Managing Dairy Farm Finances

Larry F. Tranel, Dairy Field Specialist, Northeast

Problem Statement:

Dairy producers and consultants can have major profit impacts on a dairy operations success by making sound financial decisions based on accurate analysis. The majority of producers cannot accurately name their production costs with a $1 per hundredweight range. Although benchmarking has been able to increase profits by 20% on some dairy operations, the majority of dairy producers (consultants) do not calculate financial benchmarks for their operations (clients).

Programmatic Response:

This Field Specialist authored the Dairy TRANS financial software and the Managing Dairy Farm Finances program to assist producers and consultants with the financial analysis/management and financial benchmarking of dairy farms. During the 4-State Dairy Nutrition and Management Conference, this Dairy Field Specialist presented a workshop to 11 agri-business consultants and 2 producers to assist the accurate whole farm analysis of a dairy operation and then using financial benchmarking to determine strengths and weaknesses of a model dairy farm business regarding efficiencies on a per acre, per cow, per FTE (full-time equivalent) laborer and on a per cwt. equivalent basis.

Impact/Outcome:

100% of participants rated the program and the instructor, Larry Tranel as Good (9%), Very Good (64%) or Excellent (27%).

The following survey question depicts impact: What did you like most about the workshop?

Good program; This was very good and needs to be at the beginning of this program instead of at the end; Real farms; Give and take; getting a grounding on breakeven $; gave me the knowledge of where dairy farms should be regarding financial analysis; explanation of program; equation of milk hundredweights; this was the info I was looking for; gave a good overview of the whole farm financial analysis of an operation; it broke down the farm to find problems that can be improved.

Participants were then asked to please rate their knowledge or comfort level on a scale of 1 to 10 with 10 being full knowledge for the following statements both before and after this workshop.

1. My ability to understand dairy financial analysis. Before 5.45 After 7.00 +1.55
Increase = 15.5%
2. My ability to construct a net worth statement. Before 5.73 After 7.55 +1.82
Increase = 18.2%
3. My ability to construct a net farm income statement. Before 5.27 After 6.82 +1.55
Increase = 15.5%
4. My ability to construct a cash flow statement. Before 5.73 After 7.27 +1.54
Increase = 15.4%
5. My awareness of the Dairy TRANS 4.0 program. Before 1.27 After 8.00 +6.73
Increase = 67.3%
6. My willingness to do financial analysis with clients. Before 2.40 After 4.90 +2.50
Increase = 25%
7. My appreciation for accuracy in dairy financial analysis. Before 6.82 After 8.10 +1.28
Increase = 12.8%
8. My ability to use the Dairy TRANS 4.0 program. Before 1.64 After 6.10 +4.46
Increase 44.6%
9. My ability to financially benchmark dairy operations. Before 4.10 After 6.27 +2.17
Increase 21.7%
10. My ability to analyze a dairy on a per acre, per cow, per cwt. and
per full-time labor equivalent basis. Before 3.91 After 6.36 +2.45
Increase 24.5%

11. As a result of this Managing Dairy Farm Finances Workshop, I plan to . . . .

Visit with my son-in-law; look closer at the cash flow if my own farm; inform people that don’t know about Dairy TRANS who want to know; adapt my parameters I’ve learned, and suggest clients purchase Dairy TRANS; buy the program and go over this information with the clients I work with that would benefit from it; work with more of my clients to help them understand the value their dairy operation brings to their farm enterprise; work closer with my client accounts to help analyze the health of the output; do more work in evaluation of dairy operations; try to learn more about dairy financial analysis.

12. What did you gain as a result of this Workshop?

Insight and a different look at this farm; increased confidence with financial management; I was not aware of a program to calculate all the information that Dairy TRANS does, I think it is a fairly easy way to analyze the finances of a dairy farm; wider knowledge of records analysis; a good tool I can use on farm, one more thing I can do to add value (A+); a better understanding of what is needed for producers to know about their operations and what their bankers want to know; a better understanding of dairy financials; more knowledge of this analysis system; how to better analyze my clients financial information.

June 16, 2006
109 - Dairy

Page last updated: July 9, 2006
Page maintained by Linda Schultz, lschultz@iastate.edu