A22*Uncast»r Farming, Saturday, December 9,1989
/ FOCUS
r /
Pennsylvania /^^__ —<—— —
Dairy Hird* J
. \ Call I-800-DHI-TEST for service or information
impruvumni Association \
Factors In Dairy
BY DAVID L. SWARTZ
Perry Co. Ag Agent
NEW BLOOMFIELD (Perry
Co.) —You may not have worried
about profitability the last few
months due to the excellent milk
prices you have received. Howev
er, as the end of the year approach
es, you should be analyzing your
records to determine the profita
bility and efficiency of your oper
ation and look toward setting new
goals for the new year and decade.
But what should you *use to
determine efficiency? And what
factors are important to profitabil
ity? And how can you compare
your farm to other profitable
operations?
The 1988 Dairy Farm Business
Analysis, published by Penn State
Cooperative Extension helps to
answer the above questions. The
survey gathered data from 888
Pennsylvania dairy farms.
We will focus specifically on
factors related to profitability
using information gained by the
business survey. Look at Figure 1,
which divides dairy farms into
three profitability levels. Please
note that farms with varying herd
sizes are in each profitability
group. So, herd size, by itself,
does not indicate profitability.
Significant factors from this
figure are lines 5,6,8,10,20,23,
and 24.
Lines 5 and 6-
Dairy Cows/Worker
and Pounds Milk
SoldAVorker
Notice that there is a 12 percent
difference among profitability
groups in cows managed/worker
and there is a 21 percent differ
ence in pounds of milk sold/
worker. Tills should tell you that
both are effective measures of
efficiency that contributes to pro
fitability. How does your farm
compare? Be fair in your labor
assessment. Include valid family
BY 808 ORMSBY
DHIA Training Coordinator
Pennsylvania DHIA
The data accompanying this article was pulled
from Pennsylvania DHIA’s mainframe computer
and will be a weekly feature on this page. These
data arc valuable from a business management
standpoint and deserve explanation.
First, note that the data represent only the herds
processed by the Pennsylvania DHIA between
11-20-89 and 11-27-89. This one-week summary
represents approximately one-fourth of the herds
on test, as they arc tested monthly. The 1,386
herds include 79,022 cows, for an average of 57
cows per herd.
These 79,022 cows averaged 16,528 pounds of
milk during the last 365 days, with the correspond
ing fat and protein figures. These cows averaged
307 days in milk.
The average somatic cell score for the 1,091
herds on the program is 349,038. Remember, this
data is not representing all cows on test in Pen
nsylvania, just the herds processed during the
week reported.
The balance of the data are provided by DHIA
members. These data on milk, forage and grain are
collected at the farm and reported by the supervi
sor. Some forage and grain prices are based on
cost of production, analysis results, commodity
market figures, county agents and even neighbors.
Some DHIA members report the blend price for
milk; others take into account deductions, bon
uses, etc. Pounds of grain and forage fed is often
estimated as well.
However, because these figifres are averages of
information from almost 1,400 herds, they are
useful for comparing your operations.
Farm Profitability
labor. Also, use figures on milk
sold from milk handlers slip, not
your DHIA Rolling Herd
Average.
Line 8-
Milk Sold/Cow
A 9 percent difference exists
between low and high profitability
groups on pounds of milk sold/
cow. So, comparing lines 5,6 and
8, you can theorize that increasing
efficiency of production and ship
ping more product/man had a gre
ater impact on profitability than
just increasing the absolute
amount of milk' sold.
Line 10-
Cash Cost/Cwt. Milk
The $0.92/cwt difference
shown between profitability
groups is an indication of greater
efficiency and lower costs in other
areas. (Average price of milk was
$12.60/cwt when this survey was
completed). What are your costs/
cwt milk produced? If over 80 per
cent of your gross farm income
comes from milk sales, then just
use all your costs for the farm to
figure costs/cwt. Of course, a
more accurate estimate of costs to
produce 100 pounds milk is possi
ble if you do enterprise
accounting.
Line 20- Total
Machinery Investment
Per Cow
Notice the 10 percent difference
in total machinery investment dol
lars per cow between low and high
profitability groups. You can con
clude from these figures that small
herds that invest sizably in equip
ment need to have high production
levels and high labor efficiency to
offset the higher equipment cost.
Line 23-
Total Debt/Cow
One of the largest differences
between profitability groups, a 23
percent difference in debt load/
cow. Farm advisors often say
dairy managers should have no
DHIA Averages for all herds processed between
11/20/89 and 11/27/89
Number of Herds Processed
Number of Cows Processed
Number of Cows Per Herd
Milk Per Cow (Lbs)
%-Fat
Fat Per Cow (Lbs)
%-Protein
Protein Per Cow (Lbs)
Average Days in Milk Per Cow
♦Value for CWT Milk(s)
♦Value for CWT Grain(s)
♦Value for CWT Hay(s)
♦Value for CWT Silage(s)
♦Value for Pasture Per Day(s)
♦Value for Milk Per Cow Per
Year(s)
•Feed Consumed Per Cow Per
Year(Lbs)
A: Grain
B: Hay
C: Silage
D: Day Pasture
•Feed Cost Per Cow Per Year(s)
A: Grain
B: Hay
C: Silage *
D: Pasture
•Total Feed Cost Per Cow Per
Year(s)
•Income Over Feed Costs Per
Year(s)
•Grain to Milk Ratio
•Feed Cost Per CWT Milk(s)
Avg Level For 1090 SCC Herds
•Mefabr generated figure*
Factors;
1. Net Farm Income
2. Family Labor-Mgt Income
3. Rate of Capital Turnover
4. % Return on Investment
5. Dairy Cows/Worker
6. Lbs. Milk Sold/Worker
7. Value Farm ProcL/Worker
8. Milk Sold Per Cow
9. % Cash Income From Dairy
10. Cash Cost/Cwt. Milk
11. Purchased Feed Per Cow ($)
12. Purchased Feed/Cwt Milk (S)
13. Purchased Feed as % Of Milk Income
14. Livestock Retum/$lOO Feed Fed
15. Farm Production Per Crop Acre
16. Forage Acres Per Cow
17. Grain Acres Per Cow
18. Feed Grown As % Of Feed Fed
19. Crop Value Per Total Crop Acre
20. Total Mach. Invest. Per Cow
21. New Machinery Investment Per Cow
22. Mach. Operating Cost Per Cow
23. Total Debt Per Dairy Cow
24. Annual Debt Service Per Cow
25. Cow Turnover Percent
26. Family Withdrawals
Per Family Worker
Ftoin 1911 PA Dairy Arm Budncu Analytic. Exteiulon Circular 374. Aulhon: L. Jcnklni and W. McSwetney
more than $2OOO debl/cow. But
you can see the relationship
between debt service and profita
bility. Some of you are consider
ing buying cows to cash in on high
milk prices. Be sure the increased
debt you incur can be paid out of
$12.50 cwt/milk. I doubt we will
have $l5-17/cwt milk for the life
of your cow loan!
Line 24-
Annual Debt
Service/Cow
The survey reported a 17 per
cent difference in annual debt
service/cow among profitability
groups. Obviously, this figure is
related directly to line 23; it is also
related to line 26, family with
drawals. Very often, excess debt
payments prevent adequate family
living withdrawals from the farm
business.
While many factors contribute
to your dairy farm’s profitability
(some of which are beyond our
control- e.g. the weather) the
above mentioned factors have
applicability on every dairy farm.
Spend a few moments to deter
mine how your farm measures up!
For more information on dairy
farm business analysis factors,
request from your county exten- Farm Business Analysis and/or a
sion office Extension Circular copy of Pennsylvania Dairy Farm
374, “1988 Pennsylvania Dairy Analysis Workbook.
Average Farm Feed Costs
For Handy Reference
To help farmers across the
state to have handy reference
of commodity input costs in
their feeding operations for
DHIA record sheets or to
develop livestock feed cost
data, here’s this week’s aver
age costs of various ingre
dients as compiled from reg
ional reports across the state
of Pennsylvania. Remember
these are averages so you
will need to adjust your fig-
Wholesale Price Of Milk
Set For Another Price Hike
STRONGSVILLE, Ohio
The-wholesale price of milk is set
for another price hike, the third in
the last three months. The Dec. 1
price increase was announced by
Gordon Riehl, general manager of
Milk Marketing Inc. (MMI), the
region’s largest dairy marketing
cooperative.
“Milk production is down at a
time when dairy consumption is
up. This is the supply/demand sce
nario that we’ve seen since late
summer and it’s still true,” says
Riehl.
1,386
79,022
57.0
16,528
3.71
614
3.20
529
307
13.35
8.43
4.18
1.51
.30
The Dec. 1 price will rise 77
cents for each one hundred pounds
of milk sold to processors. The
wholesale cost of milk, the
Minnesota-Wisconsin (M-W)
price which is established in the
nation’s high dairy production
states of Minnesota and Wiscon
sin, continues on its upward climb
because of the nationwide
decrease in milk production.
“Several components come into
play here, but first is the simple
fact that we have less milk today
than we did a year ago. We have
fewer dairy farmers and "fewer
cows in milk production. And of
the cows in production, each of
those animals are giving less
milk,” says Riehl.
2,206
6,396
2,831
14,007
64
539
118
212
19
According to Riehl, these fac
tors exist simply because during
the last seven years returns to
dairy farmers have decreased,
while production costs have
increased. Current raw milk prices
are now returning to 1981 price
levels.
890
1.316
1:1.0
S 88
349,038
Currently MMI is able to pay its
Low Medium High
(Under $24,450) ($24,450-$33,000) (Over $33,000)
$10,958
661
1.83
1.35
32
480,349
68,351
14,852
94
8.96
569
3.83
32
160
742
2.38
.56
53
257
430
171
455
1,707
444
25
$15,893
$18,434
$61,527
39,569
1.85
19.36
35
605,213
99,090
16,313
94
8.04
557
3.41
28
196
993
2.18
.69
54
317
392
194
443
1,331
367
27
$23,708
ures up or down according to
your location and the quality
of your crop.
Com, No. 2y - 2.73
Wheat, No. 2 - 3.68
Barley, No. 3 - 1.94
Oats, No. 2 - 1.56
Soybeans, No, 1-5.31
Old Ear Corn - 80.94
New Ear Com - 62.92
Alfalfa Hay - 112.00
Mixed Hay - 105.00
Timothy Hay - 112.00
dairy farmer members more for
their milk, but those farmers’
operational costs are also climb
ing, according to Riehl.
“Medical insurance premiums
for many of our members have
continued to climb similarly,
matching the national trend,” he
said.
And in addition, we are still fac
ing some of the effects of last
summer’s drought and this
spring’s heavy rains. These
weather conditions meant the pro
duction of low quality feeds for
dairy cattle. Lacking the levels of
nutrition that those cows usually
receive, they produced less milk.”
Milk production in most of the
eight state area in which MMI
markets its members’ milk is
down nearly 9.4 percent from the
same time last year. The United
States Department of Agriculture
(USDA) reports that nationwide
niilk production for October is
down two percent compared to
October, 1988. During this time
frame, MMI increased its average
wholesale milk price more than 11
percent. Wholesale milk prices
have bee'n on a steady uphill climb
since April.
“This isn’t a situation that is
making anyone rich,” says Riehl.
“Consumers want dairy products.
For example, cheese sales are up
si\ percent from last year, but the
cost of milk is still out-climbing
the cost of cheese.
“Off-farm employment remains
lucrative in many areas. And it’s
tough to convince a family mem-
(Turn to Pago A 29)