Dairy farmers need analysis of this year’s business to plan for next year

“The cows are carrying the crops.” A familiar statement that described most diversified crop/dairy farms for the past 15 years. Milk was the original farm-level “value added” product. You add value to your crops by putting them through dairy cows and selling milk.

In an about face caused by a wide variety of factors, for the past two years the crops have been carrying the cows — or at least giving them a pretty good boost. While most crop farms will see some pretty nice, if not record breaking, net farm income numbers for 2012, dairy farmer net farm income will be a mixed bag depending on how much of the feed needs were home grown, and how dry weather impacted individual areas in addition to the usual price and management influences.

How well did your farm do? That is a very good — and important — question that can only be fully answered by a thorough analysis of what the farm owned and owed at both the beginning and end of the year, and what happened in between.

Analysis

More than 30 Ohio dairy farms asked that question last year, rolling up their sleeves and participating in the Ohio Farm Business Analysis program. Net farm income on those farms in 2011 ranged from a positive $1,900 per cow to a loss of $1,600 per cow, averaging a loss of $270 per cow on nearly 7,000 cows.

Herd sizes ranged from 50 to 600-plus. While a few more farms will be added to that data set before the final report this week, those numbers will not change much.

The important question is where does your farm fall in that spectrum? How can you stay at the positive end or move from the low end to the high end? Bottom line, you have to know where you are now before you can address staying at or moving your position.

Inventory

With Jan. 1 just 11 days away when your paper hits the mailbox (really? where did 2012 go?), one of the most important things you can do that day is get out and do a solid inventory of all of your stored feed and grain.

Also inventory animals, classifying them by age groups that lend themselves to easily valuation. Suggested categories would be mature cows, springing heifers, bred heifers, weaned calves and calves still on milk. The minimum breakdown should be cows, heifers and calves.

While you are at it, dairy farms tend to have a lot of dollars tied up in frozen semen, supplies used in the milking process, veterinary supplies and similar items. Inventory them and put a value on them — using what they cost.

Online forms

Those tasks done, a good 1/1/13 balance sheet is well on its way. If you didn’t do this last year, using the work you just did, think back to those same items and how they would have been different last year. Balance sheets are not difficult to create, and forms to help in that process are available at http://farmprofitability.osu.edu .

The good news is that the Ohio Dairy Farm Business Analysis program is set to continue. We have had the opportunity to jump-start this project through grant support received in partnership with the Center for Farm Financial Management at the University of Minnesota and about 12 other states.

What this means is that participating farms are currently able to receive this valuable service at no charge. While this will have to become self-supporting in the next two years, there will still be the opportunity for dairy, crop and livestock farms to complete an analysis of 2012 at no cost to the farm.

Grant funds are limited to the first 50 farms, so decide soon if you want to take advantage of this grant funding. Additional farms will participate at a cost for the service. In January we will start to work on analysis of the 2012 business year. We will be doing analysis of and summaries for both conventional and organic dairy farms.

As more farms participate, we will be able to break summary data down by herd sizes and management practices that will provide excellent management information for participating farms. Maintaining confidentiality of each farm’s data is of critical importance in this process.

Assistance

Contact me at 330-533-5538 to talk about how dairy business analysis will work for your farm.

Wishing you a Christmas Season of peace and joy and a happy, healthy new year.

About the Author

(Dianne Shoemaker is an OSU Extension dairy specialist located at the extension center in Wooster, Ohio.) More Stories by Dianne Shoemaker

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