Dairy farm analysis shows net losses

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The 2018 dairy analysis work is in the books and is very reflective of the challenges Ohio’s dairy industry has faced since 2014. Several farms took a hard look at their numbers and chose to discontinue milking cows. Other farms joined the analysis program for the first time. 

In all, 20 farms — 19 conventional herds and one organic herd — participated in the 2018 Ohio Farm Business Analysis and Benchmarking program. These farms are located in 11 counties across Ohio, but this year are mainly concentrated in the northeast. 

Herd sizes were also very representative of Ohio farms, ranging from less than 50 cows to more than 1,000. Unfortunately, this year’s results aren’t surprising. 

With dairy farmers dealing with the fourth consecutive year of sustained low prices, the average net return for the 19 conventional dairy farms that completed an analysis for 2018 was a loss of $155 per cow. 

The good news is that the high 25% averaged a net return of $748 per cow (Table 1); which while positive, is also down from previous years. 

Factors for 19 conventional dairies chart

What did not change is the range between the lowest and the highest net returns per cow, nearly $3,000 in 2018. 

Ten of the 19 farms generated negative net returns per cow in 2018. These numbers continue to reinforce that the top third of dairy farms, while not exempt from financial challenges in down markets, continue to generate substantial positive net returns. 

If those returns are “enough,” depends on the size and debt position of the farm as well as the number of families the farm is supporting. 

2019 analysis work starts Jan. 1. Following a dismal start to 2019, milk prices have trended upward bringing needed cash into dairy farms’ checking accounts. As 2019 began, January and February milk prices looked alarmingly like a repeat of 2018 with Class III prices dipping under $14 per cwt. 

Only very strong producer price differentials kept the statistical uniform prices for January ($15.46) and February ($15.60) above 2018’s brutal levels ($14.84 and $14.01, respectively). Fortunately, dairy cow numbers started to decline nationally, one factor supporting improved milk prices. 

Improving milk prices does not lessen the farm’s need for accurate financial analysis numbers to both evaluate the farm’s position and progress, and to make informed management decisions. Plan to participate in financial analysis starting with your 2019 business year. 

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Dianne Shoemaker is an OSU Extension field specialist in dairy production economics. You can contact her at 330-533-5538 or shoemaker.3@osu.edu.

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