Dianne Shoemaker, Field Specialist, Dairy Production Economics, The Ohio State University Extension
Thirty-five Ohio dairy farms completed a whole farm analysis for 2013 and also evaluated the dairy enterprise and each crop enterprise on their farm. This excellent investment of valuable time resources allows them to identify strengths and areas for improvement across their farm. These 35 dairy farms chose to analyze their farm’s performance, so this is not a random sample of Ohio’s entire dairy industry. That said, there is a wealth of information in these numbers for all Ohio farms to use as they evaluate their dairy’s performance.
An enterprise overview is displayed in Table 1. The “Average of 35 farms” represents the average for all 35 farms participating. Thirty-four farms were conventionally managed, and 1 farm was organically managed. Most farms milked either Holstein or Jersey cattle, with many farms having at least a few cows of another breed besides the breed that constituted the majority of their animals.
The “Range” column identifies the high and low numbers in each category. The “Top 20% Average” column reports the average performance of the seven herds that had the highest net return per cow.
Table 1. 2013 Ohio dairy farm business analysis highlights (raised feed was valued at cost of production).
*Including revenue adjustments, labor, and management charge
**Before labor and management charge
The top 20% group of farms averaged nearly $1,000 more per cow than the average of all farms. While the net return for all farms averaged $544 per cow, there was a tremendous (and typical) range, from farms losing up to $500+ per cow to farms netting more than $2,000 per cow. Over the past three years, the top 20% group’s net return per cow has averaged $946 higher than the net return of all herds. Each year, the summary has clearly shown that it doesn’t pay to be average in the dairy industry. Shoot for the upper third of dairy farms.
Looking at farm performance by herd size shows that the herds with more than 500 cows had the highest average net return per cow at $639. However, larger herd size did not ensure a higher net return per cow as the average herd size for the top 20% of herds was 211 head. Herd size for the top 20% ranged from less than 70 to more than 800 cows. The only herd size not represented in the top 20% of herds was the 201 to 500 cow category.
Table 2. 2013 Dairy enterprise analysis by herd size (raised feed was valued at cost of production).
How do you know where your farm stands? In the farm office, bookkeeping has to go beyond what is needed for the tax preparer. Some bookkeeping programs go beyond the basics and allow the operator to generate income statements, balance sheets, and cash flow statements. These are integral parts of a year-end analysis. However, unless the accountant or bookkeeper is enterprising information, it is difficult to accurately pinpoint how individual enterprises contribute to the bottom line or compare to other competitive dairy farms.
Participating in the Ohio Dairy Farm Business Analysis and Benchmarking Program is open to all dairy farms in Ohio. Cost is minimal due to current generous grant funding at only $100 per farm. Visit http://farmprofitability.osu.edu to download the full 2013 Dairy Farm Enterprise Analysis, input forms for 2014, view past analyses, and find out more about Ohio’s program. Contact us to talk about what would work well for your farm at (330) 533-5538 or shoemaker.3@osu.edu.