Dianne Shoemaker, Field Specialist, Dairy Production Economics, Ohio State University Extension
The 2018 dairy analysis work is in the books and is very reflective of Ohio’s dairy industry. 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 conventionally and one organically managed, completed the analysis. These farms are located in 11 counties across Ohio, but mainly concentrated in the northeast. Herd sizes were 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 4th 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. 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, on average 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.
Table 1. Selected factors from 2018 Ohio Dairy Farm Business
Summary for the 19 conventionally managed dairy farms.
The 2019 analysis work will start in January. 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 (Table 2); only very strong producer price differentials kept the statistical uniform prices for January and February above 2018’s brutal levels. Fortunately, the national herd numbers started to decline, one of the factors supporting improved milk prices.
Improving milk prices does not lessen the farm’s need for accurate financial analysis to both evaluate the farm’s position and progress and to make informed management decisions. We encourage you to participate in financial analysis starting with your 2019 business year. Contact Dianne Shoemaker at email@example.com or 330-533-5538 to talk about the options.
You can download the complete 2018 Dairy Farm Business Summary at http://farmprofitability.osu.edu
Table 2. Mideast Marketing Area, Federal Order 33 Milk Price, Dairy Margin Coverage Program and Margin Protection Program prices, 2018–2019.