Dairy Industry Trends in NYS - Benchmarking Jason Karszes Senior Extension Associate PRO-DAIRY B21 Morrison Hall e-mail JK57@Cornell.edu Cornell University Phone 607-255-3809 Ithaca, NY 14853 Department of Animal Science College of Agriculture and Life Sciences Cornell University
New York Dairy Industry Currently 3 rd largest dairy state Number of herds decreasing Total cow numbers decreasing Average herd size increasing Production per cow increasing Total state production increasing Larger % of production concentrated in fewer herds 2
New York Dairy Industry Milk sales comprised 44.6% of New York State agricultural gross sales in 2012. Largest processor of the following dairy products Yogurt Cottage cheese Sour cream Total estimated agricultural impact for state is 37.6 Billion(2014) 1 1. Schmit, Todd, The Contribution of Agriculture to the New York Economy., Research & Policy Brief Series, Community & Regional Development Institute, Ithaca, NY, Cornell University, August 2014 3
Selected New York Dairy Statistics # of Cows, Thousand Total Production, Millions # of Herds Milk per Cow 2006 5,984 638 12,045 18,879 107 2007 5,771 627 12,103 19,303 109 2008 5,622 626 12,432 19,859 111 2009 5,475 619 12,424 20,071 113 2010 5,370 611 12,713 20,807 114 2011 5,246 610 12,826 21,026 116 2012 5,154 610 13,190 21,633 118 2013 5,042 610 13,463 22,080 121 2014 4,955 615 13,730 22,325 124 2015 4,817 618 14,100 22,816 128 Average Herd Size 2016 1 4,650 620 14,765 23,815 133 % Change, 5 Year 11.4% 1.6% 15.1% 13.3% 14.7% % Change, 10 Year 22.3% 2.8% 22.6% 26.1% 25.1% Source: New York Dairy Statistics 2015. 1 2016 Data from Progressive Dairyman Annual Statistics 2016 4
Selected Dairy Statistics 2011 2015, Same 136 New York Farms Dairy Farm Business Summary and Analysis Project # of Herds # of Cows, Thousand Total Production, Millions Milk per Cow Average Herd Size 2011 136 89.2 2,220 24,484 656 2012 136 92.6 2,365 25,532 681 2013 136 96.7 2,490 25,755 711 2014 136 101.9 2,611 25,631 749 2015 136 106.2 2,731 25,712 781 % Change, 4 Years 19.1% 23.0% 5.0% 19.1% % Change, NYS 1.3% 9.9% 8.5% 10.3% % of NYS, 2011 2.6% 14.6% 17.3% % of NYS, 2015 2.9% 17.2% 19.4% Source: New York Dairy Statistics 2015 and Dairy Farm Business Summary
DAIRY FARM BUSINESS SUMMARY AND ANALYSIS PROJECT
DFBS History Started in 1955 Partnership between Cornell Cooperative Extension Associations, PRO-DAIRY, and the Charles H. Dyson School of Applied Economics and Management in the Cornell SC Johnson College of Business at Cornell University Program micro-computerized in 1982 Accrual adjustments in 1985, with all extension educators using micro computer by the late 80 s.
DFBS History Follows Farm Financial Standards Council recommendations. 10 extension educators around the state utilize the educational program, with coverage in 43 counties in 2015 with 190 farms participating. Participation also from farms located in 12 different states
DFBS History Program converted to Web-Based system for the 2003 business year New comparison and trend reports with web-based system Faster information back to producers
Why Farms Participate Whole farm financial analysis Are we making any more money Meet lending requirements Improve record keeping system Standardized analysis techniques Multi-year trends
Why Farms Participate Accrual adjusted consolidated financial statement Financial analysis Budgeting Independent review of data Benchmarks of farm performance
Why Farms Participate Identify areas to improve Training of management Information for use with advisors Provide data to University for Research Extension Teaching
Use of Benchmarks on Farm Compare to past performance Compare to goals Compare to budget Local or regional data National data Other types of businesses 13
Extension Use of Dairy Benchmarks Presentations Articles Publications Discussion groups One-on-one farm visits 14
Focus Areas Changes Trends Relationships Comparisons Financial performance tied to management practicies 15
26 20 Years of Variability DFBS Farms, New York State, 1997 2016 21 Dollars per Cwt. Or % Reate of Return 16 11 6 1 Gross Milk Price, Cwt. Total Cost to Produce Milk, Cwt. Purchased Grain & Conc. % ROA w/o Apprec. 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 4
Risk Management Debt Coverage Ratio Debt per Cow Working Capital % Expenses Percent Equity Operating Expense Ratio 48.05 $209 70% 99%.58 7.40 1,179 49 91.64 5.19 2,163 40 84.66 4.19 2,560 34 79.67 3.40 3,067 29 75.69 2.94 3,629 25 70.70 2.50 4,039 21 65.72 2.05 4,630 17 62.75 1.42 5,370 10 57.78 0.37 7,241-1 45.85 173 New York Dairy Farms, 2014 17
Risk Management % Return to All Capital Debt Coverage Ratio Debt per Cow Working Capital % Expenses Percent Equity Operating Expense Ratio 6.6 8.34 $248 65% 98%.68 4.0 2.43 1,199 44 91.76 2.8 1.58 2,261 35 83.80 1.9 1.13 2,863 28 77.82.9 0.86 3,403 23 72.84 0 0.63 3,934 18 68.86 -.9 0.33 4,322 15 62.89-2.2 0.07 5,110 11 57.93-4.2-0.21 5,959 6 53.96-8.9-1.63 7,643-5 40 1.02 168 New York Dairy Farms, 2015 18
Milk Production
Milk Production
Cost Control
Cost Control
Relationships
Relationships
Relationships
Relationships
Relationships
Performance
Efficiency ASSET TURNOVER AND PROFITABILITY 173 New York Dairy Farms, 2014 Number of Number of Farm Capital (average for year) Labor & Management Income Per Net Farm Income (without Ratio Farms Cows Per Cow Per Worker Operator appreciation) >.70 57 991 $9,599 $429,494 $1,158,619 $1,688,485.60 to.69 38 763 11,431 489,577 1,037,767 1,277,883.50 to.59 40 617 13,408 544,046 982,764 1,083,118 Less than.50 38 262 15,824 525,978 671,545 348,852 ASSET TURNOVER AND PROFITABILITY 168 New York Dairy Farms, 2015 Number of Number of Farm Capital (average for year) Labor & Management Income Per Net Farm Income (without Ratio Farms Cows Per Cow Per Worker Operator appreciation) >.70 8 974 $6,959 $330,903 -$82,518 $81,232.60 to.69 16 1,196 10,073 438,997-280,707 21,532.50 to.59 41 1,064 10,885 491,531-38,777 301,899 Less than.50 103 557 14,366 572,171-77,720 162,326
Labor MILK SOLD PER WORKER AND NET FARM INCOME 173 New York Dairy Farms, 2014 No. of Farms No. of Cows Pounds Milk Per Cow Net Farm Income (without appreciation) Labor & Management Income Per Operator Pounds of Milk Sold Per Worker Under 500,000 18 64 16,481 $49,535 $-7,607 500,000 to 699,999 20 131 19,357 152,412 59,044 700,000 to 899,999 26 403 23,933 503,387 154,728 900,000 to 1,099,999 44 782 24,772 1,191,725 432,094 1,100,000 & over 65 1,100 25,977 2,029,545 788,245 MILK SOLD PER WORKER AND NET FARM INCOME 168 New York Dairy Farms, 2015 No. of Farms No. of Cows Pounds Milk Per Cow Net Farm Income (without appreciation) Labor & Management Income Per Operator Pounds of Milk Sold Per Worker Under 500,000 11 58 16,522 $8,026 $-43,435 500,000 to 699,999 16 119 20,069-6,466-48,231 700,000 to 899,999 26 450 23,280 76,729-50,377 900,000 to 1,099,999 40 711 24,368 125,320-96,794 1,100,000 & over 74 1,146 26,116 311,114-111,690
6 Year Trend Numbers 136 farms participating in Dairy Farm Business Summary for six years. 2009 2015 Capture two 3-year cycles Top 20% of farms by ROA w/o appreciation vs remaining 80% of farms What are the trends and comparison 31
Top 20% of Farms vs. Remaining 80% of Farms Selected Measures, Six Year Comparison Same 136 Farms, 2010 2015 Dairy Farm Business Summary, New York State 2010 2011 2012 2013 2014 2015 Net Investment Per Cow Top 20% $582 $1,103 $1,063 $1,011 $1,538 $1,188 80% $622 $850 $986 $886 $1,164 $1,223 Farm Capital per Cow Top 20% $8,251 $9,064 $9,722 $10,370 $11,202 $11,815 80% $9,293 $9,849 $10,567 $11,032 $11,697 $12,365 Tillable Acres per Cow Top 20% 1.75 1.79 1.78 1.77 1.77 1.80 80% 2.18 2.15 2.18 2.14 2.09 2.09 Net Calf & Cow Income, per Cow(1) Top 20% $328 $373 $421 $410 $552 $628 80% $279 $315 $376 $388 $500 $550 Operating Cost to Produce Milk per Cwt. Top 20% $12.26 $14.36 $14.83 $15.29 $15.88 $14.74 80% $14.09 $15.91 $16.13 $17.17 $17.83 $16.27 Total Cost to Produce Milk per Cwt. Top 20% $15.02 $17.68 $18.22 $18.90 $19.72 $18.83 80% $17.45 $19.49 $19.85 $21.04 $21.99 $20.49 Working Capital as Percent of Expenses Top 20% 22% 32% 29% 32% 41% 30% 80% 17% 19% 19% 19% 25% 19% % Return on Equity, Without Appreciation Top 20% 16.4% 20.2% 10.8% 15.2% 22.8% 3.8% 32 80% 6.7% 13.4% 4.5% 6.8% 16.1% -1.7%
DISCUSSION GROUPS BUSINESS FOCUS
Discussion Groups Business Focused Small groups that meet to discuss business 5-15 farms in a group Generally meet twice a year, overnight Longest tenured group meeting since 1995 Objective: Increased understanding of business and financial management
Benchmarking for Groups Key component of groups Full disclosure Two reports One sorted independently to show relationship to rest of group Second not sorted, with names If going to talk about topic, goal is to have business data benchmarked for meeting All looking at same things calculated same way 35
Total Operator Value 24 105,050 113,300 144,715 171,392 321,300 Operator Value per Month 26 3,618 3,979 4,569 5,993 6,051 Percent Change 27 1.5% 2.0% 3.0% 3.0% 8.0% ROA w/o Apprec, Standard LM Value 28-11.3% -2.8% -0.3% 2.1% 2.1% Change in ROA 29-0.03-0.02-0.01 0.00 0.00 Investment per Cow 30 9,983 10,018 10,299 10,682 11,613 Annual Change 31 (922) (443) (188) (151) 420 % Tillable Land Owned 32 16.0% 30.8% 31.9% 35.2% 36.7% Milk Cow Value, End of Year 33 1,300 1,400 1,500 1,600 1,600 Mach Invest per Cow 34 $1,913 $2,094 $2,111 $2,967 $3,013 Annual Change 35-111 -104 61 171 187 36
Areas Benchmarked Financial performance annual (DFBS) Monthly key production and financial parameters (DPM) Activity analysis projects 37
Activity Analysis Projects Objectives Increase understanding of cost and performance across different areas of business Encourage adoption of managerial accounting approaches Develop tools and approaches for use in extension educational programming 38
Activities Analyzed Dairy replacements Milking center Feed center Herd health Reproduction Haylage harvest Manure spreading Labor allocation and cost 39
Private Industry Benchmarks Additional resources for dairy industry in the Northeast Providing financial analysis and benchmarking services along with business management consulting Targeted towards client, but some published information on trends and performance Key partners with DFBS 40
Farm Credit East Blue Book(1975?) Large Herd Consulting Project (1988) Annual Financial Analysis Extensive production and activity data Dairy Profit Analyzer(2006) Monthly analysis Comparison to budget 41
Dehm Associates LLC The Dairy DashBoard Annual Financial Analysis Monthly Financial Analysis Monthly financial analysis Comparison to budget Started in 1991 42
Summary Benchmarking is key component to management New York dairy industry has a long history associated with benchmarking on and across farms Continued educational efforts can support further adoption of benchmarking 43