Financial Report Card For Wisconsin Agriculture Presented By Bruce L. Jones UW Center For Dairy Profitability January 2000 Center for Dairy Profitability 1 Financial Status of Wisconsin Farming Financial Performance of Upper-Midwest Farms Real Estate Markets Dairy Performance Importance of Dairy Development to Wisconsin Center for Dairy Profitability 2 Financial Status of Wisconsi n Farming Center for Dairy Profitability 3 Wisconsin Farm Balance Sheet Source: ERS-USDA B illio n s o f $ 30 25 20 15 10 5 0 70 75 80 85 90 95 100 Year Assets Debts Center for Dairy Profitability 4 Wisconsin Farm Assets Source: ERS-USDA 25 B illio n s $ 20 15 10 5 0 70 75 80 85 90 95 100 Year Liquid Farm Assets Real Estate & Machinery Center for Dairy Profitability 5 Wisconsin Farm Debts Source: ERS-USDA 4 B illio n s $ 3.5 3 2.5 2 1.5 1 0.5 70 75 80 85 90 95 100 Year Non- Real Estate Debt Real Estate Debt Center for Dairy Profitability 6 Liquidity of Wisconsin Farms Source: ERS-USDA 7 B illio n s $ 6 5 4 3 2 1 0 70 75 80 85 90 95 100 Year Liquid Assets Non Real Estate Debt Center for Dairy Profitability 7 Wisconsin Farm Debt to Asset 7 28 6 P ercen t 30 26 5 24 4 22 3 20 2 18 1 70 75 80 85 90 95 B illio n s $ Source: ERS-USDA 100 Year Debt to Asset Farm Debt Center for Dairy Profitability 8 Wisconsin Farm Income Source: ERS-USDA B illio n s o f $ 7 6 5 4 3 2 1 0 -1 70 75 80 85 90 95 100 Year Gross Income Net Income Center for Dairy Profitability 9 Wisconsin Farm Income Source: ERS-USDA 7 B illio n s o f $ 6 5 4 3 2 1 0 70 75 80 85 90 95 100 Year Gross Income Interest on Debt Center for Dairy Profitability 10 Wisconsin Average Farm Interest Rate Source: ERS-USDA 12 P ercen t 11 10 9 8 7 6 70 75 80 85 90 95 100 Year Center for Dairy Profitability 11 Financial Performance of Upper-Midwest Farms Center for Dairy Profitability 12 Debt to Asset Source: ERS-USDA 35 30 25 20 15 10 1980 1985 1990 1995 2000 Year WISC IOWA ILL Center for Dairy Profitability MICH MINN 13 Farm Income Indexes Source: ERS-USDA 1990 = 100 200 150 100 50 0 -50 1991 1992 1993 1994 1995 1996 1997 1998 Year Wisc Iowa Illinois Center for Dairy Profitability Mich Minn 14 Rate of Return on Assets Source: ERS-USDA 8 P ercen t 6 4 2 0 -2 -4 1980 1985 1990 1995 2000 Year WISC IOWA ILL Center for Dairy Profitability MICH MINN 15 Debt Coverage Source: ERS-USDA 2.4 P ercen t 2.2 2 1.8 1.6 1.4 1.2 1 1980 1985 1990 1995 2000 Year WISC IOWA ILL Center for Dairy Profitability MICH MINN 16 Real Estate Markets Center for Dairy Profitability 17 Wisconsin Farm Land Values Source: NASS 1400 1200 1000 800 600 400 200 0 1950 1960 1970 1980 1990 2000 YEAR Center for Dairy Profitability 18 Farm Land Value Indexes Source: NASS 170 1990 = 100 160 150 140 130 120 110 100 1991 1992 1993 1994 1995 1996 1997 1998 Year WISC IOWA ILL Center for Dairy Profitability MICH MINN 19 Acres of Wisconsin Farm Land Sold 400000 350000 300000 250000 200000 150000 100000 50000 0 85 86 87 88 89 90 91 92 Year Diverted from farming 93 94 95 96 97 98 Continuing in farming Center for Dairy Profitability 20 Value of Wisconsin Farm Land Per Acre Selling Prices 2200 2000 1800 1600 1400 1200 1000 800 600 85 86 87 88 89 90 91 92 Year Diverted from farming Center for Dairy Profitability 93 94 95 96 97 98 Continuing in farming 21 Wisconsin Farm Land Sales Number of Transactions 6000 5000 4000 3000 2000 1000 92 93 94 95 Year Diverted from farming 96 97 98 Continuing in farming Center for Dairy Profitability 22 Wisc Farm Land Diverted From Farming 35 P ercen t 30 25 20 15 10 85 86 87 88 89 90 91 92 Year % Total Acres 93 94 95 96 97 98 % Total $ Sales Center for Dairy Profitability 23 Farm Land Sales as % NFI Land Diverted From Farming 25 P ercen t 20 15 10 5 0 85 86 87 88 89 90 91 92 Year 93 Center for Dairy Profitability 94 95 96 97 98 24 Dairy Performance Center for Dairy Profitability 25 IN D E X ( 1993 = 100 ) WISCONSIN MILK PRODUCTION TRENDS 120 110 100 90 80 70 94 95 96 97 98 YEAR MILK PROD HERDS HERD SIZE Center for Dairy Profitability MILK PER COW 26 IN D E X ( 1993 = 100 ) WISCONSIN DAIRY HERDS ALL FARMS 200 180 160 140 120 100 80 60 93 94 95 96 97 98 YEAR 0 - 29 COWS 30 - 49 COWS 100 - 199 COWS 200+ COWS Center for Dairy Profitability 50 - 99 COWS 27 Annual Average Basic Formula Price Source: NASS $ P er C W T 16 14 12 10 8 6 4 1970 1975 1980 1985 Year Center for Dairy Profitability 1990 1995 2000 28 Annual Average Basic Formula Price Source: NASS $ P er C W T 14.5 14 13.5 13 12.5 12 11.5 11 0 1 2 3 4 5 6 7 8 9 Year 1980 - 1989 1990 - 1999 Center for Dairy Profitability 29 Importance of Dairy Development to Wisconsin Center for Dairy Profitability 30 WISCONSIN DAIRY TRENDS WISCONSIN DAIRY 30 TO 99 COWS 100 OR MORE COWS YEAR 1998 YEAR 1998 HERD SIZE 54.08 NUMBER OF HERDS 100 OR MORE COWS 30 TO 99 COWS 100 OR MORE COWS 5 YR. TREND 5 YR. TREND YEAR 2003 YEAR 2003 170.85 0% 3.97 % 54.08 207.58 16200 2500 -4.79 % 0.93 % 12677.33 2619.40 MILK PER COW 16164 18664 2.18 % 2.10 % 18004.47 20712.64 MILK PROD. ( BILLION #) 14.16 7.97 12.34 11.26 TOT. PROD. 30 TO 99 COWS 22.13 Center for Dairy Profitability 23.61 ( + 7%) 31 CALIFORNIA DAIRY TRENDS CALIFORNIA DAIRY 30 TO 99 COWS 100 OR MORE COWS YEAR 1998 YEAR 1998 HERD SIZE 71.00 675.18 NUMBER OF HERDS 200 MILK PER COW MILK PROD. ( BILLION #) TOT. PROD. 30 TO 99 COWS 100 OR MORE COWS 30 TO 99 COWS 100 OR MORE COWS 5 YR. TREND YEAR 2003 YEAR 2003 2.86 % 3.73 % 81.79 810.89 2080 -8.15 % 0% 130.78 2080 15553 19481 0% 0% 15553 19481 .22 27.36 .17 32.86 5 YR. TREND 27.58 Center for Dairy Profitability 33.02 ( + 20%) 32 POTENTIAL ECONOMIC IMPACT OF DAIRY MODERNIZATION IN WISCONSIN Projected decrease in farms of 30 to 99 cows is roughly 3500 With modernization this decline in farm numbers could be reduced. Center for Dairy Profitability 33 Possible outcome of modernization Retain 1200 dairy farms ( roughly a third of farms likely to exit ) and have these farms grow to an average herd size of 100 cows Result of this turn-around Increased milk production of @ 1.92 billion pounds of milk worth roughly $230.4 million Center for Dairy Profitability 34 Value Added ( Based on economic multipliers estimated by Steve Deller ) Farm Sector $.12 value-added per $1 gross income $230.4 million in gross income yields $27.65 million value-added Farm Service Sector $2.59 value-added per $1 farm sector value-added $27.65 million farm value-added yields $71.61 million service sector value-added Dairy Processing $1.36 value-added per $1 farm gross income $230.4 million in gross dairy farm income yields $255 million dairy processing value-added Total Value-added 324.26 million from the retention and growth of 1200 dairy farms Center for Dairy Profitability 35 Employment ( Based on economic multipliers estimated by Steve Deller ) Ag service sector & Dairy processing sector employment rates 23 jobs per $1 million of value-added $71.61 million of value-added for ag service sector yields 1647 jobs $225 million of value-added for dairy processing sector yields 5175 jobs @6800 jobs gained from the retention and growth of 1200 dairy farms Center for Dairy Profitability 36