>en. ~1.Jfi!ii~i~t(~l:11 WEST RN PLAI REGION ;... I I:'m:E.B~:sl.I lt't~:l:::i:!1 'I!!.!! :.~ MAY 1992 A.E. Ext >

Transcription

1 MAY 1992 A.E. Ext > a: <C WEST RN PLAI REGION 1991 en >en en 1951 t-.. _ en..; I I:'m:E.B~:sl.I lt't~:l:::i:!1 'I!!.!! :.~... ii :, ;;,:,.: :., ';,.:::;: \~H/ :: ';..;..;;.::.::.::.:: ; ::.::.::.::::.:;::::.::.::.::, ::::.::.::.',::..:>;:;:::::;:;:::;: ::::::::-:-:-:-:.. }!: ~'Dffi,/.;," : / ~1.Jfi!ii~i~t(~l:11 Stuart F. Smith Linda D. Putnam George Allhusen Jason Karszes David Thorp Department of Agricultural Economics New York State College of Agriculture and life Sciences A Statutory College of the State University Cornell University, Ithaca, New York

2 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 mployment 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.

3 1991 DAIRY FARM BUSINESS SUMMARY WESTERN PLAIN REGION Table of Contents Page INTRODUCTION Program Obj ectives Format Features SUMMARY AND ANALYSIS OF THE FARM BUSINESS Business Characteristics Income Statement Profitability Analysis Farm and Family Financial Status Cash Flow Statement Repayment Analysis Cropping Analysis Dairy Analysis Capital and Labor Efficiency Analysis COMPARATIVE ANALYSIS OF THE FARM BUSINESS Progress of the Farm Business Regional Farm Business Chart New York State Farm Business Chart Financial Analysis Chart Comparisons by Type of Barn and Herd Size Herd Size Comparisons IDENTIFY AND SET GOALS GLOSSARY AND LOCATION OF COMMON TERMS INDEX

4 1991 DAIRY FARM BUSINESS SUMMARY WESTERN PLAIN REGION* INTRODUCTION Dairy farmers throughout New York State have been participating in Cornell Cooperative Extension's farm business summary and analysis program since the early 1950's. Managers of each participating farm business receive a comprehensive summary and analysis of the farm business. The information in this report represents an average of the data submitted from dairy farms in the Western Plain region. Program Ob1ective The primary objective of the dairy farm business summary, DFBS, is to help farm managers improve the business and financial management of their business through appropriate use of historical farm data and the application of modern farm business analysis techniques. In short, DFBS identifies business and financial information farmers need and demonstrates how it should be used in identifying and evaluating strengths and weaknesses of the farm business. Format Features This regional report follows the same general format as in the 1991 DFBS printout received by all participating dairy farmers. The analysis tables have an open column or section labeled My Farm. It may be used by any dairy farm manager who wants to compare his or her business with the average data of this region. A DFBS Data Check-in Form can be used by non DFBS participants to summarize their businesses. This report features: (1) an income statement including accrual adjustments for farm business expenses and receipts, as well as measures of profitability with and without appreciation, (2) a complete balance sheet with analytical ratios; (3) a cash flow summary including debt repayment ability; (4) an analysis of crop acreage. yields. and expenses; (5) an analysis of dairy livestock numbers. production. and expenses; and (6) a capital and labor efficiency analysis. Micro DFBS, a computer program which enables Cooperative Extension agents and specialists to calculate and print individual farm business reports in their offices, is now being used by the dairy farm management field staff for nearly. 100 percent of the farms cooperating. This innovative approach provides faster processing of farm record data and increased use of the DFBS in farm management programs. *The Western Plain Region of New York State, with the number of participating farms in parentheses, is comprised of Erie (5), Genesee (8), Livingston (9), Monroe (1), Niagara (2), Orleans (2), and Wyoming (21) counties. This report was written by Stuart F. Smith, Senior Extension Associate, Farm Management. Linda Putnam was in charge of data preparation. Cindy Farrell and Beverly Carcelli prepared the publication. Farm business data were collected by Cooperative Extension agents Jason Karszes, David Thorp and Regional Specialist George Allhusen.

5 Business Characteristics SUMMARY AND ANALYSIS OF THE FARM BUSINESS Planning the optimal management strategies is a crucial component of operating a successful farm. Various combinations of farm resources, enterprises, business arrangements, and management techniques are used by the dairy farmers in this region. The following table shows important farm business characteristics and the number of farms with these characteristics. BUSINESS CHARACTERISTICS 48 Western Plain Region Dairy Farms, Type of Farm Dairy Part-time dairy Dairy cash-crop Part-time cash-crop Type of Ownership Owner Renter Number 46 o 2 dairy 0 Number 44 4 Type of Business Number Single proprietorship 24 Partnership 12 Corporation 12 Business Record System Number ELFAC II 1 Account Book 13 Agrifax (mail-in only) 8 On-Farm Computer 22 Other 4 Type of Barn Number Stanchion/Tie-Stall 6 Freestall 33 Combination 9 Milking System Number Bucket & carry o Dumping station o Pipeline 15 Herringbone parlor 27 Other parlor 6 Milking Freguency Number 2x/day 30 3x/day 14 Other 4 Production Records Number DHIC 39 Owner-Sampler 7 Other 2 None o 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 Change in inventory: Increases in inventories of supplies and other purchased inputs are subtracted in computing accrual expenses because they represent an increase in 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.

6 3 CASH AND ACCRUAL FARM EXPENSES 48 Western Plain Region Dairy Farms, 1991 Change in Inventory Change in Cash or Prepaid Accounts Accrual Expense Item Paid + Expense* + Payable Expenses 98, «598 99,413 Hired Labor Feed Dairy grain & cone. Dairy roughage Nondairy Machinery Mach. hire, rent/lease Machinery repairs/parts Auto expo (farm share) Fuel, oil & grease Livestock Replacement livestock Breeding Vet & medicine Milk marketing Cattle lease/rent Other livestock expense Crops Fertilizer & lime Seeds & plants Spray, other crop expo Real Estate Land/b1dg./fence repair Taxes Rent & lease Other Insurance Telephone (farm share) Electricity (farm share) Interest paid Miscellaneous Total Operating Expansion livestock Machinery depreciation Building depreciation TOTAL ACCRUAL EXPENSES 153,628 5, ,865 28, ,718 6,755 6,543 17,950 20, ,444 14,973 9,339 9,695 7,300 11,096 14,864 7,841 f197 12,162 47,928 9, ,279 20,578 6, o -243 «-142 o «-238 o « «o «250 1, «64 «68 «o «o «o «1, o o o 357 1, ,421 7,042 o «9 161,691 6, ,808 28, ,658 7,021 6,613 18,484 20, ,051 17,323 9,572 10,415 7,451 11,424 15,005 7, ,322 48,711 9, ,742 20,587 30,696 29, ,229 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, 1992 rent paid in If 1991 funds used to prepay 1992 rent exceeded the amount of 1991 rent prepaid in 1990, the amount of this excess is entered as a negative number to exclude it from 1991 accrual rental expenses. The excess prepaid rent should be charged against the future year's business operation. A decrease in prepaid rent is added to accrual expenses because it represents use of resources during this year that were paid for in past years. Change in accounts payable: An increase in accounts payable from beginning to end of year is added and a decrease is subtracted when calculating accrual expenses. Accrual expenses are the costs of inputs actually used in this year's production. They are the total of cash paid, as well as changes in inventory, prepaid expenses, and accounts payable.

7 4 CASH AND ACCRUAL FARM RECEIPTS 48 Western Plain Region Dairy Farms, 1991 Change in Cash Change in Accounts Accrual Receipt Item Receipts + Inventory + Receivable Receipts Milk sales 570,518 3, ,810 Dairy cattle 44,731 26, ,846 Dairy calves 12, ,432 Other livestock ,026 Crops 6,751 4, ,275 Government receipts 7, * -11 6,855 Custom machine work Gas tax refund Other 8, ,489 Less nonfarm noncash cap.** ( - ) 94 (-) 94 Total Receipts 651,704 30,235 3, ,896 *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. Changes in advanced government receipts are calculated by subtracting the end year balance from the beginning year balance (balances are listed with the current liabilities on the Balance Sheet). Changes in accounts receivable are calculated by subtracting beginning year balances from end year balances. The January milk check for this December's marketings compared with the previous January/s check is included as a change in accounts receivable. Accrual receipts represent the value of all farm commodities produced and services actually generated by the farm business during the year. Profitability Analysis Farm operators contribute labor, management, and capital to their businesses and the combination of these resources selected determines income. 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.

8 5 Net farm income is the return to the farm operators and other unpaid family members for their labor, management, and equity capital. It is the farm family's net annual return from working, managing, financing, and owning the farm business. This is not a measure of cash available from the year's business operation. Cash flow is evaluated later in this report. Net farm income is computed both with and without appreciation. Appreciation represents the change in values caused by annual changes in prices of 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 48 Western Plain Region Dairy Farms, 1991 Item Average My Farm 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) 685,896 4,548 1,239 21,477 1, , ,229 82,832 53, The chart below shows the relationship between net farm income per cow (with appreciation) and pounds of milk sold per cow. Generally, farms with a higher production per cow have higher profitability per cow... Net Farm Income/CoW' and Milk/CoW' 48 Western Plain Farms, , = 1000 :;... ~ "i 600 S ~ i!! 400 j ~ Z Pounds Milk Per Co,"",

9 6 Return to operators' labor, mana~ement, and equity capital measures the total net farm income for the farm operator(s), It is calculated by deducting a charge for unpaid family labor from net farm income. Operators' labor is not included in unpaid family labor. Return to operators' labor, management, and equity capital has been calculated both with and without appreciation. Appreciation is an important part of the return to ownership of farm assets. RETURN TO OPERATORS' LABOR. MANAGEMENT. AND EQUITY 48 Western Plain Region Dairy Farms, 1991 With Without With My Farm Without Item Apprec. Apprec. Apprec. Apprec. Net farm income Family labor 1,300 per month Return to operators' labor, management, & equity 82,832-2,080 80,752 53,667-2,080 51, Labor and mana~ement income is the return which farm operators receive for their labor and management used in operating the farm business. Appreciation is not included as part of the return to labor and management because it results from ownership of assets rather than management of the farm business. Labor and management income is calculated by deducting the opportunity cost of using equity capital, at a real interest rate of five percent, from the return to operators' labor, management, and equity capital excluding appreciation. The interest charge of five percent reflects the long-term average rate of return above inflation that a farmer might expect to earn in comparable risk investments. LABOR AND MANAGEMENT INCOME 48 Western Plain Region Dairy Farms, 1991 Item Return to operators' labor, management, & equity without appreciation Real 5% on 845,810 average equity capital Labor & Management Income Labor & Management Income per 1.66 Operator/Manager 51,587-42,291 9,296 5,600 My Farm

10 7 Return on equity capital measures the net return rema1n1ng for the farmer's equity or owned capital after a charge has been made for the owner-operator's labor and management. The earnings or amount of net farm income allocated to labor and management is the opportunity cost of operators' labor and management estimated by the cooperators. Return on equity capital is calculated with and without appreciation. The rate of return on equity capital is determined by dividing the amount returned by the average farm net worth or equity capital. Return on total capital is calculated by adding interest paid to the return on equity capital and then dividing by average farm assets to calculate the rate of return on total capital. RETURN ON EQUITY CAPITAL AND RETURN ON TOTAL CAPITAL 48 Western Plain Region Dairy Farms, 1991 Item Average My Farm Return to operators' labor, management, & equity capital with appreciation 80,752 Value of operators' labor & management - 45,919 Return on equity capital with appreciation 34,833 Interest paid 48,710 Return on total capital with appreciation 83,543 Return on equity capital without appreciation 5,668 Return on total capital without appreciation 54,378 Rate of return on average equity capital: with appreciation 4.12% % without appreciation.67% % Rate of return on average total capital: with appreciation 5.79% % without appreciation 3.77% % Farm and Family Financial Status The first step in evaluating the financial position of the farm is to construct a balance sheet which identifies all the assets and liabilities of the business. The second step is to evaluate the relationship between assets, liabilities, and net worth and changes that occurred during the year. Financial lease obligations are included in the balance sheet. The present value of all future payments is listed as a liability since the farmer is committed to make the payments by signing the lease. The present value is also listed as an asset, representing the future value the item has to the business. For 1991, leases were discounted by 10.0 percent. Advanced government receipts are included as current liabilities. Government payments received in 1991 that are for participation in the 1992 program are the end year balance and payments received in 1990 for participation in the 1991 program are the beginning year balance.

11 FARM BUSINESS & NONFARM BALANCE SHEET 48 Yestern Plain Region Dairy Farms, 1991 Farm Assets Jan. 1 Dec. 31 Current Farm cash, checking & savings 10,766 13,650 Accounts rec. 42,257 46,328 Prepaid expo 2,537 2,666 Feed & supplies 137, ,853 Farm Liabilities & Net Yorth Jan. 1 Dec. 31 Current Accounts payable 13,746 20,796 Operating debt 44,677 39,090 Short-term 11,417 11,883 Advanced govt. rec. o Total 193, ,497 Total 69,840 71,951 Intermediate Dairy cows: owned 218,069 leased 244 Heifers 100,550 Bulls/other 1vstk. 2,119 Mach./eq. owned 249,384 Mach./eq. leased 3,178 Farm Credit stock 8,774 Other stock/cert. 34,843 Total Long-Term Landjbuildings: owned leased 617, , , ,780 2, , ,732 37, , , Intermediate Structured debt 1-10 years 226, ,849 Financial lease (cattle/mach.) 3, Farm Credit stock 8,774 9,732 Total 238,343 Long Term Structured debt >10 yrs 252,740 Financial lease (structures) , ,101 Total 594, ,770 Total 253, ,186 Total Farm Assets 1,404,764 1,481,952 Total Farm Liab. FARM NET YORTH 561, , , ,294 Nonfarm Assets, Liabilities & Net Yorth (Average of 26 farms reporting) Liabilities Assets Jan. 1 Dec. 31 & Net Yorth Jan. 1 Dec. 31 Personal cash, chkg. Nonfarm Liab. 2,768 3,052 & savings 8,534 9,946 Cash value life ins. 6,312 7,062 Nonfarm real estate 9,215 9,215 Auto (personal sh.) 3,995 4,755 Stocks & bonds 5,004 7,380 Household furn. 7,162 8,488 All other 19,973 22,398 Total Nonfarm 60,194 69,245 NONFARM NET YORTH 57,426 66,193 Farm & Nonfarm Assets. Liabilities. & Net Yorth* Jan. 1 Dec. 31 Total Assets 1,464,958 1,551,197 Total Liabilities 564, ,710 TOTAL FARM & NONFARM NET YORTH 900, ,487 *Assumes that average nonfarm assets and liabilities for the nonreporting farms were the same as for those reporting.

12 9 Balance sheet analysis involves examination of relative asset and debt levels for the business. Percent equity is calculated by dividing end of year net worth by end of year assets and multiplying by 100. The debt to asset ratio is compiled by dividing liabilities by assets. Low debt to asset ratios reflect business solvency and the potential capacity to borrow. Debt levels per productive unit represent old standards that are still useful if used with measures of cash flow and repayment ability. The change in farm net worth without appreciation is an excellent indicator of farm generated financial progress. BALANCE SHEET ANALYSIS 48 Western Plain Region Dairy Farms, 1991 Item Average My Farm Financial Ratios - Farm: Percent equity 57% Debt/asset ratio: total _% long-term.50 intermediate/current.37 Change in Net Worth: Without appreciation -24, With appreciation 4, Farm Debt Analysis: Accounts payable as % of total debt 3% ----_% Long-term liabilities as a % of total debt 50% ---_% Current & inter. 1iab. as a % of total debt 50% ----_% Per Tillable Per Tillable Farm Debt Levels: Per Cow Acre Owned Per Cow Acre Owned Total farm debt 2,535 1, Long-term debt 1, Intermediate & current debt 1, 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 48 Western Plain Region Dairy Farms, 1991 Item Value beg. of year Purchases Gift/inheritance Lost capital Sales Depreciation + Real 78,950* 0 25,193 8,562 29,204 Average of Region's Farms Estate Machinery & Equipment 593, , ,974 30, ,384 Net investment 15,991 4,714 Appreciation + 21,134** + 1,239 Value end of year 630, ,337 *17,188 land and 61,762 buildings and/or depreciable improvements. **Exc1udes 343 of appreciation on assets sold during the year.

13 10 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 compare all the cash inflows including beginning balances with all the cash outflows including ending balances for the year. By definition, total cash inflows must equal total cash outflows when beginning and ending balances are included. Any imbalance is, therefore, the error from incorrect accounting of cash inflows and cash outflows. Whenever an imbalance exists, all other financial measures may also be in error. ANNUAL CASH FLOW STATEMENT 48 Western Plain Region Dairy Farms, 1991 Item Average My Farm Cash Inflows Beginning farm cash, checking & savings 10, Cash farm receipts 651,703 Sale of assets: Machinery 1,974 Real estate 7,906 Other stock & certificate 1,636 Money borrowed (intermediate & long-term) 169,920 Money borrowed (short-term) 5,393 Increase in operating debt 0 Nonfarm income 5,340 Cash from nonfarm capital used in the business 2,621 Money borrowed - nonfarm 660 Total 857,919 Cash Outflows --- Cash farm expenses 536,279 Capital purchases: Expansion livestock 20, Machinery 37,384 Real estate 78,950 Other stock & certificate 2,206 Principal payments (intermediate & long-term) 97,857 Principal payments (short-term) 4,927 Decrease in operating debt 5,587 Personal withdrawals & family expenditures including nonfarm debt payments 60,483 Ending farm cash, checking & savings 13,650 Total 857, Imbalance (error)

14 11 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 The cash flow projection worksheet on the next page can be used to estimate repayment ability, which can then be compared to planned 1992 debt payments shown below. FARM DEBT PAYMENTS PLANNED Same 40 Western Plain Region Dairy Farms, 1990 & 1991 Average My Farm 1991 Payments Planned 1991 Payments Planned Debt Payments Planned Made 1992 Planned Made 1992 Long-term 35,207 38,057 32,792 Intermediate-term 54,115 86,987 61,283 Short-term 9,311 6,113 7,965 Operating (net reduction) 26,146 8,955 2,055 Accounts payable (net reduction) 3, ,858 Total 128, , ,953 Per cow Per cwt milk Percent of total 1991 receipts 19% 21% Percent of 1991 milk receipts 23% 25% The cash flow coverage ratio measures the ability of the farm business to meet its planned debt payment schedule. The ratio shows the percentage of payments planned for 1991 (as of December 31, 1990) that could have been made with the amount available for debt service in Farmers who did not participate in DFBS in 1990 have their 1991 cash flow coverage ratio based on planned debt payments for CASH FLOW COVERAGE RATIO Same 40 Western Plain Region Dairy Farms, 1990 & 1991 Item Average My Farm Cash farm receipts 642,773 - Cash farm expenses 521, Interest paid 43,496 from farm** - Net personal withdrawals 57,020 (A) Amount Available for Debt Service 108,025 (B) Debt Payments Planned for (as of December 31, 1990) 128,065 (A + B) = Cash Flow Coverage Ratio for **Personal withdrawals and family expenditures less nonfarm income and nonfarm money borrowed. If family withdrawals are excluded, or inaccurately included, the cash flow coverage ratio will be incorrect.

15 12 ANNUAL CASH FLOW' W'ORKSHEET Regional My Farm Expected 1992 Item Average Total Per Cow Change Projection (per cow) Average number of cows Accrual Oper. Receipts Milk 2, Dairy cattle Dairy calves Other livestock 4.39 Crops Misc. receipts Total 2, _ Accrual Oper. Expenses Hired labor Dairy grain & cone Dairy roughage Nondairy feed 1.32 Mach. hire/rent/lease Mach. rpr./parts & auto Fuel, oil & grease Replacement lvstk Breeding Vet & medicine Milk marketing Cattle lease.82 Other livestock expo Fertilizer & lime Seeds & plants Spray/other crop expo Land, bldg.,fence repair Taxes Real estate rent/lease Insurance Utilities Miscellaneous Total Less Int. Paid 2, Net Accrual Operating Income (total) (without interest paid) 182,958 _ Change in lvstk./crop inv.* 30, Change in accts. rec. 3,957 + Change in feed/supply inv.** 8,421 + Change in accts. payable*** 6,259 NET CASH FLOW 163, Net personal withdrawals from ---- farm (see footnote on pg. 12) 54,483 Available for Farm Debt Payments & Investments 108,963 - Farm debt payments 153,044 Available for Farm Investment -44,081 - Capital purchases: cattle, machinery & improvements 139,118 Additional Capital Needed. *Includes change in advance government receipts. **Includes change in prepaid expenses. ***Excludes change in interest account payable.

16 13 Cropping Analysis The cropping program is an important part of the dairy farm business and often represents opportunities for improved management. A complete evaluation of what the available land resources are, how they are being used, how well crops are producing, and what it costs to produce them is important to evaluating alternative cropping and feed purchasing alternatives. LAND RESOURCES AND CROP PRODUCTION 48 Western Plain Region Dairy Farms, 1991 Item Land Tillable Nonti11able 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 Avera&e Owned Rented Total Farms Acres* Prod/Acre tn DM tn 4.75 tn DM tn DM tn DM bu bu bu My Farm Owned Rented Total Acres 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 216, corn silage 205, corn grain 83, oats 8, tillable pasture 8, and idle 30. 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 48 Western Plain Region Dairy Farms, 1991 Item Avera&e My Farm Total tillable acres per cow 2.61 Total forage acres per cow Harvested forage dry matter, tons per cow 6.69

17 14 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. CROP RELATED ACCRUAL EXPENSES Western Plain Region Dairy Farms Reporting, 1991 Total All Corn Corn Per Hay Crop Corn Silage Grain Till. Per Per Per Per Ton Per Dry Item Acre Acre Ton DM Acre DM Shell Bu. Number of farms reporting Average number of acres Fertilizer & lime Seeds & plants Spray & other crop expense Total My Farm: Fertilizer & lime --- Seeds & plants Spray & other crop expense 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 48 Western Plain Region Dairy Farms, 1991 Average My Farm Machinery Total Per Til. Total Per Til. Expense Item Expenses Acre Expenses Acre Fuel, oil & grease 13,658 Machinery repairs & parts 28,565 Machine hire, rent & lease 6,808 Auto expense (farm share) 561 Interest (5%) 12,618 Depreciation 30,696 Total 92,

18 15 Dairy Analysis Analysis of the dairy enterprise can reveal a great deal about the strengths and weaknesses of the dairy farm business. Information on this page should be used in conjunction with 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. DAIRY HERD INVENTORY 48 Western Plain Region Dairy Farms, 1991 Item No. Dairy Cows Value Bred No. Value Heifers Open No. Value Calves No. Value Beg. year (owned) + Change w/o apprec. + Appreciation ,069 21,866 3,560 End year (owned) End incl. leased , , ,450 Average number (all age groups) My Farm: 88 60,105 4, , , ,876 Beg. of year (owned) + Change w/o apprec. + Appreciation End of year (owned) End including leased Average number (all age groups) Total milk sold and milk sold per cow are extremely valuable measures of size and productivity, respectively, on the dairy farm. These measures of milk output are based on pounds of milk marketed during the year. Farm managers on DHI should compare milk sold per cow with their rolling herd average on the test date nearest December 31 to see how close the DHI estimate of milk produced is to actual milk sales. HILK PRODUCTION 48 Western Plain Region Dairy Farms, 1991 Item Average My Farm Total milk sold, lbs. 4,404,512 Milk sold per cow, lbs. 18,833 Average milk plant test, percent butterfat 3.60

19 16 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. 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. Total costs without operator's labor, management, and capital are the operating costs plus depreciation and unpaid family labor. ACCRUAL RECEIPTS FROM DAIRY AND COST OF PRODUCING MILK 48 Western Plain Region Dairy Farms, 1991 Average My Farm Item Total Per Cow Per Cwt. Total Per Cow Per Cwt. Accrual Costs of Producing Milk Operating costs 460,242 1, Total costs w/o opers' labor, mgmt. & capital 522,222 2, Total Costs 610,432 2, Accrual Receipts From Milk 573,810 2, The accrual operating expenses most commonly associated with the dairy enterprise are listed in the table below. Evaluating these costs per unit of production enables an evaluation of the dairy enterprise. DAIRY RELATED ACCRUAL EXPENSES 48 Western Plain Region Dairy Farms, 1991 Average My Farm Item Per Cow Per Cwt. Per Cow Per Cwt. Purchased dairy grain & concentrates Purchased dairy roughage Total Purchased Dairy Feed Purchased grain & conc. as % of milk receipts 28% % Purchased feed & crop expo Purchased feed & crop expo as % of milk receipts 36% % Breeding Veterinary & medicine Milk marketing Cattle lease Other livestock expense

20 17 Capital and Labor Efficiency Analysis Capital efficiency factors measure how intensively the capital is being used in the farm business. Measures of labor efficiency are key indicators of management's success in generating products per unit of labor input. Item Farm capital Real estate Machinery & equipment Capital turnover, years My Farm: Farm capital Real estate Machinery & equipment Capital turnover, years CAPITAL EFFICIENCY 48 Western Plain Region Dairy Farms, 1991 Per Worker Per Cow 241,014 6,171 2,618 42,473 1, Per Tillable Acre 2, Per Tillable Acre Owned 4,184 1, LABOR FORCE INVENTORY AND ANALYSIS 48 Western Plain Region Dairy Farms, 1991 Years Value of Labor Force Months Age of Educ. Labor & Mgmt. Operator number ,551 Operator number ,514 Operator number ,854 Family paid 4.60 Family unpaid Hired Total Worker Equivalent Operator/Manager Equiv. My Farm: Total 12 Worker Equivalent Operator's 12 Operator/Manager Equiv. Labor Efficiency Total Average Per Worker Cows, average number Milk sold, pounds Tillable acres 234 4,404, , Work units 2, Total My Farm Per Worker Average My Farm Per Per Per Per Labor Costs Total Cow Til. Acre Total Cow Til. Acre Value of operator(s) labor (l,300/mo.) 25, Family unpaid (l,300/mo.) 2, Hired 99, Total Labor 127, Machinery Cost 92, Total Labor & Mach. 220,

21 18 Progress of the Farm Business COMPARATIVE ANALYSIS OF THE FARM BUSINESS Comparing your business with average data from regional DFBS cooperators that participated in both of the last two years is one part of a business checkup. It is equally important for you to determine the progress your business has made over the past two or three years and to set targets or goals for the future. PROGRESS OF THE FARM BUSINESS Same 40 Western Plain Region Dairy Farms, 1990 & 1991 Selected Factors Size of Business Average number of cows Average number of heifers Milk sold, 1bs. Worker equivalent Total tillable acres Average of 40 Farms* ,077, ,314, My Farm 1991 Goal Rates of Production Milk sold per cow, 1bs. Hay DM per acre, tons Corn silage per acre, tons 18, , Labor Efficiency Cows per worker Milk sold/worker, 1bs , ,834 Cost Control Grain & cone. purchased as % of milk sales Dairy feed & crop expo per cwt. milk Labor & mach. costs/cow 28% ,024 28% % % % Capital Efficiency** Farm capital per cow Mach. & equip. per cow Capital turnover, years' 5,932 1, ,170 1, Profitability Net farm inc. w/o apprec. Net farm inc. w/apprec. Labor & mgt. income per oper./manager Rate of return on eq. capital w/apprec. Rate of return on all capital w/apprec. 110, ,591 37,420 10% 10% 56,621 83,573 6,160 4% 6% % % % % % % Financial Summary Farm net worth, end year Debt to asset ratio Farm debt per cow 865, , , ,339 *Farms participating both years. **Average for the year.

22 19 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 quinti1e of farms included in the regional summary. FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS 48 Western Plain Region Farms, Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv- of Milk Milk Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow DM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,296,975 21, , ,426,119 20, , ,828,028 18, , ,754,753 17, , ,123,622 15, ,287 Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % , ,308 1, Value and Cost of Production Profitability Milk Oper. Cost Total Cost Net Farm Net Farm Labor & Change in Receipts Milk Production Income Inc. w/o Mgt. Inc. Net Worth Per Cow Per Cwt. Per Cwt. w/apprec. Apprec. Per Oper. w/apprec. (9) (9) (9) (3) (3) (3) (5) 2, , ,310 65, ,462 2, ,445 76,922 13,460 33,266 2, ,968 31,564 4,487 12,754 2, ,701 14,904-8,040-9,070 2, ,278-39,567-81, ,771

23 20 New York State 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 figure at the top of each column is the average of the top 10 percent of the 395 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 395 New York Dairy Farms, 1990 Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv- of Milk Milk Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow DM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,643,712 21, , ,871,316 19, , ,089,248 18, , ,691,784 17, , ,417,006 17, , ,151,117 16, , ,206 16, , ,604 15, , ,783 14, , ,451 11, ,302 Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % , , ,173 1, ,273 1, , ,474 1, *Page number of the participant's DFBS where the factor is located.

24 21 FARM BUSINESS CHART FOR FARM MANAGEMENT COOPERATORS 395 New York Dairy Farms, 1990 Milk Milk Oper, Cost Oper, Cost Total Cost Total Cost Receipts Receipts Milk Milk Production Production Per Cow Per Cwt, Per Cow Per Cwt, Per Cow Per Cwt, (9) (9) (9) (9) (9) (9) 3, ,112 7,19 1,997 12,78 2, ,425 8,96 2,311 14,06 2,806 15,27 1,547 9,65 2, ,669 14,98 1,668 10,15 2,594 15,32 2, ,791 10,68 2,710 15,80 2, ,922 11,20 2,802 16,29 2,390 14,57 2, ,921 16,99 2,262 14,44 2, ,041 17,69 2,064 14,23 2,281 13,14 3,196 19,04 1,721 13,59 2,593 14,90 3, Profitability Return to Operator's Labor, Labor & Net Farm Income Management, & Equity Capital Management Income With Without With Without Per Per Appreciation Appreciation Appreciation Appreciation Farm Operator (3) (3) (3) (3) (3) (3) 231, , , , ,403 96,579 91,230 81,401 89,849 79,191 47,621 31,927 66,354 56,580 61,893 52,316 29,650 21,508 50,670 44,618 47,120 40,525 20,689 15,542 42,626 34,580 38,335 31,926 14,330 10,878 33,267 28,118 29,721 24,485 7,592 6,034 25,805 20,654 21,927 16,616 1,361 1,060 19,089 13,852 14,945 10,124-5,365-4,331 11,588 6,798 6,513 1,732-15,640-13,572-11,058-9,971-14,637-14,241-34,015-30,508 Farm Business Charts for farms with freesta11 barns and 120 cows or less and more than 120 cows, and farms with conventional barns with 60 cows or less and more than 60 cows are shown on pages 25-28, Financial Analysis Chart The farm financial analysis chart on page 22 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, 9, II, and 17 of this publication, References to DFBS output page numbers for participating dairy farmers are provided in the table headings.

25 22 Debt Payments Per Cow (7)* FINANCIAL ANALYSIS CHART 395 New York Dairy Farms, 1990 Liquidity (repayment) Available for Cash Flow Debt Service Coverage Per Cow Ratio (11) (7) Debt Payments as Percent Debt of Milk Sales Per Cow (7) (5) 4% , , , , , , , ,726 Solvency Debt/Asset Ratio Leverage Percent Current & Long Ratio** Equity Intermediate Term (5) (5) (5) Profitability Percent Rate of Return with appreciation on: Equity Investment*** (3) (3) 21% 16% Efficiency (Capital) Capital Real Estate Machinery Total Farm Change in Turnover Investment Investment Assets Net Worth (years) Per Cow Per Cow Per Cow w/appreciation (10) (10) (10) (10) (5) , , , , ,087 53, , ,667 33, ,594 1,050 6,103 22, ,865 1,194 6,482 15, ,125 1,318 6,869 10, ,504 1,472 7,340 3, ,037 1,658 7,990-3, ,705 1,946 8,937-11, ,762 2,646 11,419-47,167 *Page number of the participant's DFBS where the factor is located. **Do11ars of debt per dollar of equity, computed by dividing total liabilities by total equity. ***Return on all farm capital (no deduction for interest paid) divided by total farm assets.

26 23 Comparisons 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 used has as many of the same physical characteristics as possible as the farm being analyzed. To assist in this endeavor, dairy farms in the 1990 State Summary* have been divided into those with freesta11 and those with conventional housing. Within each group is a further classification by size of the dairy herd. The table on page 24 shows the average values for the resulting four groups of dairy farms. Within each housing type, the larger herd size has the highest crop yields and pounds of milk sold per cow. The total cost of producing milk was lower on the larger farms and labor efficiency greater. Profitability was also greater on the larger farms within each housing type. Farm business charts have been computed for each of the four housing and herd size categories. References to DFBS output page numbers for participating dairy farmers are provided in the table headings. From these charts on pages 25-28, the range in size of business, rates of production, labor efficiency, value and cost of producing milk, and profitability can be observed. The range in every category of business performance is tremendous. 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. Farm managers should remember, however, that their competition is not limited to the other farms in their own barn type and herd size category. They should observe how their management performance compares with farms in other categories as well. Herd Size Comparisons A detailed comparison of profitability, financial situation, and business analysis factors across herd sizes is contained on pages of the 1990 State Summary*. As herd size increases, the average profitability also increases (pages 36-37). Net farm income without appreciation was 227,064 per farm for the 300 or more herd size group and 10,520 per farm for those with less than 40 cows. 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 38-41), but percent equity and debt/asset ratios do not show a significant variation between size groups. Debt payments per cow were lowest for the moderate size herd groups and they demonstrated a strong ability to make debt payments. Crop yields generally increased as herd size increased, but fertilizer and lime expenses, and machinery cost per tillable acre also increased (pages 42 43). Milk sold per cow increased as herd size increased, ranging from 15,372 pounds on the farms with less than 40 cows to 19,199 pounds on farms with 300 or more cows. Farm capital per worker generally increased, and farm capital per cow decreased as herd size increased. Milk sold per worker increased dramatically as herd size increased, ranging from 304,000 pounds at the lowest herd size category up to 872,000 pounds at the largest size cateogry. *Smith, Stuart F., Wayne A. Knoblauch, and Linda D. Putnam, Dairy Farm Management Business Summary, New York, 1990, Department of Agricultural Economics, Cornell University. A.E. Res. 91-5, August 1991.

27 24 SELECTED BUSINESS FACTORS BY TYPE OF BARN AND HERD SIZE 364 New York Dairy Farms, 1990 Farms with: Conventional Freestall Item 60 Cows >60 Cows <120 Cows >120 Cows Number of farms Cropping Program Analysis Total Tillable acres 162 Tillable acres rented* 50 Hay crop acres* 105 Corn silage acres* 28 Hay crop, tons DM/acre 2.3 Corn silage, tons/acre 13.2 Oats, bushels/acre 55.8 Forage DM per cow, tons 7.9 Tillable acres/cow 3.5 Fert. & lime exp./til. acre Total machinery costs 22,362 Machinery cost/tillable acre , , , Dairy Analysis Number of cows 47 Number of heifers 37 Milk sold, lbs. 741,903 Milk sold/cow, lbs. 15,959 Operating cost of prod. milk/cwt Total cost of prod. milk/cwt Price/cwt. milk sold Purchased dairy feed/cow 693 Purchased dairy feed/cwt. milk 4.34 Pure. grain & cone. as % milk rec. 28% Pure. feed & crop exp./cwt. milk ,461,585 16, % ,451,384 17, % ,558,311 18, % 5.28 Capital Efficiency Farm capital/worker 172,643 Farm capital/cow 7,444 Farm capital/til. acre owned 3,090 Real estate/cow 3,790 Machinery investment/cow 1,444 Capital turnover, years ,664 6,914 3,294 3,195 1, ,685 6,834 3,389 3,016 1, ,105 6,066 3,706 2,660 1, Labor Efficiency Worker equivalent 2.00 Operator/manager equivalent 1.21 Milk sold/worker, lbs. 370,048 Cows/worker 23 Work units/worker 248 Labor cost/cow 589 Labor cost/tillable acre , , , Profitability & Balance Sheet Analysis Net farm income (w/o apprec.) 18,620 Labor &mgmt. income/operator 2,279 Farm debt/cow 2,426 Percent equity 67% 35,416 8,017 2,093 70% *Average of all farms, not only those reporting data. 35,472 8,594 2,194 68% 115,054 39,642 2,231 64%

28 25 FARM BUSINESS CHART FOR SHALL CONVENTIONAL STALL DAIRY FARMS 127 Conventional Stall Dairy Farms with 60 or Less Cows, New York, 1990 Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv- of Milk Milk Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow DM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,063,570 19, , ,623 18, , ,369 17, , ,538 17, , ,836 16, , ,062 16, , ,951 15, , ,772 14, , ,080 13, , ,339 10, ,088 Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % , , , , ,320 1, , ,596 1, Value and Cost of Production Profitability Milk Dper. Cost Total Cost Net Farm Income Labor &. Change in Receipts Milk Production With Without Mgmt. Inc. Net Worth Per Cow Per Cwt. Per Cwt. Apprec. Apprec. Per Dper. w/apprec. (9) (9) (9) (3) (3) (3) (5) 2, ,739 48,969 25,562 42,873 2, ,695 35,933 17,760 22,785 2, ,555 29,744 13,303 16,110 2, ,556 25,100 8,783 12,312 2, ,909 19,976 4,369 6, , ,881 15, ,309 2, ,294 10,762-2, , ,480 6,635-7,250-4,426 1, ,188 2,872-16,427-11,086 1, ,724-12,754-32,617-36,059 *Page number of the participant's DFBS where the factor is located.

29 26 FARM BUSINESS CHART FOR LARGE CONVENTIONAL STALL DAIRY FARMS 97 Conventional Stall Dairy Farms with More Than 60 Cows, New York, 1990 Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv- of Milk Milk Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow DM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,584,859 20, , ,875,410 19, , ,629,899 18, , ,517,394 18, , ,403,263 17, ,292 _ ,328,227 16, , ,219,172 16, , ,101,764 14, , ,499 13, , ,905 11, ,511 Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % , ,137 1, ,216 1, , ,362 1, Value and Cost of Production Profitability Milk Oper. Cost Total Cost Net Farm Income Labor &. Change in Receipts Milk Production With Without Mgmt. Inc. Net Worth Per Cow Per Cwt. Per Cwt. Apprec. Apprec. Per Oper. w/apprec. (9) (9) (9) (3) (3) (3) (5) 3, ,960 91,167 46,704 77,975 2, ,165 61,082 27,104 39,645 2, ,447 49,457 19,419 29,725 2, ,672 43,537 13,118 23,556 2, ,293 34,340 9,424 17, , ,204 27,752 4,553 12,420 2, ,594 21, ,334 2, ,611 14,713-5,082-2,665 2, ,273 9,758-13,809-11,179 1, ,728-5,646-23,429-47,564 *Page number of the participant's DFBS where the factor is located.

30 FARK BUSINESS CHART FOR SMALL FREESTALL DAIRY FARKS 60 Freesta11 Barn Dairy Farms with 120 or Less Cows, New York, 1990 Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv- of Milk Milk Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow OM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,158,034 20, , ,944,413 19, , ,846,013 18, , ,696,622 17, , ,536,651 17, , ,343,093 16, , ,213,815 16, , ,049,918 15, , ,600 13, , ,120 12, , Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % _... _ _ _... _ , , ,153 1, ,267 1, , ,481 1, Value and Cost of Production Profitability Milk Oper. Cost Total Cost Net Farm Income Labor &. Change in Receipts Milk Production With Without Mgmt. Inc. Net Worth Per Cow Per Cwt. Per Cwt. Apprec. Apprec. Per Oper. w/apprec. (9) (9) (9) (3) (3) (3) (5) 1, ,819 96,206 44,877 75,638 2, ,708 70,840 27,364 48,824 2, ,020 56,741 19,085 33,368 2, ,252 48,026 13,408 23,325 2, ,880 36,075 10,018 15, , ,702 27,444 6,031 10,534 2, ,015 15, ,011 2, ,564 10,333-9,174-7,476 2, ,105-2,985-18,460-19,705 3, ,572-12,043-26,264-77,443 *Page number of the participant's DFBS where the factor is located.

31 FARM BUSINESS CHART FOR LARGE FREESTALL DAIRY FARMS 80 Freesta11 Barn Dairy Farms with More Than 120 Cows, New York, 1990 Size of Business Rates of Production Labor Efficiency Worker No. Pounds Pounds Tons Tons Corn Cows Pounds Equiv of Milk Milk' Sold Hay Crop Silage Per Milk Sold alent Cows Sold Per Cow DM/Acre Per Acre Worker Per Worker (10)* (10) (10) (9) (8) (8) (10) (10) ,936,108 21, ,002, ,399,112 20, , ,683,440 20, , ,760,735 19, , ,413,110 18, , ,070,859 18, , ,884,946 17, , ,714,383 17, , ,432,639 16, , ,908,456 14, , Cost Control Grain % Grain is Machinery Labor & Feed & Crop Feed & Crop Bought of Milk Costs Machinery Expenses Expenses Per Per Cow Receipts Per Cow Costs Per Cow Per Cow Cwt. Milk (9) (9) (10) (10) (9) (9) % , , ,089 1, ,162 1, ,217 1, , ,354 1, Value and Cost of Production Profitability Milk Oper. Cost Total Cost Net Farm Income Labor &. Change in Receipts Milk Production With Without Mgmt. Inc. Net Worth Per Cow Per Cwt. Per Cwt. Apprec. Apprec. Per Dper. w/apprec. (9) (9) (9) (3) (3) (3) (5) 3, , , , ,516 3, , ,670 89, ,826 3, , ,705 61,282 80,200 2, , ,389 42,376 65,041 2, ,366 92,999 31,694 46, , ,705 74,817 20,966 35,148 2, ,032 58,137 15,068 21,132 2, ,070 43,367 7,425 1,876 2, ,473 31,356-5,216-14,390 2, ,111 9,388-35,772-58,492 *Page number of the participant's DFBS where the factor is located.

32 29 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 the short term. Goal setting is as important on a dairy farm as it is in other businesses. Written goals are a tool which farm operators can use to ensure that the business continues to move in the proper direction. 1. Goals should be specific. 2. Goals should be realistic and achievable. 3. The achievement of the goal should be verifiable. 4. You should designate a time when each goal will be achieved. Goal setting on a dairy farm does not have to be a complex process. In many cases it provides a process for writing down and agreeing on goals that you have already given some thought to. It is also important to remember that once you write out your goals they are not cast in concrete. If a change takes place which has a major impact on the farm business, the goals should be reworked to accommodate that change. Refer to your goals as often as necessary to keep the farm business progressing. It is important to identify both long and short range goals when looking at the future of your farm business. A suggested format for writing out your goals is as follows: a. Begin with a general philosophy statement which incorporates both business and family goals. b. Identify 4-6 long range goals. c. Identify specific short range goals for a given time period (i.e., one year). I. General Philosophy and Objectives Worksheet for Setting Goals

33 30 II. Worksheet for Setting Goals (continued) Long Range Goals (require two or more years to achieve) III. Short Range Goals (possible to achieve in one or two years) What How When NOTE: Once long and short range goals have been identified, it is helpful to rank them in order of priority. Prepared by T.R. Maloney, Extension Associate, Cornell University Summarize Your Business Performance The Farm Business and Financial Analysis Charts on pages and 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: Need Improvement: _

34 31 GLOSSARY AND LOCATION OF COHMON 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 10) Appreciation - (defined on page 5) Balance Sheet - A "snapshot" of the business financial position at a given point in time, usually December 31. The balance sheet equates the value of assets to liabilities plus net worth. Capital Efficiency - The amount of capital invested per production unit. Relatively high investments per worker with low to moderate investments per cow imply efficient use of capital. Capital Turnover. Years - The number of years required for total farm income to equal total farm assets, calculated by dividing average total farm assets by total accrual operating receipts plus appreciation. 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 11) 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) Dairy (farm) - A farm business where dairy farming is the primary enterprise, operating and managing this farm is a full-time occupation for one or more people and cropland is owned. Dairy Cash-Crop (farm) - Operating and managing this farm is the full-time occupation of one or more people, cropland is owned but crop sales exceed 10 percent of accrual milk receipts. Debt Per Cow - Total end-of-year debt divided by end-of-year number of cows. Debt to Asset Ratios - (defined on page 9)

35 32 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. 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. 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. Labor and Management Income - (defined on page 6) Labor and Management Income Per Operator - The return to the owner/manager's labor and management per full-time operator. Labor Efficiency - Production capacity and output per worker. Liquidity - Ability of business to generate cash to make debt payments or to convert assets to cash. Net Farm Income - (defined on page 5) Net Worth - The value of assets less liabilities equal net worth. equity the owner has in owned assets. It is the Operating Costs of Producing Milk - (defined on page 16) Opportunity Cost. The cost or charge made for using a resource based on its value in its most likely alternative use. The opportunity cost of a farmer's labor and management is the value he/she would receive if employed in hisfher most qualified alternative position. Other Livestock Expenses. All other dairy herd and livestock expenses not included in more specific categories. Other livestock expenses include; bedding, DHIC, milk house and parlor supplies, livestock board, registration fees and transfers. Part-Time Cash-Crop Dairy (farm). Operating and managing this farm is not a full-time occupation, crop sales exceed 10 percent of accrual milk receipts and cropland is owned.

36 33 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 costs including the opportunity costs of the owner/manager's labor, management, and equity capital. 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) Return to Operators' Labor. Management. and Equity Capital - (defined on page 6) 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 16) 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.

37 34 INDEX Pagels) Pagels) Accounts Payable. 3,8 Financial Analysis Chart 22 Accounts Receivable. 4,8 Financial Lease. 8 Accrual Expenses. 3,5 Income Statement. 2 Accrual Receipts. 4,5 Inflows. 10 Acreage. 13 Labor and Management Advanced Government Income. 6 Receipts. 7,8 Labor and Management Age. 17 Income Per Operator. 6 Amount Available Labor Efficiency. 17 for Debt Service. 11 Land Resources. 13 Annual Cash Flow Liquidity, 9 Statement. 10 Lost Capital. 9 Appreciation, 5,9,15 Machinery Expenses. 3,14 Balance Sheet. 8 Milking Frequency. 2 Barn Type. 2 Milk Production. 15 Business Type. 2 Milking System. 2 Capital Efficiency. 17 Money Borrowed. 10 Capital Turnover, Years 17 Net Farm Income. 5 Cash From Nonfarm Net Investment.,. 9 Capital Used in Net Worth,. 8 the Business. 10 Number of Cows. 15 Cash Flow Coverage Ratio. 11 Operating Costs of Cash Paid.. '". 2 Producing Milk. 16 Cash Receipts. 4,10 Opportunity Cost. 6 Change in Accounts Other Livestock Expenses. 3 Payable. 3 Outflows. 10 Change in Accounts Part-Time Cash-Crop Receivable 4 Dairy (farm). 2 Change in Inventory... 2,3 Part-Time Dairy (farm). 2 Change in Net Worth Personal Withdrawals and Crop Expenses.., '" 3,14 Family Expenditures Crop/Dairy Ratios. 13 Including Nonfarm Dairy (farm) 2 Debt Payments. 10 Dairy Cash-Crop (farm) 2 Principal Payments. 10 Debt Per Cow. 9 Profitability. 4 Debt to Asset Ratios... 9 Receipts. 4 Depreciation, 3,9 Record System,. 2 Dry Matter 13 Repayment Analysis. 11 Education 17 Replacement Livestock. 3 Equity Capital... 8 Return on Equity Capital. 7 Expansion Livestock.. 3,10 Return on Total Capital 7 Expenses 3 Return to Operator's Farm Business Chart 19,20, Labor, Management,... 21,25, and Equity Capital ,27,28 Solvency '".. 9 Farm Debt Payments Total Costs of as Percent of Producing Milk. 16 Milk Sales. 11 Whole Farm Method. 16 Farm Debt Payments Worker Equivalent,. 17 Per Cow. 11 Yields Per Acre. 13

38 OTHER AGRICULTURAL ECONOMICS EXTENSION PUBLICATIONS No Item Pricing in New York state: A Three Phase study Focusing on Price Systems, Accuracy, Consumer Perception and Related Costs to the Food Industry Gene A. German Debra J. Perosio No New York Economic Handbook 1992 Agricultural situation and Outlook Extension staff No Northeast Beef Farm Business Summary Caro ine Nowak Rasmussen Danny G. Fox Stuart F. Smith Ted C. Perry No Issues in the Development and Marketing of Reduced Chemical Agricultural Products: A Look at Disease-Resistant Apple Cultivars Cecile Murphy Lois Schertz Willett No Economics of Integrated Pest Management Practices for Insects in Grape Production Darwin P. Snyder Timothy H. Weigle Gerald B. White No Economics of Integrated Crop Management for Field Crops, New York state, Darwin P. Snyder J. Keith Waldron Donald R. Specker No Micro DFBS: A Guide to Processing Dairy Farm Business Summaries in County and Regional Extension Offices for Micro DFBS v 2.6 Linda D. Putnam Wayne A. Knoblauch Stuart F. smith No Motivation: Improving Business Performance Through People Thomas R. Maloney Robert A. Milligan Jonas B. KaUffman, III No The Changing Landscape of New York Agriculture in the Twentieth Century B. F. Stanton