate & current debt

$

Per Cow

2,849

1,740

2,445

1,110

58%

0.42

0.59

0.29

0.72

1.95

12%

2%

61%

39%

7.6%

$

Per Tillable

Acre Owned

2,127

1,299

1,825

828

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).

FARM INVENTORY BALANCE


Item

Value beginning of year

Average of Region’s Farms

Real Estate

$ 477,934

Machinery & Equipment

$ 196,165

Purchases

Gift & inheritance

Lost capital

Sales

Depreciation

$ 49,213*

+ 0

11,965

26,264

20,692 -

-

$ 48,257

+ 0

1,120

29,959

Net investment

Appreciation

Value end of year

=

$

-9,709

+ 5,336

473,561

*$18,908 land and $30,305 buildings and/or depreciable improvements.

= 17,177

+ 5,829

$ 219,171

11

The Statement of Owner Equity has two purposes. It allows (1) verification that the accrual income statement and market value balance sheet are consistent (in accountants terms, they reconcile) and (2) identification of the causes of change in equity that occurred on the farm during the year. The Statement of Owner Equity allows you to determine to what degree the change in equity was caused by (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) , (3) increases or decreases in the value (price) of assets owned by the business (called change in valuation equity), and (4) the error in the business cash flow accounting.

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

STATEMENT OF OWNER EQUITY (RECONCILIATION)


Item

Beginning of year farm net worth

Net farm income w/o appreciation

+Nonfarm cash income

-Personal withdrawals & family

expenditures excluding

nonfarm borrowings

RETAINED EARNINGS

Nonfarm noncash transfers to farm

+Cash used in business

from nonfarm capital

-Note or mortgage from farm

real estate sold (nonfarm)

CONTRIBUTED/WITHDRAWN CAPITAL

Appreciation

-Lost capital

CHANGE IN VALUATION EQUITY

IMBALANCE/ERROR

End of year net worth*

$ 19,008

+ 4,894

- 47,361

$ 0

+ 21,247

- 694

$ 26,076

- 11,965

Average

$ 627,227

+ $

+ $

-23,459

20,553

+ $ 14,111

- 0

= $ 638,432

My Farm

$ ________

+ ________

- ________

$ ________

+ ________

- ________

$ ________

- ________

$________

+$ ________

+$ ________

+$ ________

- $________

=$ ________

Without appreciation

With appreciation

*May not add due to rounding.

$

$

-14,871

11,205

$______________

$______________

12

Cash Flow Statement

Completing an annual cash flow statement is an important step in understanding the sources and uses of funds for the business. Understanding last year's cash flow is the first step toward planning and managing cash flow for the current and future years.

The annual cash flow statement is structured to show net cash provided by operating activities, investing activities, financing activities and from reserves. All cash inflows and outflows, including beginning and end balances, are included.

Therefore, the sum of net cash provided from all four activities should be zero. Any imbalance is the error from incorrect accounting of cash inflows/outflows.

ANNUAL CASH FLOW STATEMENT


Average Item

Cash Flow from Operating Activities

Cash farm receipts

Cash farm expenses

= Net cash farm income

Personal withdrawals & family expenses including nonfarm debt payments

Nonfarm income

Net cash withdrawals from the farm

= Net Provided by Operating Activities

Cash Flow From Investing Activities

Sale of assets: machinery

+ real estate

+ other stock & cert.

= Total asset sales

Capital purchases: expansion livestock

+ machinery

+ real estate


Total invested in farm assets

= Net Provided by Investment Activities

Cash Flow From Financing Activities

Money borrowed (intermediate & long term)

+ Money borrowed (short term)

+ Increase in operating debt

+ Cash from nonfarm capital used in business

+ Money borrowed - nonfarm

= Cash inflow from financing

Principal payments (intermediate & long term)

+ Principal payments (short term)

+ Decrease in operating debt

Cash outflow for financing

= Net Provided by Financing Activities

Cash Flow From Reserves

Beginning farm cash, checking & savings

Ending farm cash, checking & savings

= Net Provided from Reserves

Imbalance (error)

$

422,693

$

4,894

$ 1,120

25,570

0

$ 23,580

48,257

49,213

565

$

57

$

490,046

47,418

107,480

2,506

1,923

21,247

66,290

935

0

$

$

$

$

67,353

$ 42,524

26,690

$ 121,615

133,213

$ 67,225

8,163

4,060

$

$

$

$

$

24,829

-94,925

65,988

4,103

-5

13

ANNUAL CASH FLOW STATE ME NT

Item

Cash Flow from Operating Activities

Cash farm receipts

Cash farm expenses

= Net cash farm income

Personal withdrawals & family expenses including nonfarm debt payments

Nonfarm income

Net cash withdrawals from the farm

= Net Provided by Operating Activities

Cash Flow From Investing Activities

Sale of assets: machinery

+ real estate


= Total asset sales

Capital purchases: expansion livestock

+ machinery

+ real estate


Total invested in farm assets

= Net Provided by Investment Activities

Cash Flow From Financing Activities

Money borrowed (intermediate & long term)

+ Money borrowed (short term)

+ Increase in operating debt

+ Cash from nonfarm capital used in business

+ Money borrowed - nonfarm

= Cash inflow from financing

Principal payments (intermediate & long term)

+ Principal payments (short term)

+ Decrease in operating debt

Cash outflow for financing

= Net Provided by Financing Activities

Cash Flow From Reserves

Beginning farm cash, checking & savings

Ending farm cash, checking & savings

= Net Provided from Reserves

Imbalance (error)

$ __________

__________

$ __________

__________

$ __________

__________

__________

$ __________

__________

__________

__________

$ __________

__________

__________

__________

__________

$ __________

__________

__________

My Farm

$ _________

$ _________

$ _________

$ _________

$ _________

$ _________

$ _________

_________

$ _________

$ _________

$ _________

$ _________

$ _________

14

Repayment Analysis

A valuable use of cash flow analysis is to compare the debt payments planned for the last year with the amount actually paid. The measures listed below provide a number of different perspectives on the repayment performance of the business. However, the critical question to many farmers and lenders is whether planned payments can be made in 2001.

The cash flow projection worksheet on the next page can be used to estimate repayment ability, which can then be compared to planned 2001 debt payments shown below.

FARM DEBT PAYMENTS PLANNED

Same 30 Central Valleys Region Dairy Farms, 1999 & 2000

Debt Payments

Average

2000 Payments

Planned Made

Planned

2001

My Farm

2000 Payments

Planned Made

Planned

2001

Long term

Intermediate term

Short term

Operating (net

reduction)

Accounts payable

(net reduction)

Total

Per cow

Per cwt. 2000 milk

Percent of total

2000 farm receipts

Percent of 2000

milk receipts

$ 19,364

25,551

1,465

$ 18,393

35,279

1,136

4,560 0 2,221

200 0 507

$ 51,140 $ 54,808 $ 56,027

$

$

437

2.21

13%

15%

$

$

468

2.37

14%

17%

$ 22,281

28,898

2,120

$ ________ $ ________ $ ________

_________ ________ ________

_________ ________ ________

_________ ________ ________

_________ ________ ________

$ ________ $ ________ $ ________

$ ________ $ ________

$ ________ $ ________

_________

_________

________

________

The cash flow coverage ratio and debt coverage ratio measure the ability of the farm business to meet its planned debt payment schedule. The ratios show the percentage of payments planned for 2000 (as of December 31, 1999) that could have been made with the amount available for debt service in 2000. Farmers who did not participate in DFBS in

1999 have their 2000 ratios based on planned debt payments for 2001.

COVERAGE RATIOS


Item

Cash Flow Coverage Ratio

Cash farm receipts

Cash farm expenses

+ Interest paid (cash)

Net personal withdrawals from farm*

(A) = Amount Available for Debt Service $

(B) = Debt Payments Planned for 2000

(as of December 31, 1999)

(A/ B)= Cash Flow Coverage Ratio for

$

2000

$

Average Item

Debt Coverage Ratio

373,197 Net farm income (w/o apprec.)

301,500 + Depreciation

20,246 + Interest paid (accrual)

42,646 - Net personal withdrawals from farm*

49,297

51,140

0.96

(A’) = Repayment Capacity

(B) = Debt Payments Planned for 2000

(as of December 31, 1999)

(A’/B)= Debt Coverage Ratio for 2000

$

$

$

Average

47,114

27,973

20,246

42,646

52,687

51,140

1.03

*Personal withdrawals and family expenditures less nonfarm income and nonfarm money borrowed. If family withdrawals are excluded, or inaccurately included, the ratios will be incorrect.

15

Item

Average no. of cows

Total cwt. of milk sold

Accrual Operating Receipts

Milk

Dairy cattle

Dairy calves

Other livestock

Crops

Misc. Receipts

Total

ANNUAL CASH FLOW WORKSHEET

Regional Average

Per Cow

157

Per Cwt.

31,007

$ 2,852 $ 14.44

260 1.32

25

3

0.13

0.02

37 0.19

180 0.91

$ 3,357 $ 17.00

My Farm

Per Cow/

Per Cwt.

_________

_________

$________

_________

_________

_________

_________

_________

$________

Expected

Change

_________

_________

_________

_________

_________

_________

_________

_________

_________

2001

Projection

_________

_________

$ ________

_________

_________

_________

_________

_________

$ ________

Accrual Operating Expenses

Hired labor


Dairy roughage

Nondairy feed

Mach. hire, rent & lease

Mach. repair & vehicle exp.

Fuel, oil & grease


Breeding

Vet & medicine

Milk marketing

Bedding

Milking supplies

Cattle lease

Custom boarding bST

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 Interest Paid

$

35

95

199

27

84

0

42

43

341 $

718

39

0

54

151

75

107

49

63

80

43

26

68

36

59

73 0.37

47 0.24

$ 2,555 $ 12.94

0.13

0.34

0.18

0.30

0.25

0.32

0.41

0.22

0.18

0.48

1.01

0.14

0.43

0.00

0.21

0.22

1.73

3.64

0.20

0.00

0.27

0.76

0.38

0.54

$________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

$________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

Net Accrual Operating Income

(without interest paid)

- Change in livestock & crop invent.*

- Change in accounts receivable

- Change in feed & supply inventory**

+ Change in accounts payable***

NET CASH FLOW

- Net family withdrawals

Available for Farm

- Farm debt payments

Available for Farm Investment

- Capital purchases

Additional Capital Needed

$

Total

$ 125,929

25,453

11,548

-6,889

4,225

$ 100,043

$ 42,467

57,576

99,216

$ -41,640

121,615

$ 163,255

$________

_________

_________

_________

_________

$________

_________

$________

_________

$________

_________

$________

_________

_________

_________

_________

_________

_________

_________

_________

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

$ ________

_________

_________

_________

_________

$ ________

_________

_________

_________

$ ________

_________

$ ________

$ ________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

$ ________

16

Cropping Analysis

The cropping program is an important part of the dairy farm business and often represents opportunities for improved productivity and profitability. A complete evaluation of what the available land resources are, how they are being used, the level of crop yields, and what it costs to produce crops is important in evaluating alternative cropping and feed purchasing alternatives.

LAND RESOURCES AND CROP PRODUCTION


Item

Land

Tillable

Nontillable

Other nontillable

Total

Crop Yields

Hay crop

Corn silage

Other forage

Total forage

Corn grain

Oats

Wheat

Other crops

Tillable pasture

Idle

Total Tillable Acres

16

11

2

9

36

4

35

10

3

Owned

217

32

79

328

Farms

35

31

Average

23

337

77

23

38

22

64

34

397

Rented

180

12

12

204

Acres*

208

142

Total

397

44

91

532

Prod/Acre

3.19 tn DM

13.89 tn

4.94 tn DM

1.30 tn DM

3.82 tn DM

76 bu

53 bu

53 bu

Owned

______

______

______

______

My Farm

Acres

______

______

______

______

______

______

______

______

______

______

Rented

_______

_______

_______

_______

______

Total

______

______

______

______

Prod/Acre

_______ tn DM

_______ tn

_______ tn DM

_______ tn DM

_______ tn DM

_______ bu

_______ bu

_______ bu

*This column represents the average acreage for the farms producing that crop. Average acreages including those farms not producing were hay crop 202, corn silage 123, corn grain 21, oats 2, tillable pasture 28, and idle 11.

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


Item

Total tillable acres per cow

Total forage acres per cow

Harvested forage dry matter, tons per cow

Average

2.54

2.09

7.98

My Farm

___________

___________

___________

17

Cropping Analysis (continued)

A number of cooperators have allocated crop expenses among the hay crop, corn, and other crops produced. Fertilizer and lime, seeds and plants, and spray and other crop expenses have been 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 13 farms in the region.

CROP RELATED ACCRUAL EXPENSES


Item

Total

Per

Till.

Acre

All

Corn

Per

Acre

Corn

Silage

Per

Ton DM

Corn

Grain

Per Dry

Sh. Bu.

Per

Acre

Hay Crop

Per

Ton DM

Per

Till

Acre

Pasture

Per

Total

Acre

No. of farms

reporting

Ave. number

of acres

Fert. & lime

Seeds & plants

Spray & other

crop exp.

TOTAL

36

397

5

126

$ 26.88

$ 37.10

$ 9.06

14.22

44.01

10.75

$ 0.33

0.39

$ 20.63

12.11

23.10

52.07

12.72

0.46

5.56

$ 64.20

$ 133.18

$ 32.53

$ 1.18

$ 38.30

6

156

2

89 168

$ 4.98

$ 2.81

$ 1.48

2.92

13.37

7.04

1.34

$ 9.24

0.00

$ 16.18

0.00

$ 8.52

My Farm

Fert. & lime $_______ $ _______ $ _______ $ ______ $ _______ $________ $ _______ $ ______

Seeds & plants _______

Spray & other

crop exp.

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 EXPENSES


Machinery

Expense

Fuel, oil & grease


Machine hire, rent & lease

Interest (5%)

Depreciation

Total

$

Total

Expenses

11,774

23,719

8,495

10,576

29,959

$ 84,523

Average

$

Per Till.

Acre

29.58

59.60

21.34

26.57

75.27

$ 212.37

Total

Expenses

My Farm

Per Till.

Acre

$ __________

__________

__________

__________

__________

$ __________

$ _________

_________

_________

_________

_________

$ _________

18

Dairy Analysis

Analysis of the dairy enterprise can reveal strengths and weaknesses of the dairy farm business. Information on this page should be used in conjunction with DHI and other dairy production information. Changes in dairy herd size and market values that occur during the year are identified in the table below. The change in inventory value without 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.

Item No.

DAIRY HERD INVENTORY


Dairy Cows

Value No.

Bred

Value No.

Heifer

Open

Value No.

Calves

Value

Beg. year (owned)

+ Change w/o apprec.

+ Appreciation

End year (owned)

End including leased 162

Average number 157

My Farm:

Beg. year (owned)

+ Change w/o apprec.

+ Appreciation

End year (owned)

End including leased

Average number

146 $ 155,821

20,692

6,037

162 $ 182,550

_____ $ ______

_______

_______

_____ $ ______

_____

_____

47 $ 44,702

-4,223

4,737

43 $ 45,216

115 (all age groups)

_____ $______

_______

_______

_____ $______

_____ (all age groups)

38 $ 20,659

4,428

4,016

45 $ 29,103

______ $ ______

_______

_______

______ $ ______

27 $ 7,922

1,285

1,807

32 $ 11,014

_____ $_______

________

________

_____ $_______

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.

Item

MILK PRODUCTION


Average My Farm

Total milk sold, lbs.

Milk sold per cow, lbs.

Average milk plant test, percent butterfat

3,100,719

19,802

3.73%

______________

______________

______________

Monitoring and evaluating culling practices and experiences on an annual basis are important herd management tools. Culling rate can have an affect on both milk per cow and profitability.

Item

Cows sold for beef

Cows sold for dairy

Cows died

Culling rate**

Number

44

2

9

ANIMALS LEAVING THE HERD


Average

Percent*

28.0

1.3

5.7

33.8

Number

My Farm

Percent*

*Percent of average number of cows in the herd. **Cows sold for beef plus cows died.

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 RECEIPTS FROM DAIRY, COSTS OF PRODUCING MILK,

AND PROFITABILITY


Total

Average

Per Cow Per Cwt.

Total

My Farm

Per Cow Per Cwt.

Item

Accrual Cost of

Producing Milk

Operating costs

Purchased inputs

costs

Total Costs

Accrual Receipts

From Milk

Net Milk Receipts

Net Farm Income

without Apprec.

Net Farm Income

with Apprec.

$ 378,036 $ $ 12.19

$ 428,687 $ 2,730 $ 13.83

$ 511,959 $ 3,261 $ 16.51

$ 447,695 $ 2,852 $ 14.44

$ 416,413 $ 2,652 $ 13.43

$ 19,008 $

$ 45,084 $

2,408

121

287

$

$

0.61

1.45

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

$ ________ $ ________ $ ________

The accrual operating expenses most commonly associated with the dairy enterprise are listed in the table below.

Feed and crop expenses include total purchased dairy feed plus fertilizer, seeds, spray and other crop expenses.

DAIRY RELATED ACCRUAL EXPENSES


Per Cow

Average

Per Cwt.

Per Cow

My Farm

Per Cwt.

Item

Purchased dairy grain

& concentrate

Purchased dairy roughage

Total Purchased

Dairy Feed

Purchased grain & conc.

as % of milk receipts

Purchased feed & crop exp.

Purchased feed & crop exp.

as % of milk receipts

Breeding


Milk marketing

Bedding

Milking supplies

Cattle lease

Custom boarding bST


$

$

$

$

718

39

757

25%

920

32%

35

95

199

27

84

0

42

43

26

$

$

$

$

3.64

0.20

3.84

4.66

0.18

0.48

1.01

0.14

0.43

0.00

0.21

0.22

0.13

$ _________

__________

$ _________

$ _________

$ ________

_________

$ ________

______ %

$ ________

$ _________

______ %

$ ________

__________

__________

_________

_________

__________

__________

__________

__________

__________

__________

_________

_________

_________

_________

_________

_________

20

Capital and Labor Efficiency Analysis

Capital efficiency factors measure how effectively 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. When evaluating a business, the relationship between capital efficiency and labor efficiency should be explored. For example, if capital efficiency shows high capital investment per worker or per cow, labor efficiency should be high reflecting use of capital to make labor more effective. However, if capital investment is high per worker or per cow, and labor efficiency is low, a problem may exist on that farm.

$

CAPITAL EFFICIENCY


Per

Worker

Per

Cow

Per Tillable

Acre

264,972

52,357

$ 6,818

3,031

1,347

$ 2,690

531

$

Per Tillable

Acre Owned

4,933

2,193

Item

Farm capital

Real estate

Machinery & equipment

Ratios

Asset turnover

0.52

My Farm

Farm capital

Real estate

Machinery & equipment

Ratios

Asset turnover

________

Operating Expense

0.81

$ __________

__________

__________

Operating Expense

________

$

Interest Expense

0.06

__________

__________

__________

$ _________

_________

_________

Interest Expense

________

Depreciation Expense

0.10

$ _________

_________

_________

Depreciation Expense

________

Labor Force

Operator number 1

Operator number 2

Operator number 3

Family paid

Family unpaid

Hired

Total

My Farm: Total

Operator’s

LABOR FORCE INVENTORY


Months

13.1

6.1

2.8

2.6

2.4

21.3

48.5

Age

47

40

38

Years of Educ.

13

13

11

_______

_______

/ 12 = 4.04 Worker Equivalent

1.76 Operator/Manager Equivalent

/ 12 = ____ Worker Equivalent

/ 12 = ____ Operator/Manager Equivalent

Value of

Labor & Mgmt.

$ 26,650

12,664

7,756

21

Small conventional stall operations of 60 or less cows should strive for labor efficiency of 600,000 or more pounds of milk sold per worker. Large conventional stall operations should strive for 850,000 or more pounds of milk sold per worker. Small free stall operations of less than 300 cows should strive for 1,000,000 pounds of milk sold per worker and large free stall operations with more than 300 cows should strive for over 1,200,000 pounds of milk sold per worker.

Labor costs and machinery costs should also be evaluated both individually and jointly. The more machinery or technology at a worker’s disposal, the less time, and therefore cost, that should be required to get work accomplished.

Striving for labor and machinery costs per cow of less than $1,000 on small conventional stall barns, less than $900 on large conventional stall barns, less than $850 on small free stall barns and below $750 on large free stall barns should be a goal.

LABOR EFFICIENCY


Labor

Efficiency

Cows, average number

Milk sold, pounds

Tillable acres

Work units

Total

157

3,100,719

398

1,573

Average

Per Worker

39

767,505

99

389

Total

_________

_________

_________

_________

My Farm

Per Worker

__________

__________

__________

__________

Labor Costs Total

LABOR AND MACHINERY COSTS


Average

Per

Cow

Per

Cwt.

Total

Value of operator(s)

labor ($1,900/mo.)

Family unpaid

($1,900/mo.)

Hired

Total Labor

Machinery Cost

Total Labor & Mach.

$ 41,800

$ 84,523

$ 184,435

$

$

Hired labor expense per hired worker equivalent

Hired labor expense as % of milk sales

266

$ 538

1,175

$ 1.35

4,560 29 0.15

53,552 341 1.73

$ 99,912 $ 636 $ 3.22

$ 2.73

$

$ 26,888

5.95

12.0%

My Farm

Per

Cow

Per

Cwt.

$ ________ $ _______ $ ______

________

________

_______

_______

______

______

$ ________ $ _______ $ ______

$ ________ $ _______ $ ______

$ ________ $ _______ $ ______

$ ________

%

22

COMPARATIVE ANALYSIS OF THE FARM BUSINESS

Progress of the Farm Business

Comparing your business with average data from regional DFBS cooperators that participated in both of the last two years can be helpful to establishing your goals for these parameters. It is equally important for you to determine the progress your business has made over the past two or three years, to compare this progress to your goals, and to set goals for the future.

PROGRESS OF THE FARM BUSINESS


1999

My Farm

2000 Goal Selected Factors

Average of 30 Farms*

1999

Size of Business

Average number of cows

Average number of heifers

Milk sold, lbs.

Worker equivalent

Total tillable acres

Rates of Production

Milk sold per cow, lbs.

Hay DM per acre, tons

Corn silage per acre, tons

Labor Efficiency

Cows per worker

Milk sold/worker, lbs.

Cost Control

Grain & conc. purchased

as % of milk sales

114

89

2,218,915

3.44

353

19,493

2.5

15.1

33

645,033

24%

Dairy feed & crop exp.

per cwt. milk

Labor & mach. costs/cow

Operating cost of producing

$

$

4.45

1,244

cwt. of milk

Capital Efficiency**

Farm capital per cow

Mach. & equip. per cow

Asset turnover ratio

Profitability

$ 10.51

$ 6,785

$ 1,442

0.52

Net farm income w/o apprec.

$ 72,015

Net farm income w/apprec.

$ 87,030

Labor & mgt. income

per operator/manager

Rate of return on equity

capital w/appreciation

Rate of return on all

capital w/appreciation

Financial Summary

Farm net worth, end year

Debt to asset ratio

Farm debt per cow

$ 23,496

8.7%

8.1%

$ 541,102

$

0.32

2,238

2000

117

94

2,311,386

3.54

366

19,683

3.2

14.0

33

652,934

$

$

$

$

$

$ 47,114

$ 67,596

$ 8,650

4.7%

5.5%

$ 556,548

0.35

$ 2,424

27%

4.69

1,289

11.08

7,059

1,527

0.50

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

________%

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

_________

$ _________ $ _________ $ _________

$ _________ $ _________ $ _________

$ _________

$ _________ $ _________ $ _________

$ _________ $ _________ $ _________

_________

$ _________ $ _________ $ _________

$ _________ $ _________ $ _________

$ _________

________%

________%

_______ %

$ _________

_________

$ _________

_______ %

_______ %

________ %

$ _________

_________

$ _________

________ %

________ %

$ _________ $ _________ $ _________

_________ _________ _________

$ _________ $ _________ $ _________

*Farms participating both years.

**Average for the year.

23

RECEIPTS AND EXPENSES PER COW AND PER CWT.


1999

Item

Average Number of Cows

Cwt. Of Milk Sold

Per Cow

114

ACCRUAL OPERATING RECEIPTS

Milk

Dairy cattle

Dairy calves

Other livestock

Crops

Miscellaneous receipts

Total Receipts

$ 2,926

167

20

5

61

192

$ 3,372

ACCRUAL OPERATING EXPENSES

Hired labor


Dairy roughage

Nondairy feed

Machine hire/rent/lease


Fuel, oil & grease


Breeding


Milk marketing

Bedding

Milking supplies

Cattle lease

Custom boarding bST expense


Fertilizer & lime

Seeds & plants

Spray/other crop expense

Land, building, fence repair

Taxes

Real estate rent/lease

Insurance

Utilities

Interest paid

Miscellaneous

Total Operating Expenses

Expansion Livestock

Machinery Depreciation

Real Estate Depreciation

Total Expenses

$ 297

692

11

0

72

199

63

54

38

74

114

19

97

0

3

28

33

62

41

59

68

66

90

43

76

150

37

$ 2,487

3

180

70

$ 2,740

Net Farm Income Without Appreciation $ 632

Per Cwt.

22,189

$ 15.03

0.86

0.10

0.03

0.31

0.99

$ 17.32

$ 1.52

3.56

0.06

0.00

0.37

1.02

0.32

0.28

0.19

0.38

0.59

0.10

0.50

0.00

0.02

0.14

0.17

0.32

0.21

0.30

0.35

0.34

0.46

0.22

0.39

0.77

0.19

$ 12.78

0.02

0.93

0.36

$ 14.08

$ 3.25

Per Cow

117

$ 2,831

217

23

7

63

231

$ 3,372

77

173

32

$ 2,684

47

170

69

$ 2,970

$ 403

53

68

81

36

29

63

39

46

$ 308

760

18

1

74

189

86

52

48

91

180

34

92

0

13

39

2000

Per Cwt.

23,114

$ 14.33

1.10

0.12

0.04

0.32

1.17

$ 17.07

0.39

0.88

0.16

$ 13.58

0.24

0.86

0.35

$ 15.03

$ 2.04

0.15

0.32

0.20

0.23

0.27

0.35

0.41

0.18

$ 1.56

3.85

0.09

0.00

0.38

0.96

0.43

0.26

0.24

0.46

0.91

0.17

0.47

0.00

0.06

0.20

24

Regional Farm Business Chart

The Farm Business Chart is a tool which can be used in analyzing your business. Compare your business by drawing a line through or near the figure in each column which represents your current level of performance. The five figures in each column represent the average of each 20 percent or quintile of farms included in the regional summary. Use this information to identify business areas where more challenging goals are needed.

FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS


Worker

Equivalent

(11)*

9.78

4.44

2.87

2.15

1.35

Size of Business

No.

of

Cows

(11)

483

143

78

63

34

Pounds

Milk

Sold

(11)

9,973,992

2,822,533

1,529,673

1,093,333

461,144

Pounds

Milk Sold

Per Cow

(10)

23,096

20,296

18,680

16,561

12,720

Rate of Production

Tons

Hay Crop

DM/Acre

(9)

4.2

3.2

2.8

2.4

1.6

Tons Corn

Silage

Per Acre

(9)

18

15

13

12

9

Labor Efficiency

Cows

Per

Worker

Pounds

Milk Sold

Per Worker

(11) (11)

49

36

30

26

20

973,111

740,498

585,602

423,208

291,834

Grain

Bought

Per Cow

(10)

$ 298

548

676

749

975

% Grain is of Milk

Receipts

(10)

16%

23

24

29

37

Milk

Receipts

Per Cow

Value and Cost of Production

Oper. Cost

Milk

Per Cwt.

Total Cost

Production

Per Cwt.

(10) (10) (10)

$ 3,235

2,839

2,555

2,284

1,746

$ 8.18

9.55

10.51

11.73

15.90

$ 13.09

14.38

15.62

17.77

24.33

Machinery

Costs

Per Cow

(11)

$ 359

472

525

595

1,013

*Page number of the participant's DFBS where the factor is located.

Cost Control

Labor &

Machinery

Costs per Cow

(11)

$ 999

1,146

1,300

1,445

1,960

Feed & Crop

Expenses

Per Cow

(10)

$ 468

727

845

938

1,150

Net Farm

Income w/Apprec.

(3)

$ 160,792

78,689

48,065

24,204

-69,828

Profitability

Net Farm

Inc. w/o

Apprec.

(3)

$ 124,332

52,663

28,201

9,888

-102,590

Labor &

Mgt. Inc.

Per Oper.

(3)

$47,240

15,461

5,571

-7,322

-59,632

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$ 3.28

3.95

4.50

5.00

5.96

Change in

Net Worth w/Apprec.

(6)

$ 82,749

29,836

9,978

935

-57,619

25

Supplementary Information

Each year DFBS cooperators volunteer to complete supplementary data collection forms looking at selected management aspects of the business or specific research areas being studied. This is in addition to the normal DFBS data collection form. Two areas that were examined this year were the source of dairy replacements and the breakdown of the milk income and marketing expenses. Following is a summary of this information.

SOURCE OF DAIRY REPLACEMENTS


Animals Entering Herd

Number calving in 2000 for first time

Animals purchased, % 1

Animals raised by farm, % 2

Current Heifer Inventory

Raised on dairy, %

Raised by a custom grower, %

Average

118

17.2

82.8

81

19

1 Animals purchased are animals purchased from a different farm and were not the farms genetics.

2 Animals raised by farm are animals that were born on the farm and entered the herd, which includes animals raised by the farm or custom grower.

On the average farm, 118 animals calved for the first time in 2000. The breakdown on these animals for source was 17.2% purchased and 82.8% raised by the farm. Of the current heifer inventory, 81% were raised on the dairy and 19% were being raised by a custom grower. There is increased interest in evaluating the dairy replacement enterprise.

Milk Income and Marketing Expense Breakdown

Starting January 1 st , 2001, the northeast switched to multiple components pricing, which changed the format of the milk check and how farmers received payment for their milk. To examine the breakdown of the gross milk income and the marketing expenses, 74 farms filled out a detailed form for all the different sources of income for milk sales and the milk marketing expenses on an accrual basis. This information is reported in the following two tables. The tables are divided into six different areas, each representing a different area of income or expenses.

The first section looks at the value of the milk components on a per cwt. basis. The second area looks at the Producer Price

Differential. The third area looks at the premiums a farm receives. Any premiums not specifically noted as quality or volume related are included in market premiums. The fourth area looks at the expenses associated with marketing milk. A new line item in this section is the expenses associated with utilizing forward contracting or hedging programs to market milk, such as commission or broker fees. The fifth area is income from the compact program or from forward contracting or hedging programs. The sixth area is the patronage dividends or refunds from the milk cooperatives. Equity purchased in the milk cooperative utilizing a monthly deduction from the milk check or a percent of the patronage dividend is treated as a capital purchase and is not a milk marketing expense. The cumulative total for these six areas is the net price received on farms. Your net farm price can be found on page 10 of your farm’s DFBS report.

The table on page 26 reports the averages for these different areas. The table on page 27 contains the range for each of the individual lines of the report. This table is in farm business chart format with each item sorted independently and ranked by fifths. Numbers for the different areas will not add to the totals for that quintile or to the net price received because the highest farms for each item were averaged, not the same farms throughout the six areas. This table shows the range of income and expenses received by farms for all the different areas.

For your individual farm, compare your accrual numbers following this same format to look at how you compare to other farms in your region and to identify possible areas to generate additional revenue.

26

AVERAGE MILK INCOME AND MARKETING REPORT


BASE FARM PRICE

Butterfat

Protein

Solids

Total Component Contribution

PPD

Base Farm Price

Premiums

Quality

Volume

Market Premiums

Total Premiums

BASE FARM PRICE + PREMIUM

Deductions

Promo

Hauling + Stop Charges.

Market Fees & Coop Dues

Futures/Contract Fees

Total Deductions

BASE FARM PRICE + PREMIUMS - DEDUCTIONS

Marketing Programs

Compact

Futures Contracts, Forward Contracting, Etc.

Total Marketing Income

Patronage Dividends

NET PRICE RECEIVED ON FARM, ALL SOURCES

PPD - Hauling, per cwt.

PPD - Hauling + Market Premiums, per cwt.

Pounds

317,577.00

261,077.90

489,113.09

8,617,559.41

Percent Price/Pound

3.71%

3.03%

5.63%

$ 1.2634

Total

$ 398,523.66

$/Cwt of Milk

$ 4.68

$ 1.6813

$ 433,854.43

$ 5.06

$ 0.0525

$ 25,680.42

$ 0.30

$ 2.5458

$ 213,842.50

$ 2.55

$10.04

$ 12.59

$ 12,344.17

$ 0.13

$ 21,946.03

$ 0.16

$ 28,483.59

$ 0.26

$ 0.55

$ 13.13

$ 13,049.68

$ 0.15

$ 40,008.64

$ 0.52

$ 5,638.69

$ 0.07

$ 3.40

$ 0.00

$ 0.74

$ 8,158.92

$ 0.14

$ 7,197.64

$ 0.05

$ 0.20

$ 13,846.23

$ 0.23

$ 2.02

$ 2.28

$ 12.40

$ 12.82

27

MILK PRICE INFORMATION BY QUINTILE

(Each Category Sorted Independently)


Butterfat, %

Protein, %

Other Solids, %

Butterfat, $ per Cwt.

Protein, $ per Cwt.

Other solids, $ per Cwt.

Total Component Value per Cwt.

PPD, $ per Cwt.

Base Farm Price per Cwt.

Quality, $ per Cwt.

Volume, $ per Cwt.

Market premium, $ per Cwt.

Total Premium, $ per Cwt.

Base Farm Price + Premiums per Cwt.

Promotion, $ per Cwt.

Hauling, $ per Cwt.

Market fees & coop dues per Cwt.

Futures/contract fees, $ per Cwt.

Total Marketing Expenses per Cwt.

Base + Premiums – Deductions per Cwt.

Compact, $ per Cwt.

Futures contract, forward contracting, $ per Cwt.

Total Marketing Income, $ per Cwt.

Patronage Dividends, $ per Cwt.

Net Price Received From All Sources, $ per Cwt.

PPD - hauling, $ per Cwt.

PPD - hauling + mkt premiums, $ per Cwt.

Lowest

Quintile

3.49

2.84

5.18

3.63

2.93

5.63

3.68

2.97

5.70

3.78

3.03

5.75

Highest

Quintile

4.00

3.41

5.90

4.37

4.76

0.28

$ 9.50

4.52

4.93

0.29

$ 9.77

4.61

5.03

0.29

$ 9.91

4.73

5.12

0.29

$ 10.11

5.22

5.50

0.34

$ 10.98

2.24

2.31

2.42

2.68

3.12

.01

.00

.00

$ 11.87

.07

.08

.00

.01

$ 12.16

.35

.13

.07

.19

$ 12.38

.47

.20

.24

.28

$ 12.72

.70

.27

.50

.84

$ 13.90

1.19

.13

.28

.00

.00

$ 12.29

$ .47

.15

.40

.03

.00

$ 12.67

$ .60

.15

.50

.06

.00

$ 12.86

$ .68

.15

.57

.07

.00

$ 13.32

$ 14.62

$ .79

.17

.90

.17

.00

$ 1.18

.00

.00

$ 11.59

$ .00

.00

.00

$ 11.98

$ .00

.00

.00

$ 12.19

$ .00

.00

.00

$ 12.51

$ .16

.76

.28

$ 13.80

$ .87

$ .00

$ 11.86

1.73

1.85

$ .00

$ 12.36

1.88

2.01

$ .00

$ 12.66

1.97

2.13

$ .12

$ 13.09

2.11

2.38

$ 1.07

$ 14.24

2.44

3.07

28

New York State Farm Business Charts

The Farm Business Chart is a tool which can be used in analyzing a business by drawing a line through the figure in each column which represents the current level of management performance. The figure at the top of each column is the average of the top 10 percent of the 314 farms for that factor. The other figures in each column are the average for the second 10 percent, third 10 percent, etc. Each column of the chart is independent of the others. The farms which are in the top 10 percent for one factor would not necessarily be the same farms which make up the top 10 percent for any other factor.

The cost control factors are ranked from low to high, but the lowest cost is not necessarily the most profitable. In some cases, the "best" management position is somewhere near the middle or average. Many things affect the level of costs, and must be taken into account when analyzing the factors.

FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS


Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

18.6

9.9

7.0

851

418

279

19,987,607

9,126,584

5,925,301

25,069

23,355

22,344

5.3

4.0

3.4

23

20

19

55

47

44

1,213,661

1,009,282

888,653

5.3

4.2

198

145

3,903,863

2,857,909

21,492

20,435

3.0

2.6

17

16

40

37

798,241

731,684

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

3.5

111 2,145,630 19,413 2.3

15 34 660,719

3.0

2.5

2.0

1.4

87

71

56

40

1,605,859

1,261,635

1,003,180

588,644

18,334

17,209

15,764

12,475

2.0

1.7

1.5

1.0

14

12

10

8

31

28

24

18

597,681

493,858

390,912

281,530

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Per Cow

(11)

Cost Control

Machinery

Costs

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$365

519

590

653

15%

20

22

23

$278

381

427

463

$778

933

1,028

1,111

$506

703

805

866

$3.25

3.81

4.25

4.48

700 24 504 1,164 921 4.67

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

743

793

852

25

27

28

541

582

624

1,223

1,299

1,398

971

1,021

1,089

4.88

5.05

5.29

916

1,036

30

37

701

845

1,540

1,847

1,163

1,300

5.71

6.78


29

FARM BUSINESS CHART FOR

FARM MANAGEMENT COOPERATORS


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)

$3,817

3,461

3,293

3,160

$16.50

15.56

15.27

15.05

$1,200

1,635

1,832

1,998

$7.89

9.24

9.90

10.35

$2,176

2,532

2,752

2,864

$12.45

13.42

13.97

14.48

3,046 14.86

2,137 10.78

2,987 14.98

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

2,908

2,743

14.73

14.58

2,262

2,367

11.20

11.66

3,101

3,211

15.43

16.16

2,529

2,320

1,838

14.39

14.12

13.61

2,479

2,636

2,955

12.10

12.76

14.43

3,306

3,459

3,867

16.79

17.98

22.84

Net Farm Income

Without Appreciation

Per As % of Total

Total

(3)

Cow

(10)

Accrual Receipts

(3)

Net Farm Income

With Appreciation

Total

(3)

Profitability

Per

Cow

(10)

Labor &

Management Income

Per Per

Farm

(3)

Operator

(3)

$578,366

222,031

$1,174

863

0.33

0.25

$668,929

270,325

$1,351

1,035

$454,170

150,302

$318,071

88,408

136,405

96,263

763

663

0.22

0.19

180,888

124,395

922

824

82,986

54,339

54,378

39,122

74,615 550 0.17

91,554 697 38,704 26,018

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

56,349

39,420

26,824

15,421

-10,114

464

376

290

173

-114

0.14

0.11

0.09

0.16

-0.06

69,234

53,026

38,225

26,086

4,679

615

520

405

282

12

25,330

13,406

1,342

-11,196

-42,427

15,699

9,369

876

-10,038

-38,149

Farm Business Charts for farms with freestall barns and 150 cows or less, 151-300 cows, and more than 300 cows; and farms with conventional barns with 60 cows or less and more than 60 cows are shown on pages 33-37.

Financial Analysis Chart

The farm financial analysis chart on page 30 is designed just like the Farm Business Chart and may be used to assess the financial health of the farm business. Most of the financial measures used in the chart are defined on pages 6,

10, 14 and 20 of this publication. References to DFBS output page numbers for participating dairy farmers are provided in the table headings.

30

FINANCIAL ANALYSIS CHART


Planned

Debt

Payments

Per Cow

(8)*

$128

247

333

Available for

Debt Service

Per Cow

(12)

$1,177

868

757

Cash Flow

Coverage

Ratio

(8)

5.71

2.38

1.88

Liquidity (repayment)

Debt Pay-

Debt

Coverage

Ratio

(8)

7.13

2.84

2.19

ments as Percent of Milk

Sales

(8)

4%

8

11

Debt Per

Cow

(5)

$217

929

1,464

Working

Capital as

% of Total

Expenses

(5)

57%

34

27

Current

Ratio

(5)

30.96

5.03

3.54

383

430

675

599

1.61

1.38

1.75

1.52

13

14

1,862

2,343

22

18

2.73

2.10

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

476 546 1.17

1.28

16 2,758 13 1.71

521

581

710

922

486

406

300

69

1.04

0.89

0.70

0.29

1.10

0.94

0.73

0.31

18

21

24

37

3,067

3,426

3,882

5,125

-2

-17

9

5

1.45

1.20

0.91

0.55

Leverage

Ratio*

Percent

Equity

Solvency

Debt/Asset Ratio

Current &

Intermediate

Long

Term

Profitability

Percent Rate of Return with

Equity appreciation on:

Investment**

(5)

0.06

0.17

(5)

98%

88

(5)

0.03

0.11

(5)

0.00

0.00

(3)

36%

19

(3)

19%

14

0.29

0.40

80

73

0.19

0.26

0.04

0.18

14

11

11

9

0.56

66 0.33

0.29

8 8

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

0.70

60 0.39

0.38

6 6

0.90

1.13

1.50

3.91

54

48

40

23

0.47

0.55

0.64

0.88

0.46

0.56

0.73

1.19

-3

-31

3

0

0

-5

4

3

Asset

Turnover

(ratio)

Efficiency (Capital)

Real Estate

Investment

Per Cow

Machinery

Investment

Per Cow

Total Farm

Assets

Per Cow

Change in

Net Worth w/Appreciation

Farm Net Worth,

End Year

(11)

.85

.72

(11)

$1,210

1,808

(11)

$527

775

(11)

$4,275

5,134

(6)

$449,790

169,937

(4)

$3,107,799

1,452,198

.64

.59

2,109

2,336

944

1,082

5,668

6,126

93,388

59,438

1,021,329

804,166

.54

2,628 1,204 6,555 42,597 644,876

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

.50

.46

.41

.35

.25

2,935

3,307

3,836

4,552

6,622

1,348

1,493

1,738

2,103

2,899

6,999

7,497

8,214

9,192

11,691

29,284

20,531

12,457

838

-47,361

547,645

429,658

347,748

251,306

124,028

*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

31

Comparison by Type of Barn and Herd Size

When analyzing a dairy farm business by comparing it to a group of farms, it is important that the group of farms have used as many of the same physical characteristics as possible as the farm being analyzed. To assist in this endeavor, dairy farms in the summary have been divided into those with freestall and those with conventional housing. Conventional housing includes stanchion and tiestall barns. Within each group, is a further classification by size of the dairy herd.

The table on page 32 includes the average values for the resulting five groups of dairy farms. The average size of farms in the five groups ranges from 47 cows on the small conventional farms to 601 cows on the largest freestall farms.

The largest freestall farms averaged the highest milk output per cow and per worker, the lowest total cost 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 farm businesses.

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

33-37. By comparing the farm's performance on the most appropriate business chart, a farm manager will be better able to evaluate his or her business performance.

Herd Size Comparisons

A detailed comparison of profitability, financial situation and business analysis factors across herd sizes is contained on pages 46-55 of the 1999 State Summary*. As herd size increases, the average profitability generally increases

(page 46)*. Net farm income without appreciation averaged $ 21,114 per farm for the less than 50 cow farms and

$639,672 per farm for those with 600 cows and over. This relationship generally holds for all measures of profitability including rate of return on capital.

Farm net worth increases rapidly as herd size increases (pages 50-53)*, even though percent equity was higher on the smaller farms. The group with more than 600 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 54-55)*. The farms with 600 and more cows per farm averaged 42 percent more milk sold per cow than the smallest farms. All of the groups with 150 or more cows averaged above 20,000 pounds of milk sold per cow while the farms smaller than 150 cows averaged 18,104 pounds of milk sold per cow. Farm capital per worker increased, and farm capital per cow decreased as herd size increased. Milk sold per worker increased dramatically as herd size increased, ranging from 363,719 pounds at the lowest herd size category up to 1,118,658 pounds at the largest size category.

*Wayne A. Knoblauch, Linda D. Putnam, and Jason Karszes, Dairy Farm Management Business Summary, New York,

1999, Department of Agricultural, Resource, and Managerial Economics, Cornell University, R.B. 2000-03, October 2000.

32

Item

SELECTED BUSINESS FACTORS BY TYPE OF BARN AND HERD SIZE


Conventional Freestall

Farms with: <= 60 Cows >60 Cows <=150 Cows 151-300 Cows >300 Cows

52 63 55 69 Number of farms

Cropping Program Analysis

Total Tillable acres

Tillable acres rented*

Hay crop acres*

Corn silage acres*

Hay crop, tons DM/acre

Corn silage, tons/acre

Oats, bushels/acre

Forage DM per cow, tons

Tillable acres/cow

Fert. & lime exp./tillable acre

Total machinery costs

Machinery cost/tillable acre

Dairy Analysis

Number of cows

Number of heifers

Milk sold, lbs.

Milk sold/cow, lbs.

Operating cost of prod. milk/cwt.

Total cost of prod. milk/cwt.

Price/cwt. milk sold

Purchased dairy feed/cow

Purchased dairy feed/cwt. milk

Purchased grain & conc. as % milk rec.

Purchased feed & crop exp./cwt. milk

Capital Efficiency

Farm capital/worker

Farm capital/cow

Farm capital/tillable 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

53

$195,392

$8,315

$3,794

$4,222

$1,734

0.37

2.00

1.33

397,293

24

$872

$251

Profitability & Balance Sheet Analysis

Net farm income (without appreciation) $25,834

Labor & management income/operator

Rate Return on all capital with appreciation

$ 3,537

2.0%

Farm debt/cow

Percent equity

$1,967

76%

38

6.6

3.5

$19.93

$25,558

$157

163

60

104

27

1.9

11.8

47

34

794,585

16,920

$10.15

$17.63

$14.86

$694

$4.11

25%

$4.82

296

124

177

61

2.2

14.7

63

8.2

3.4

$22.70

$47,622

$161

87

70

1,572,844

18,027

$10.40

$15.88

$14.85

$648

$3.58

23%

$4.55

$210,516

$7,453

$3,770

$3,298

$1,565

0.43

3.08

1.59

510,664

28

$709

$208

$50,194

$12,243

4.8%

$1,965

74%

308

141

164

85

2.4

14.1

45

7.7

2.9

$26.23

$56,876

$185

105

74

2,019,084

19,267

$11.34

$15.85

$14.85

$787

$4.09

25%

$5.01

$252,922

$7,347

$4,619

$3,330

$1,423

0.46

3.05

1.46

661,995

34

$614

$209

$45,437

$10,141

4.5%

$2,633

64%

557

261

266

196

2.7

15.2

61

7.9

2.5

$33.97

$119,638

$215

219

165

4,572,742

20,833

$11.27

$14.65

$14.98

$790

$3.78

24%

$4.67

$249,401

$6,514

$4,820

$2,561

$1,239

0.58

5.72

1.79

799,430

38

$617

$243

$115,430

$38,510

9.5%

$2,607

61%

1,149

531

486

515

3.6

17.3

36

7.9

1.9

$36.28

$285,367

$248

601

436

13,630,992

22,694

$11.34

$13.70

$14.89

$911

$4.02

25%

$4.75

$266,995

$5,931

$5,768

$2,269

$1,004

0.67

13.35

2.13

1,021,048

45

$653

$342

$337,256

$113,628

12.3%

$2,901

52%

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

33

FARM BUSINESS CHART FOR SMALL CONVENTIONAL STALL DAIRY FARMS

53 Conventional Stall Dairy Farms with 60 or Less Cows, New York, 1999

Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

3.36

2.82

2.49

2.16

1.98

60

57

54

52

51

1,249,557

1,097,188

997,166

951,687

842,501

23,442

21,649

19,974

18,273

17,468

4.1

3.2

2.7

2.3

2.0

24

20

17

15

14

42

34

31

27

26

866,834

623,722

511,506

431,444

405,806

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

1.83

47 771,571 16,658 1.8

11 25 382,448

1.71

1.52

1.39

1.12

46

42

37

30

700,887

636,598

553,671

319,766

15,691

14,698

13,054

8,782

1.6

1.4

1.2

0.9

10

10

8

6

23

20

18

15

352,446

326,229

266,346

193,003

Cost Control

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Machinery

Costs

Per Cow

(11)

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$291

435

15%

19

$284

370

$892

1,109

$398

509

$3.31

3.52

495

537

21

22

430

482

1,222

1,301

630

697

3.81

4.14

558 22 540 1,361 745 4.56

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

601

670

735

818

1,066

24

27

30

33

43

580

614

670

742

857

1,453

1,585

1,707

1,847

2,090

784

898

1,036

1,154

1,343

4.87

5.13

5.65

6.58

7.58

Milk

Receipts

Per Cow

(10)


Oper. Cost

Milk

Per Cwt.

(10)

Total Cost

Production

Per Cwt.

(10)

Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

Change in

Net Worth w/Apprec.

(6)

$3,495

3,255

$6.88

8.35

$13.66

14.90

$67,606

51,727

$1,399

1,028

$37,900

24,910

$56,577

41,828

3,049

2,849

8.67

9.12

15.48

16.35

39,496

34,679

861

735

15,940

12,211

25,057

22,037

2,554 9.98

16.91

29,487 652 8,205 18,746

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

2,423

2,294

2,169

1,960

1,208

10.53

11.17

11.68

12.74

15.67

17.89

19.10

20.80

23.78

29.51

23,104

19,484

14,070

4,661

-11,863

532

418

264

104

-369

2,786

22

-6,642

-14,728

-37,507

15,378

12,474

9,145

2,663

-11,715


34

FARM BUSINESS CHART FOR LARGE CONVENTIONAL STALL DAIRY FARMS

52 Conventional Stall Dairy Farms with More Than 60 Cows, New York, 1999

Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

4.87

4.07

3.63

3.24

3.17

154

106

98

89

81

2,730,517

1,955,695

1,847,727

1,657,243

1,504,242

24,029

20,762

19,622

18,787

18,451

4.4

3.2

2.8

2.5

2.1

24

20

19

18

16

42

38

35

32

30

770,362

701,390

659,484

602,209

568,430

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

2.93

77 1,441,765 17,688 2.0

15 29 524,998

2.72

2.52

2.26

1.80

74

70

67

64

1,362,999

1,232,960

1,168,162

1,018,863

17,211

16,396

15,643

14,002

1.9

1.7

1.4

1.0

14

12

9

7

27

25

22

19

461,326

405,822

371,817

315,077

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Machinery

Costs

Per Cow

(11)

Cost Control

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$320

464

538

568

12%

18

20

21

$283

422

466

515

$887

988

1,072

1,164

$514

635

710

774

$3.03

3.48

3.77

4.07

608 22 562 1,237 824 4.39

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

646

687

723

24

26

28

591

629

650

1,307

1,414

1,496

857

881

919

4.64

4.95

5.28

769

902

30

35

700

837

1,644

1,799

970

1,140

5.68

6.74

Milk

Receipts

Per Cow

(10)


Oper. Cost

Milk

Per Cwt.

(10)

Total Cost

Production

Per Cwt.

(10)

Net Farm Income


Total

(3)

Profitability

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

Change in

Net Worth w/Apprec.

(6)

$3,471

3,082

$7.60

8.82

$13.02

14.10

$118,857

83,539

$1,145

916

$54,023

37,675

$81,736

47,776

2,928

2,810

9.47

9.74

14.49

15.22

70,691

62,069

847

689

29,425

21,755

36,423

31,469

2,728 10.20

15.87

51,419 574 17,112 26,330

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

2,661

2,553

2,436

2,280

2,051

10.76

11.12

11.51

12.03

13.97

16.40

16.86

17.41

18.26

20.60

42,228

33,666

29,170

21,667

3,657

489

449

371

294

64

12,169

7,566

1,784

-9,900

- 34,295

21,569

17,147

13,183

2,177

-20,718


35

FARM BUSINESS CHART FOR SMALL FREESTALL DAIRY FARMS

63 Freestall Barn Dairy Farms with 150 or Less Cows, New York, 1999

Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

4.88

4.15

3.76

3.40

3.22

147

141

132

121

115

3,202,363

2,826,420

2,591,385

2,430,389

2,225,447

23,465

22,587

21,572

20,668

19,876

5.7

3.4

3.0

2.6

2.3

21

19

17

17

16

59

46

43

39

38

1,099,774

932,011

819,869

741,613

686,560

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

2.90

108 2,035,131 19,182 2.1

14 34 640,699

2.59

2.37

2.11

1.62

95

85

74

49

1,724,716

1,479,864

1,250,141

839,593

18,501

17,675

15,995

12,201

1.9

1.6

1.4

1.1

13

11

10

7

32

29

28

19

602,729

572,122

497,571

324,190

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Machinery

Costs

Per Cow

(11)

Cost Control

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$398

532

612

648

16%

20

22

24

$278

394

422

455

$755

907

1,002

1,073

$504

757

872

911

$3.37

4.15

4.48

4.76

680 25 520 1,125 935 4.95

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

739

775

833

26

27

29

542

595

682

1,182

1,236

1,400

981

1,033

1,093

5.10

5.31

5.55

929

1,063

31

37

776

908

1,552

1,859

1,176

1,348

6.08

6.82

Milk

Receipts

Per Cow

(10)


Oper. Cost

Milk

Per Cwt.

(10)

Total Cost

Production

Per Cwt.

(10)

Net Farm Income


Total

(3)

Profitability

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

Change in

Net Worth w/Apprec.

(6)

$3,499

3,279

3,117

3,056

$8.40

9.73

10.28

10.85

$13.54

14.11

14.75

15.38

$105,781

90,022

77,375

67,071

$892

792

686

571

$59,306

42,957

35,110

17,345

$132,279

61,621

49,786

41,699

2,995 11.16

15.91

54,109 521 12,461 34,045

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

2,883

2,748

2,557

11.46

11.83

12.33

16.41

16.66

17.19

36,762

25,170

16,133

419

293

199

7,745

-692

-7,054

26,599

18,504

10,198

2,352

1,871

13.43

14.47

18.04

21.75

8,502

- 6,797

92

- 60

-13,987

-32,477

1,712

-11,848


36

FARM BUSINESS CHART FOR MEDIUM FREESTALL DAIRY FARMS

55 Freestall Barn Dairy Farms with 151-300 Cows, New York, 1999

Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Cows

Per

Worker

(11)

Labor Efficiency

Pounds

Milk Sold

Per Worker

(11)

8.90

7.39

6.60

6.10

297

280

258

238

6,965,476

6,123,854

5,579,962

5,288,803

25,959

24,416

23,228

22,273

4.8

3.8

3.3

3.1

23

20

18

18

55

50

47

42

1,180,513

994,280

882,331

846,958

5.83

228 4,804,482 21,486 2.9

17 41 812,892

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

5.57

4.96

4.61

214

198

185

4,348,085

3,939,776

3,565,149

20,629

19,499

18,557

2.6

2.4

2.2

16

15

14

38

36

34

784,754

750,910

701,611

4.29

3.96

173

156

3,283,627

2,811,352

17,405

15,725

1.8

1.2

11

9

31

28

660,157

583,431

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Per Cow

(11)

Cost Control

Machinery

Costs

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$448

637

680

723

14%

21

22

23

$349

417

455

501

$803

896

968

1,054

$700

819

864

936

$3.36

4.11

4.33

4.46

749 25 537 1,141 962 4.59

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

782

819

26

27

564

591

1,214

1,305

987

1,015

4.89

4.97

870

909

1,038

28

30

36

622

703

812

1,380

1,478

1,617

1,059

1,151

1,296

5.15

5.64

6.40

Milk

Receipts

Per Cow

(10)


Oper. Cost

Milk

Per Cwt.

(10)

Total Cost

Production

Per Cwt.

(10)

Total

(3)

Profitability

Net Farm Income

Without Apprec.

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

Change in

Net Worth w/Apprec.

(6)

$4,048

3,626

3,430

3,298

$9.11

9.86

10.34

10.51

$12.57

13.22

13.79

14.20

$307,993

217,554

163,915

136,148

$1,287

861

757

690

$155,954

110,405

68,703

56,765

$302,351

188,506

146,148

125,984

3,204 10.89

14.76

128,773 589 45,661 99,684

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

3,078

2,918

11.73

12.16

15.08

15.39

107,451

86,609

484

410

34,085

22,418

73,593

58,794

2,776

2,593

2,329

12.72

13.22

14.40

16.08

16.68

17.78

64,416

30,768

-26,452

321

158

-123

11,250

-3,441

- 47,671

40,024

11,494

-67,566

*Page number of the participant’s DFBS where the factor is located.

37

FARM BUSINESS CHART FOR LARGE FREESTALL DAIRY FARMS

69 Freestall Barn Dairy Farms with 300 or More Cows, New York, 1999

Worker

Equivalent

(11)*

Size of Business

No.

of

Cows

(11)

Pounds

Milk

Sold

(11)

Pounds

Milk Sold

Per Cow

(10)

Rates of Production

Tons

Hay Crop

DM/Acre

(9)

Tons Corn

Silage

Per Acre

(9)

Labor Efficiency

Cows

Per

Worker

(11)

Pounds

Milk Sold

Per Worker

(11)

30.13

19.38

15.37

14.46

12.13

1,492

916

677

589

530

35,463,663

21,330,989

15,899,554

13,831,992

11,689,937

25,925

24,421

23,720

23,381

22,842

6.1

5.0

4.4

4.0

3.8

24

21

20

19

19

59

53

49

47

46

1,398,957

1,234,591

1,126,537

1,064,267

1,009,216

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

10.93

445 9,793,417 22,157 3.6

17 45 966,074

9.84

8.92

8.13

6.61

406

389

367

322

9,089,815

8,628,060

7,712,372

5,989,077

21,648

21,040

20,420

17,594

3.4

2.9

2.1

1.4

16

15

14

11

43

40

38

33

929,661

872,738

802,159

669,307

Grain

Bought

Per Cow

(10)

% Grain is of Milk

Receipts

(10)

Machinery

Costs

Per Cow

(11)

Cost Control

Labor &

Machinery

Costs Per Cow

(11)

Feed & Crop

Expenses

Per Cow

(10)

Feed & Crop

Expenses Per

Cwt. Milk

(10)

$617

691

756

809

32%

28

27

27

$246

368

409

442

$731

899

1,022

1,088

$841

922

978

1,014

$3.97

4.35

4.44

4.59

839 26 471 1,130 1,055 4.70

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

871

901

928

25

24

23

494

515

548

1,164

1,191

1,231

1,101

1,134

1,161

4.82

5.00

5.13

973

1,042

22

20

605

725

1,312

1,441

1,214

1,312

5.38

6.05

Milk

Receipts

Per Cow

(10)


Oper. Cost

Milk

Per Cwt.

(10)

Total Cost

Production

Per Cwt.

(10)

Profitability

Net Farm Income


Total

(3)

Per Cow

(10)

Labor &

Mgmt. Inc.

Per Oper.

(3)

Change in

Net Worth w/Apprec.

(6)

$3,948

3,654

3,550

3,455

$9.10

10.15

10.70

11.13

$11.71

12.53

12.97

13.54

$1,117,509

679,305

426,163

305,873

$1,035

841

752

638

$737,887

331,566

209,766

140,966

$797,943

520,123

338,284

242,994

3,369 11.51

14.02

258,146 534 98,432 182,176

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

3,265

3,197

3,107

11.81

12.11

12.37

14.33

14.70

14.99

225,101

182,181

143,273

437

369

312

73,125

57,971

39,379

149,863

100,949

65,273

2,988

2,681

12.85

13.34

15.22

16.13

101,868

44,602

250

103

21,884

-20,310

15,739

-89,510


38

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 desired direction.

Goals should be SMART:

1. Goals should be S pecific.

2. Goals should be M easurable.

3. Goals should be A chievable but challenging.

4. Goals should be R ewarding.

5. Goals should be T imed with a designated date by which the goal will be achieved.

Goal setting on a dairy farm should be a process for writing down and agreeing on goals that you have already given some thought to. It is also important to remember that once you write out your goals they are not cast in concrete. If a change takes place which has a major impact on the farm business, the goals should be reworked to accommodate that change. Refer to your goals as often as necessary to keep the farm business progressing.

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

b.

c.

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.

Identify 4-6 objectives.

Identify SMART goals.

Worksheet for Setting Goals

I.

Mission and Objectives

II. Goals

What How

39

Worksheet for Setting Goals (Continued)

When Who is Responsible

Summarize Your Business Performance

The Farm Business and Financial Analysis Charts on pages 24 and 28-30 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:

40

GLOSSARY AND LOCATION OF COMMON TERMS

Accounts Payable - Open accounts or bills owed to feed and supply firms, cattle dealers, veterinarians and other providers of farm services and supplies.

Accounts Receivable - Outstanding receipts from items sold or sales proceeds not yet received, such as the payment for December milk sales received in January.

Accrual Expenses - (defined on page 3)

Accrual Receipts - (defined on page 4)

Annual Cash Flow Statement - (defined on page 12)

Appreciation - (defined on page 5)

Asset Turnover Ratio - The ratio of total farm income to total farm assets, calculated by dividing total accrual 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.

bST Usage - An estimate of the percentage of herd, on average, that was supplemented with bovine somatotropin during the year.

Capital Efficiency - The amount of capital invested per production unit. Relatively high investments per worker with low to moderate investments per cow imply efficient use of capital.

Cash From Nonfarm Capital Used in the Business - Transfers of money from nonfarm savings or investments to the farm business where it is used to pay operating expenses, make debt payments and/or capital purchases.

Cash Flow Coverage Ratio - (defined on page 14)

Cash Paid - (defined on page 2)

Cash Receipts - (defined on page 4)

Change in Accounts Payable - (defined on page 3)

Change in Accounts Receivable - (defined on page 4)

Change in Inventory - (defined on page 2)

Cost of Term Debt - A weighted average of the cost of borrowed capital to the farm. Calculate by multiplying end of year principal of each loan that is borrowed by the interest rate for each loan at that time. Add up each amount that is calculated for each loan and then divide by total amount of borrowed funds. Do not include accounts payable, operating debt or advanced gavernment receipts. This information is found on pages 8 & 9 of the data entry form.

Culling Rate - (defined on page 18)

Current Portion - (defined on page 7)

Current Ratio – Measures the extent to which current farm assets, if liquidated, would cover current farm liabilities.

Calculated as current farm assets at end year divided by current farm liabilities at end year.

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.

41

Dairy Cash-Crop (farm) - Operating and managing this farm is the full-time occupation of one or more people, cropland is owned but crop sales exceed 10 percent of accrual milk receipts.

Debt Coverage Ratio – (defined on page 14)

Debt Per Cow - Total end-of-year debt divided by end-of-year number of cows.

Debt to Asset Ratios - (defined on page 10)

Deferred Taxes - (defined on page 9)

Depreciation Expense Ratio – Machinery and building depreciation divided by total accrual receipts.

Dry Matter - The amount or proportion of dry material that remains after all water is removed. Commonly used to measure dry matter percent and tons of dry matter in feed.

Equity Capital - The farm operator/manager's owned capital or farm net worth.

Expansion Livestock - Purchased dairy cattle and other livestock that cause an increase in herd size from the beginning to the end of the year.

Farm Debt Payments as Percent of Milk Sales - Amount of milk income committed to debt repayment, calculated by dividing planned debt payments by total milk receipts. A reliable measure of repayment ability, see page 14.

Farm Debt Payments Per Cow - Planned or scheduled debt payments per cow represent the repayment plan scheduled at the beginning of the year divided by the average number of cows for the year. This measure of repayment ability is used in the Financial Analysis Chart.

Financial Lease - A long-term non-cancellable contract giving the lessee use of an asset in exchange for a series of lease payments. The term of a financial lease usually covers a major portion of the economic life of the asset. The lease is a substitute for purchase. The lessor retains ownership of the asset.

Hired Labor Expense per Hired Worker Equivalent – The total cost to the farm per hired worker equivalent. Divide accrual hired labor expense by number of hired plus family paid worker equivalents.

Hired Labor Expense as % of Milk Sales – The percentage of the gross milk receipts that is used for labor expense.

Divide accrual hired labor expense by accrual milk sales.

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

Interest Expense Ratio – Accrual interest expense divided by total accrual receipts.

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 fulltime operator.

Labor Efficiency - Production capacity and output per worker.

Leverage Ratio - (defined on page 10)

Liquidity - Ability of business to generate cash to make debt payments or to convert assets to cash.

Net Farm Income - (defined on page 5)

Net Farm Income from Operations Ratio - (defined on page 7)

Net Milk Receipts – Accrual milk receipts less milk marketing expense.

42

Net Worth - The value of assets less liabilities equal net worth. It is the equity the owner has in owned assets.

Operating Costs of Producing Milk - (defined on page 19)

Operating Expense Ratio – Total accrual expenses less interest and machinery and building depreciation, divided by total accrual receipts.

Opportunity Costs - The cost or charge made for using a resource based on its value in its most likely alternative use.

The opportunity cost of a farmer's labor and management is the value he/she would receive if employed in his/her most qualified alternative position.

Other Livestock Expenses - All other dairy herd and livestock expenses not included in more specific categories.

Other livestock expenses include; bST, DHIC, registration fees and transfers.

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

Personal Withdrawals and Family Expenditures Including Nonfarm Debt Payments - All the money removed from the farm business for personal or nonfarm use including family living expenses, health and life insurance, 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.

Purchased Inputs Cost of Producing Milk - (defined on page 19)

Renter - Farm business owner/operator owns no tillable land and commonly rents all other farm real estate.

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

Replacement Livestock - Dairy cattle and other livestock purchased to replace those that were culled or sold from the herd during the year.

Return on Equity Capital - (defined on page 7)

Return on Total Capital - (defined on page 7)

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

Total Costs of Producing Milk - (defined on page 19)

Whole Farm Method - A procedure used to calculate costs of producing milk on dairy farms without using 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.

Working Capital – A theoretical measure of the amount of funds available to purchase inputs and inventory items after the sale of current farm assets and payment of all current farm liabilities. Calculated as current farm assets at end year less current farm liabilities at end year.

Page(s)

Accounts Payable .....................................................3,8

Accounts Receivable ................................................4,8

Accrual Expenses .....................................................3,5

Accrual Receipts ......................................................4,5

Acreage .....................................................................16

Advanced Government Receipts..............................7,8

Age ............................................................................20

Amount Available for Debt Service..........................14

Annual Cash Flow Statement....................................12

Appreciation......................................................5,11,18

Asset Turnover Ratio ................................................20

Balance Sheet ..............................................................8

Barn Type....................................................................2

bST Usage ...................................................................2

Business Type .............................................................2

Capital Efficiency......................................................20

Cash From Nonfarm Capital Used in

the Business......................................................12

Cash Flow Coverage Ratio........................................14

Cash Paid.....................................................................2

Cash Receipts .........................................................4,12

Certified Organic Milk Producer.................................2

Change in Accounts Payable.......................................3

Change in Accounts Receivable..................................4

Change in Inventory.................................................2,3

Change in Net Worth ................................................11

Cost of Term Debt ...................................................10

Crop Expenses........................................................3,17

Crop/Dairy Ratios .....................................................16

Culling Rate ..............................................................18

Current Portion.........................................................7,8

Current Ratio.............................................................10

Dairy (farm) ................................................................2

Dairy Cash-Crop (farm) ..............................................2

Dairy Replacements ..................................................25

Debt Coverage Ratio .................................................14

Debt per Cow ............................................................10

Debt to Asset Ratios..................................................10

Deferred Taxes ............................................................9

Depreciation ...........................................................3,10

Depreciation Expense Ratio ......................................20

Dry Matter.................................................................16

Education...................................................................20

Equity Capital..............................................................7

43

INDEX

Page(s)

Expansion Livestock ..............................................3,12

Expenses......................................................................3

Farm Business Chart.............................24,28-30,33-37

Farm Debt Payments as Percent

of Milk Sales....................................................13

Farm Debt Payments Per Cow...................................13

Financial Analysis Chart ...........................................30

Financial Lease............................................................8

Hired Labor Expenses per Hired Worker

Equivalent........................................................21

Hired Labor Expense as % of Milk Sales..................21

Income Statement ........................................................2

Inflows.......................................................................12

Interest Expense Ratio...............................................20

Labor & Mgmt. Income...............................................6

Labor & Mgmt. Income Per Oper. ..............................6

Labor Efficiency........................................................20

Land Resources .........................................................16

Leverage Ratio...........................................................10

Liquidity ....................................................................10

Lost Capital ...............................................................10

Machinery Expenses...............................................3,17

Marketing Report.......................................................26

Milk Price .............................................................26,27

Milk Production.........................................................18

Milking Frequency ......................................................2

Milking System ...........................................................2

Money Borrowed.......................................................12

Net Farm Income.........................................................5

Net Farm Income from Operations Ratio ....................7

Net Investment...........................................................10

Net Milk Receipts......................................................19

Net Worth ....................................................................8

Number of Cows........................................................18

Operating Costs of Prod. Milk...................................19

Operating Expense Ratio...........................................20

Opportunity Cost .........................................................6

Other Livestock Expenses ...........................................3

Outflows ....................................................................12

Part-Time Cash-Crop Dairy (farm) .............................2

Part-Time Dairy (farm)................................................2

Percent Equity ........................................................9,10

Personal Withdrawals and Family Expenditures

Including Nonfarm Debt Payments ..................12

Principal Payments....................................................12

Profitability .................................................................4

Purchased Inputs Cost ...............................................19

Receipts .......................................................................4

Record System.............................................................2

Repayment Analysis..................................................14

Replacement Livestock ...............................................3

Retained Earnings .....................................................11

Return on Equity Capital.............................................7

44

Return on Total Capital ...............................................7

Rotational Grazing..................................................2,17

Solvency ....................................................................10

Total Costs of Producing Milk ..................................19

Whole Farm Method..................................................19

Worker Equivalent ....................................................20

Working Capital ........................................................10

Yields Per Acre..........................................................16

OTHER A.E.M. EXTENSION BULLETINS

EB No Title

2001-11 Northern Hudson Region 2000

Dairy Farm Business Summary

Fee

(if applicable)

($8.00)

Author(s)

Conneman, G. J., L. D. Putnam,

C. S. Wickswat, S. Buxton,

D. Maxwell, and J. Karszes

2001-10 New York Small Herd Farms, 70 Cows or Fewer

2000

($12 ea.) Knoblauch, W. A., L. D. Putnam,

M. Kiraly, and J. Karszes

2001-09 Southeastern New York Region 2000


2001-08 Northern New York Region 2000


2001-07 Western And Central Plateau Region 2000


2001-06 Dairy Farm Business Summary, New York Large

Herd Farms, 300 Cows or Larger, 2000

($8 ea.)

($8 ea.)

Knoblauch, W. A., L. D. Putnam,

S. E. Hadcock, L. R. Hulle,

M. Kiraly, and J. J. Walsh


W. Van Loo, P. Murray,

A. Deming, C. Nobles, M. Ames, and J. Karszes

($8 ea.)

($12 ea.)


J. Karszes, J. W. Grace,

J. S. Petzen, and S. T. Richards

Karszes, J., W. A. Knoblauch, and

L. D. Putnam

2001-05 Dairy Farm Business Summary, Western and

Central Plain Region, 2000

2001-04 Farmland Protection Planning in New York

($8 ea.) Knoblauch, W. A., L. D. Putnam,

J. Karszes, S. Richards,

J. Hanchar, C. Oostveen,

B. Dehm, K. English, S. True,

J. Gremer, and G. Allhusen

Maloney, M. and N. Bills

2001-03 Mocash: A Computer Spreadsheet for Projecting

Monthly Cash Flows

LaDue, E. L., J. Schuelke, and

V. Mensah-Dartey

2001-02 1999 Department Publications Peters, C.

2001-01 Considering Cooperation: A Guide For New

Cooperative Development

Henehan, B. and B. L. Anderson

2000-18 CASHPRO ($5 ea.) Ladue E., J. Schuelke and

V. Mensah-Dartey

Paper copies are being replaced by electronic Portable Document Files (PDFs). To request PDFs of AEM publications, write to (be sure to include your e-mail address): Publications, Department of Applied Economics and Management, Warren Hall, Cornell University, Ithaca, NY

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DAIRY FARM BUSINESS SUMMARY CENTRAL VALLEYS REGION

CENTRAL VALLEYS

REGION

2000

Eddy L. LaDue

Zaid Kurdieh

Carry Oostveen

A. Edward Staehr

Charles Z. Radick

Jackie Hilts

Karen Baase

Jason Karszes

Linda D. Putnam

Department of Applied Economics and Management

College of Agriculture and Life Sciences

Cornell University, Ithaca, New York 14853-7801

This material is based upon work supported by Smith

Lever funds from the Cooperative State Research,

Education, and Extension Service, U.S. Department of

Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the

U.S. Department of Agriculture.

OTHER A.E.M. EXTENSION BULLETINS

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DAIRY FARM BUSINESS SUMMARY CENTRAL VALLEYS REGION

CENTRAL VALLEYS

REGION

2000

Eddy L. LaDue

Zaid Kurdieh

Carry Oostveen

A. Edward Staehr

Charles Z. Radick

Jackie Hilts

Karen Baase

Jason Karszes

Linda D. Putnam

Department of Applied Economics and Management

College of Agriculture and Life Sciences

Cornell University, Ithaca, New York 14853-7801

This material is based upon work supported by Smith

Lever funds from the Cooperative State Research,

Education, and Extension Service, U.S. Department of

Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the

U.S. Department of Agriculture.

OTHER A.E.M. EXTENSION BULLETINS

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