Dianne Shoemaker, Extension Field Specialist, The Ohio State University
We need to change how we think of January and February. Tax time. That never has a very positive feel to it. Instead, let’s think of it as scorekeeping time. Tally up the points; assets and income for the home team. Liabilities and expenses are the opposing team’s points. At the end of the 2013 game, who won the game? While it is not quite that simple, farm business analysis is a way of keeping score on many business levels. If it was a good year, a few of the opposing team’s points are allocated to Uncle Sam….and that is a good thing.
So as we enter the 2013 scorekeeping season, how did Ohio’s dairy farms fare in 2012, the last completed season? To find out, we’ll look at 40 farms that participated in the Ohio Dairy Farm Analysis Program. Results of these dairy enterprise analyses are summarized in Table 1.
Table 1. 40 Ohio dairy farms, 2012 dairy enterprise analysis. Homegrown feed
valued at farm’s cost of production.
*Includes other revenue adjustments, labor, and management charge.
** Before labor and management charge.
Table 2. Ohio Dairy Farm Business Analysis Summary,
comparison of 2011and 2012 results, average for all farms,
homegrown feed valued at farm’s cost of production.
*Includes other revenue adjustments, labor, and management
** Before labor and management charge.
So how do we characterize 2012? Better than 2010, when net return per cow was in double digits, but not as good as 2011 as can be seen in Table 2. So what happened? Feed prices were certainly high both years, but milk prices were substantially different. The Statistical Uniform Price, that is the Class III price plus the producer price differential for Federal Order 33 was fully $1.92/cwt less in 2012 that 2011. One dollar of that was due to the producer price differential, only $0.18 in 2012 compared to $1.18 in 2011. The balance came from a Class III price averaging $17.44 in 2012 compared to $18.37 in 2011. Even though the feed cost per cwt for the 40 farms in 2012 averaged $11.78, 82¢ less than the previous year, that reduction, and some additional reductions in expenses couldn’t, on average, compensate for the substantially lower milk price and a decline in milk sold per cow.
It should be noted that many, but not all, of the farms were the same (2011 and 2012), and new farms chose to participate in the analysis in 2012. Clearly, there are farms doing very well, and some must chart a new path if they want to continue milking cows as seen in the range of net farm returns from a loss of greater than $1100 to a positive $1750 per cow (Table 1). Eight farms, representing the top 20% based on net return per cow, averaged a positive $1,145 per cow, $914 per cow more than the average of all farms. These farms continue to have more dollars available to pay unpaid labor and management, principal, reinvest in the business, invest off the farm, and pay taxes!
So, it’s nice to know how you did, but how does this scorekeeping help plan for the future? Each farm that completed an analysis also received a benchmarking chart which showed how their dairy enterprise compared to all the other Ohio dairy farms in 40 income, expense, and production areas. These analyses are also available for crop enterprises and the whole farm economic analyses. These comparisons easily help answer the questions: “how am I doing compared to other dairy farms”, and “is it an item that is worth spending my time and resources addressing?”
While it is tax time, it is also time to check the score on the business side of the dairy. Completing a farm business analysis is an excellent investment in the future of your business. Check out the forms at our website at http://farmprofitability.osu.edu/. Cost to the farm is only $100 as this program is supported by Farm Business Management and Benchmarking Grant Funding from the USDA National Institute of Food and Agriculture. If you have questions, please email Dianne Shoemaker at firstname.lastname@example.org or call at 330.533.5538. It is February already. Game on.