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Newsletter | Past Issues
October,
2006
In This Issue:
Transition
Planning Workshops Slated for Winter 2007
Credit
Issues for Ohio 's Farmers. What is in the Cards?
Seminars
Scheduled for Agricultural Lenders
Ohio
's Income Tax Schools for Practitioners
2007 Agricultural, Food and Public Policy Preference
Survey: Ohio's Outlook
2005
Ohio Landscape and Nursery Economic Impact Study
Ethanol
and Livestock – Management Issues and Resources
Designing
Effective Pay-for-performance Systems for Employees
and Suppliers: Part V – Team Incentive Plans
Production
Economics of Ohio Dairy Farms 1996-2005
Do
you have a question that you would like to ask the Ohio
AG Manager Team? If so, click here to email your
question.
Transition
Planning Workshops Slated for Winter 2007
David
Marrison, Extension Educator-Ashtabula County
Planning
is one of the most critical functions of management.
Planning decisions can range from the short term of
addressing the everyday “fires” of the farm business
to long range planning for retirement, transition and
estate planning. One area in which many farmers feel
uncomfortable planning for is the future of the farm
without them. As farmers plan for the long term success
of their business, there are a myriad of decisions to
be made. Some of the questions that often arise include:
Who will manage the business in the future? How much
money will I need to make it through retirement? How
do I treat each offspring fairly when it comes to dividing
up our farm? How will I know if my kids are ready to
take over the farm? What are the legal hoops that need
to be jumped through to pass the farm on without hurting
the financial standing of the farm? How can we plan
so the farm will be profitable for multiple generations?
Is there enough equity in the farm that I can retire
without selling out?
OSU Extension is pleased to announce that four “Building
For the Successful Transition of Your Agricultural Business”
workshops will be held across the State of
Ohio during January, February, and March 2007. Each
of these two-day workshops is designed to help family
businesses develop a transition plan for their family
business. The sessions will challenge you to examine
your business to the core and to actively plan for the
future. These sessions will help farm families come
together to develop a plan for the farm's future, discover
ways to increase family communication, plan for retirement,
and learn strategies for transferring management skills
and the farm's assets from one generation to the next.
These workshops are made possible by a grant received
from the North Central Risk Management Education Center.
The first workshop session at each location will help
all members of the family business analyze the current
status of the business, determine where the business
is going, and plan for the future. Participants will
learn how responsibilities can be shared between generations
and how the new generation of managers can be developed.
Participants will examine the strengths, weaknesses,
opportunities and threats to their business and will
develop a shared vision for the future. This workshop
session will challenge family members to honestly communicate
with one another when planning for the future. Dr. Bernie
Erven, Professor Emeritus from The Ohio State University,
will be the keynote speaker for this session.
The
second workshop session will feature the nuts and bolts
of transferring a family business from one generation
to the next. This workshop will allow participants to
learn more about business organization structures and
strategies, how to treat on-farm and off farm heirs,
how to equitably transfer assets, how to plan for adequate
retirement income, and how buy-sell agreements, trusts,
and life insurance can be utilized in succession planning.
Dr. Paul Wright and Robert Moore from Wright Law Co.
LPA in Dublin, Ohio will be keynote speakers for the
second workshop.
The
program dates and locations are:
January
23 & 24 (Carroll County)
Carrollton
Days-Inn
1111
Canton Road
Carrollton,
Ohio 44615
Local
Contact: Mike Hogan (330-627-4310)
January
25 & February 7 (Henry County)
Northwest
State Community College
22600
State Route 34
Archbold,
Ohio 43502
Local
Contact: Greg Labarge (419-337-9210)
February
26 & 27 (Pickaway County)
Deer
Creek Resort & Conference Center
22300
State Park Road 20
Mt
Sterling, Ohio 43143
Local
Contact: Mike Estadt (740-474-7534)
February
27 & March 6 (Marion County)
All
Occasion Catering
6989
Waldo Delaware Road
Waldo,
Ohio 43356
Local
Contact: Steve Ruhl (419-947-1070)
All
sessions will be held from 9:00 a.m. to 4:30 pm. A special
evening program is being developed for the sessions
in Carroll and Pickaway Counties. The registration fee
for attending the two-day workshop will be $75 for the
first member of a family and $50 for each additional
family member attending. Registration
includes workshop notebook, refreshments and lunch for
both sessions. Registration is due 10 days prior
to the first session at each location.
Local
information can be obtained by contacting the local
host (see numbers listed above). Registration
and hotel details can also be found at: http://ohioagmanager.osu.edu/calendar/RME-2006.php
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Credit
Issues for Ohio 's Farmers. What is in the Cards?
Dianne
Shoemaker, Extension Dairy Specialist, Don Breece, Extension
Farm Management Specialist, Mike Gastier, Agriculture
Extension Educator, Huron County, Nancy Hudson, Extension
FCS Specialist
Challenging
financial times come and go as part of the natural cycle
of agricultural businesses. While this familiar pattern
is decades-old, today's financial tools provide new
opportunities, as well as perils for the unsuspecting
farm business.
More
than 12 years ago, we began to see farm balance sheets
with accumulated credit card debt of many thousands
of dollars. This current, unsecured debt is showing
up in both the farm business and personal columns of
the balance sheet.
While
unusual, these balances can approach and pass the $100,000
mark. A frequent “fix” for a farm with some unencumbered
assets is to roll the credit card debt “down” the balance
sheet into an intermediate or long-term loan with scheduled
payments…using livestock, machinery, equipment or land
as collateral. Caution: Is it in the best interest of
the family to take unsecured credit card debt and to
secure it with farm business assets? It may be wise
to obtain some financial or legal advice before making
this kind of a decision. Furthermore, will the underling
problem(s) be addressed with this refinancing “solution”?
While
forcing the farm to make regular payments to pay off
the credit card debt, this “fix” may only briefly take
care of the problem of high interest rates, late payment
penalties and, possibly, calls from collection agencies.
Before taking this step, the farm's management team
has to ask: why was credit card debt accumulated? Has
the underlying problem been identified? Can it be fixed?
How will it be fixed?
Why
are credit card balances accumulated? There are many
reasons, and they will vary from farm to farm. Business
reasons might include depressed commodity prices, increasing
input costs, insufficient operating capital (pre-planned
lines-of-credit), inefficient or unprofitable business
operations, a farm trying to support too many families
for its' scale of operations, etc.
Personal
reasons might include living beyond the available family
living dollars, unexpected medical events, poor planning
(or no planning!), or an unclear understanding of smart
use of credit cards.
To
help understand the use of credit cards for both personal
and business expenses and the implications of credit
card use on credit reports, credit scoring and other
business factors, we begin our “Credit Issues for Farmers:
What is in the cards?” series.
Look
for future articles addressing the basics of credit
cards, credit reports, credit scoring, minimum payments,
and strategies for managing credit card debts.
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Seminars
Scheduled for Agricultural Lenders
Glen
Arnold, Extension Educator, Putnam County
The
Ohio State University Extension has scheduled two seminars
in western Ohio for Agricultural Lenders. The dates
are Tuesday, October 24 th at the Hancock County Extension
office in Findlay and Wednesday, October 25 th at the
Champaign County Extension office in Urbana. Topics
which will be covered at these seminars include:
Prospects
for Success and Growth of an Ethanol Industry in Ohio
– Ohio is poised to have several ethanol plants
built in the next few years. As fuel prices drop, what
is Ohio 's future in the ethanol industry? The speaker
is Dr. Matt Roberts, Grain Marketing Specialist, with
Ohio State University Extension. Dr Roberts has a strong
background in the energy markets.
Ohio
's New Household Sewage Rules – The Ohio Department
of Health plans to implement new septic rules in January
of 2007 that could impact where houses are constructed
in rural areas. The speaker is Jean Caudill of the Ohio
Department of Health.
Production
Costs on Ohio 's Dairy Farms – Dairy farmers
in Ohio are experiencing low milk prices at a time when
input costs have risen sharply. The speaker is Dr. Don
Breece, State Farm Management Specialist, who tracts
production costs on many Ohio dairy farms using the
FINPACK program.
Lending
to Farmers Who Contract With Large Livestock Farms
– Ohio is experiencing rapid growth in the dairy industry
and the swine industry. We'll discuss the need for capitol
for businesses such as custom manure hauling, livestock
transportation, feed delivery, hay harvest and silage
chopping. The speaker is Eric Dresbach, president of
the Midwest Professional Nutrient Applicators Association.
Updated
Farm Land Survey and Cash Rent Rates – Ohio
State University Extension has recently released the
new custom rate chart and also updated their survey
of farm land prices. The speaker is Barry Ward, OSU
Leader, Production Business Management.
Additional
information and a registration form for the Ag Lender
Seminars can be downloaded at http://putnam.osu.edu/natural_resources_environment/2006-ag-lender-seminar
. You can also contact your local extension office
and ask them to access the Ag Lender information on
the Putnam County Extension office web site.
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Ohio
's Income Tax Schools for Practitioners
Donald J. Breece, Farm Management Specialist,OSU
Extension
The Ohio Income Tax Schools are designed for tax preparers
with some experience preparing and filing federal tax
returns for individuals and small businesses. Instruction
focuses on tax law changes and on the problems faced
in preparing tax returns. The tax school workbook also
will cover changes in filing Ohio tax returns. Highly
qualified instructors will explain and interpret tax
regulations and recent changes in tax laws.
Participants in the Tax Schools receive a 700-page workbook
prepared by the Land Grant University Tax Education
Foundation, especially for the income tax schools held
in Ohio and 30 other states. The workbook is available
only as a part of tax school registration. This year
participants will also receive RIAs Federal Tax Handbook.
The $260 registration fee includes the workbook and
other reference materials, instructor fees, meals, meeting
rooms, and other expenses.
The locations and tax school dates are:
Ashland: Tuesday-Wednesday, November 14-15
Fremont: Thursday-Friday, November 16-17
Columbus: Monday-Tuesday, November 20-21
Zanesville: Tuesday-Wednesday, November 28-29
Lima: Thursday-Friday, November 30-December 1
Dayton: Tuesday-Wednesday, December 5-6
Kent: Tuesday-Wednesday, December 5-6
Chillicothe: Thursday-Friday, December 7-8
A web site is available for registration: http://aede.osu.edu/programs/TaxSchool/
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2007
Agricultural, Food, and Public Policy Preference Survey:
Ohio's Outlook
Allison
Specht , Carl Zulauf, and Barry Ward - Department of
Agricultural,
Environmental,
and Development Economics, The Ohio State University
September
2006
In
November and December 2005, 3,000 Ohio farmers were
randomly selected for a survey regarding issues and
policies that could be topics during the 2007 Farm Bill
debate. A total of 622 returned surveys were determined
to be useable for this analysis. Major findings are:
1.
The goals for the farm bill that Ohio farmers
most support are (1) “to enhance opportunities for small
and beginning farms; (2) “to reduce U.S. dependency
on non-renewable energy sources;” and (3) “to assure
a safe, secure, abundant, and affordable food supply.”
2.
Two goals that directly speak to the economic
situation of farmers and historically are associated
with farm bills, “enhance farm income” and “reduce price
and income risk” had net support of approximately 50%
but nevertheless ranked near or at the bottom among
the eight goals listed in question A-1. Thus, among
Ohio farmers, the goals of the farm bill extend beyond
farm income and risk.
3.
No consensus exists regarding which crop
support programs should be cut if cuts are needed.
4.
If farm support programs are removed, a
large share of Ohio farmers believe their financial
situation will be worse off after five years.
5.
Among potential new programs, bioenergy
production received the most support followed by assistance
and funding for food safety programs.
6.
Farmers who receive payments from a program
are more likely to support the program than farmers
who do not receive payments from the program.
7.
Ohio farmers are divided on whether farm
program payments are capitalized into land values.
8.
As a group, Ohio farmers support provision
of technical and financial assistance for addressing
environmental problems associated with farming.
9.
Ohio farmers support for further free trade
agreements is mixed.
10.
As a group, Ohio farmers want labeling and
traceability explored as food system options.
To
view the complete paper go to:
http://aede.osu.edu/resources/docs/pdf/UNT91BB4-IG5J-8M1U-PX6XTYA24SL4I2UG.pdf
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2005
Ohio Landscape and Nursery Economic Impact Study
Stan
Ernst, Jim Chatfield and Barry Ward, Department of Agricultural,
Environmental and Development Economics and OSU Extension
A
survey entitled “Ohio Landscape & Nursery Economic
Impact Study” (a.k.a. “Green Industry Survey”) was conducted
from February 2006 to June 2006 to attempt to document
the economic size and importance of Ohio 's nursery
and landscape industry in 2005. This study was designed
to measure changes in the industry from similar previous
studies. This project was undertaken with the financial
support of the Ohio Nursery and Landscape Association
(ONLA) with the support of The Ohio State University
Extension Nursery, Landscape and Turf Team. Research
was conducted through the OSU Department of Agricultural,
Environmental, and Development Economics The list of
licensed nursery dealers and nursery producers was provided
by the Ohio Department of Agriculture (ODA).
Based
on our survey results, we estimate the value of all
sales by certified nursery stock dealers and producers
in Ohio was $4.13 billion for 2005.
The annual growth rate was 12.1% between 2001 and 2005.
Of this total, approximately $3.36 billion was
from licensed nursery dealers and $770.3 million
from licensed nursery producers. Among enterprise
sub-sectors of the total population, Landscape
Services continue to be the high-sales leaders
for the industry in Ohio at about $1.9 billion
for combined Landscape Construction/Installation,
Maintenance, and Design sales. Landscape maintenance
alone grew 23.3% from 2001 to 2005.
The
total number of employees in the nursery industry is
still somewhat hard to determine using the existing
methodology. However, the trends we saw in 2001 continued
in 2005. We projected 241,735 workers
employed at some level of the nursery and landscape
industry in 2005, with an annual payroll for the industry
of nearly $3 billion. Mixed enterprises
(businesses participating in multiple subsectors, all
of which are less than 50% of the total enterprise)
are the largest labor demander with the combined landscape
enterprises maintaining a strong second position in
this study. The nursery and landscape industry contributed
an estimated $491 million in taxes
(property, sales, FICA, and income) in 2005.
Specific
data and trend interpretation following previous study
guidelines are contained in the full document at:
http://aede.osu.edu/resources/docs/pdf/PEL40PQJ-1MOH-CTRD-1JT7PH8GGWT2UGXI.pdf
Additional
analysis will be conducted using the data set obtained
in this project and will be available from the Department
of Agricultural, Environmental, and Development Economics.
For more information on this report or other aspects
of this research, contact Stan Ernst, Ernst.1@osu.edu
.
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Ethanol
and Livestock – Management Issues and Resources
Brian
Roe, Department of Agricultural, Environmental and Development
Economics and OSU Extension
More
ethanol plants will be coming to Ohio and to other livestock
regions around the United States , which has led some
to question how this will impact the livestock sector.
While the ‘when' and ‘where' of additional Ohio ethanol
plants are constantly evolving, livestock producers
will have to deal with the fundamental fact – less corn
will be available for feed while more ethanol byproducts
will be available.
Over
the next few months we will tackle several questions
that have been surfacing about the emerging livestock-ethanol
situation and update a set of links to resources that
provide some of the most recent research on the topic.
Question:
As the supply of ethanol co-products increases,
how will that affect the price of the co-products?
John
Lawrence, Iowa State University and director of the
Iowa Beef Center , responds:
“There
have been several examples of when co-product has been
free for the hauling as new plants come on-line, dryers
malfunction, or something is out of spec, but this is
not a long run sustainable price. Economics suggests
that as the supply of co-products out paces demand prices
will be lower. What is the lower bound? It depends on
alternative markets for the co-product. One alternative
are other buyers including livestock production in other
states and countries. The storage and long distant movement
suggests that plants will have to dry the product with
is costly at current natural gas prices. A second alternative
is the co-product's value as fuel for the plant. There
is some price at which the plant is better off to burn
DGS than sell it at too low of a price. Burning is likely
to require additional investment into equipment and
take time for plants to make that decision and get it
installed. However, in the long run burning may set
the lower price for DGS. A third alternative is to spread
the DGS on the ground as fertilizer. There is some nitrogen
and phosphorous value.”
For
more information on ethanol by-products and the livestock
sector, consider these links below:
Iowa
Beef Center – Ethanol Co-Products for Cattle Feeding
http://www.iowabeefcenter.org/content/ethanol.htm
Illinois
- Using Illinois By-Product Feeds in Livestock Feeding
Programs
http://ilift.traill.uiuc.edu/distillers/index.cfm
Missouri
– By-Products Links for Dairy Producers
http://agebb.missouri.edu/dairy/byprod/index.htm
National
Corn Growers' Association Distilled Grain Feeding Recommendations
– All species
http://www.ncga.com/ethanol/pdfs/111005DGFeedingRecommendations.pdf
Wisconsin
– Ethanol Co-Products and Dairy
http://www.das.psu.edu/dairynutrition/documents/shaverdistillppt.pdf
Minnesota
Distillers Grain Byproducts in Livestock Feed Resources
Page
http://www.ddgs.umn.edu/
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Designing
Effective Pay-for-performance Systems for Employees
and Suppliers: Part V – Team Incentive Plans
Steven
Wu, Assistant Professor, AED Economics, The Ohio State
University
When
performance outcomes are impacted by the actions of
a team of people working together and when individual
contributions are difficult to measure, it may be appropriate
to design team based incentive schemes. For example,
many business projects (e.g. marketing plans, launching
new products) involve teamwork. However, pay-for-performance
plans are much more complex for teams and are much more
sensitive to strategic manipulation and “gaming” by
team members. Thus, managers must be extremely careful
in designing team pay-for-performance schemes to avoid
negative unintended consequences.
When
several members contribute to a project but there is
no good measure of any one member's “output,” there
is potential for free riding because it is hard to determine
who has contributed the most. Most people can probably
remember instances in which team members shirked on
group projects in high school or college. When pay is
contingent on team output, incentives for each team
is muted because (a) low effort by an individual can
be easily disguised and (2) the reward for one's contribution
is spread over the entire team so that it has reduced
marginal impact on the individual's pay. For example,
for a given output, Q, the team is awarded
some dollar amount P . This P would
be disbursed among all team members so that each gets
P/n for a team of size n . That is,
everyone
gets
paid the same even if not everyone has worked hard.
The bigger the team, the bigger are these problems.
Only in the case when team members are fully awarded
for their contribution will optimal incentives arise,
but this is difficult to accomplish when individual
contributions are hard to measure. It is also impossible
to pay each team member P because it would
simply be too expensive and not self financing (payments
will exceed gains from the incentive plan).
One
solution is to hire a third-party to manage the team.
This third party would promise to pay each member the
full amount P , but in exchange, each member
has to make an up-front payment to the third party (e.g.
entrance fee), but this is rarely feasible in practice.
Also,
there is evidence that group incentive plans may lead
to high turnover of better performers (Malkovich and
Newman). Top performers may feel that it is unfair that
incentives for high individual performance should be
diluted and spread across all employees in the group,
regardless of their contribution. Top performing employees
may leave if they feel that there is too much free riding
and their “just share” of compensation is distributed
to others who free ride.
An
upside of team incentives is that it can also signal
to workers that cooperation is a desirable norm and
are often enthusiastically accepted by workers. Therefore,
it is often not difficult to get many employees to buy
into a team incentive plan.
Possible
solutions to the team incentive problem:
- Have
team members monitor each other. But this can be difficult
if teammates don't want to “snitch” on each other.
In some cases, it works. For instance, many professional
sports teams have designated captains whose jobs are
to provide leadership and crack a whip on those who
are not trying hard.
- Create
awards in which members can nominate teammates. Provide
a cash bonus for being nominated. This puts a positive
spin on the idea of team members monitoring each other.
- Improve
performance measures of individual activities if possible.
For example, rather than measuring customer satisfaction
of an entire department, see how customers of specific
individuals rate their experience.
- Might
have both team output goals and individual goals.
That is, individual incentives kick in only after
team goals are met. This signals that cooperation
is desirable and at the same time addresses the free
rider problem. However, this requires that individual
contributions be measurable.
A
more detailed discussion of these issues can be found
in the book by Brickley, Smith and Zimmerman, and the
book by Milkovich and Newman.
A
Note on Relative Performance Plans
Relative
performance plans are pay-for-performance plans that
are based on how an employee performs relative to other
employees. For example, one can design a tournament
scheme where those that rank in the 80 th percentile
or higher receive a bonus and those that rank below
the 20 th percentile are fired. In the broiler industry,
tournament style compensation plans are built into the
contracts written by integrators for growers. Growers
are typically compensated based on how they perform
relative to other growers under contract with the integrator.
Are
relative performance plans desirable? The answer is
it depends on the type of risk facing the employees.
If there is a common random factor that affects all
employees, then relative performance compensation is
desirable. For example, suppose the entire tournament
cohort of growers is affected by a common weather shock
which simultaneously reduces the productivity of all
growers in the group. Because grower compensation under
tournaments is determined by relative performance
and not absolute performance, growers would be insulated
from a common shock. On the other hand, had the growers
operated under a fixed performance standard contract,
each grower would feel the full brunt of the weather
shock because it becomes more difficult for each grower
to meet the fixed performance standard. Thus, tournaments
are an important instrument for mitigating certain types
of risks.
As
another illustration, students typically prefer grading
curves (relative performance scheme) if there is great
uncertainty about the difficulty of a professor's exams.
If the professor writes an exceptionally difficult exam,
an absolute grading scale would harm the students. For
instance, if nobody scores above 90%, no “A's” would
be awarded and overall class great point average would
be low. On the other hand, a curve would protect students
from unreasonable exams.
Possible
downsides of using relative performance schemes are
that they may promote excess competition and employees
may try to sabotage each other. Moreover, some researchers
have found that people may perceive them to be less
fair than absolute performance payment systems so that
employers may have to pay more to induce employees to
participate in a relative performance plan (Wu and Roe).
Thus, relative performance plans should only be used
in the following circumstances:
1.
When there is a large common random factor.
2.
Teamwork is not important.
3.
There are clear performance measures for each individual.
4.
There is little opportunity for employees to sabotage
each other's performance; i.e. they work relatively
independently of each other.
References
Brickley,
J.A., C.W. Smith, and J.L. Zimmerman. Managerial
Economics and Organizational Architecture. 2 nd
Edition. Boston , MA : McGraw-Hill, 2001.
Milkovich,
George T. and Jerry M. Newman Compensation ,
6 th Edition. Boston , MA : McGraw-Hill, 1999
Wu,
Steven and Brian Roe. “Tournaments, Fairness, and Risk.”
American Journal of Agricultural Economics 88(2006):561-573.
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Production
Economics of Ohio Dairy Farms 1996-2005
Donald
J. Breece Ph.D., Farm Management Specialist, Ohio
State University Extension
Click
here for a PDF version of this article
For
the past ten years financial and production data was
collected from Ohio dairy farms, participating in educational
programs. Using the computer program FINACK, Farm Business
Planning and Analysis instructors and Extension Educators
submitted data into the national farm financial data
base, FINBIN. Located at the University of Minnesota
, the Center of Farm Financial Management maintains
one of the largest and most accessible sources of farm
financial and production benchmark information in the
world. FINBIN places detailed reports on whole farm,
crop, and livestock financials at your fingertips. Their
web site is: http://www.finbin.umn.edu/
.
Using
the larger FINBIN data base, benchmarks can be established
and Ohio farm data can be compared with confidence.
The average Ohio dairy herd is just over 100 cows and
Minnesota reports farms of similar size. The cost of
production is determined on a cow and replacement (whole
herd) basis and includes an opportunity cost for home
grown feed. In other words, homegrown feed, such as
corn and alfalfa hay, is valued from a twelve month
average farm value, reported by the Ohio Agriculture
Statistics Service. For example, the total feed cost
per hundred weight of milk sold (including feed for
the replacements) in 2005 was $7.29 for 6 Ohio farms
averaging 104 cows (19,063 pounds milk sold/cow/year)
and $6.60 for 421 Minnesota farms averaging 116 cows
(20,671 pounds). To be most profitable, the goal is
$6.50 total feed cost per hundred.
Dairy
farm financial goals are important to consider and comparisons
of these goals are every bit as important as production
goals for the long term viability of a business. The
following are these goals:
Return on Assets > 7%
Return on Equity >ROA
Operating Profit Margin 20 to 30 %
Asset Turnover 50 to 75 %
Term Debt Coverage 1.25 to 1.50
Expense as % Income < 75 %
Debt to Asset < 40 %
Financial
Summary of Dairy Farms in OH & MN (market value)
1996-2004
|
Ohio
|
Ohio
|
Minnesota
|
Minnesota
|
|
Average
|
Top
20% |
Average
|
Top
20% |
NFI
|
$51,011
|
$127,335
|
$66,017
|
$192,635
|
ROA
% |
4.2
|
8.4
|
7.4
|
10.8
|
ROE
% |
3.0
|
9.2
|
9.1
|
15.0
|
OPM
% |
12.9
|
19.9
|
23.0
|
29.5
|
Asset
TO |
32.8
|
42.0
|
32.1
|
36.4
|
Term
Debt |
163
|
197
|
144
|
212
|
Work.
Cap. |
$18,775
|
$22,183
|
$31,095
|
$71,065
|
Exp.
% Inc. |
80.9
|
74.4
|
76.4
|
71.7
|
D/A
Ratio |
33
|
33
|
44
|
42
|
Cost
of Production-Dairy with Replacements- Ohio 1996-2005

Feed
Cost/cwt. Ohio Dairy Farms-
Cow
& Replacements

Net
Returns per Cow on Ohio Dairy Farms 1996-2005
 
2005
Minnesota Dairy Farm Data by Size of Farm and Individual
Operator: http://www.finbin.umn.edu/0607.aspx
“Large
herds have consistently produced more milk per cow,
have received higher prices for their milk, and have
earned much higher whole farm net incomes but they have
also had higher costs per head. Those trends continued
in 2005 but the difference in costs was out-weighed
by the production and price advantage, resulting in
slightly higher returns per cow for larger herds.”
“While
large herds generated more milk per cow, they also had
higher expenses. The expenses shown include all direct
and overhead expenses and either actual payments or
a charge for owner/operator labor and management. Compared
to 51 to 100 cow herds, those with over 500 cows paid
$170 more for feed and $300 more for non-operator labor.
Their depreciation and interest costs were only slightly
higher, somewhat negating the theory that recent expansion
costs explain the difference. There was evidence of
significant size economies in only a few overhead expense
categories such as insurance, utilities, and operator
labor expense.”
“Consistent
with previous years, large herds received a higher price
per hundredweight, but the difference seems to be diminishing.
The largest herds received, on average, just $.44 more
per cwt. than herds of 51 to 100 cows. That difference
has been as much as $1.00 in previous years.”
“
Large
herds earned much higher net incomes than smaller herds
on both a whole farm and per operator basis . These
results are consistent but with greater magnitude compared
with previous years. We might call this the Wal-Mart
effect—you can make a lot of money on a small margin
(although their margin was not that small in 2005) if
you have enough volume.”


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