A3O-Lancaster Farming, Saturday, June 20, 1998 Be careful not to take on more debt than what the dairy can comfortably handle. Some guidelines are: 1 Limit debt load per cow. The guidelines listed below will vary, depending on economic conditions and management abilities. So push the pencil and determine what you can afford. - $2,000 per cow with average production, management and cost control. - $3,000 per cow with good production, management and cost control. - $4,000 per cow with excellent production, management and cost control. Debt servicing costs can lake a big bite out of profit margins. See Table 1. Each $l,OOO borrowed per cow for 15 years at 8% interest costs $ll5 per cow per year, or $0.68 per cwt. milk when 2. Am* * or a B°°“ flute* s return on your capital, production is at 17,000 lb. per cow. Increase debt loads to $3,000, and the cost per cow per year goes up to $345 Table 2. Investment Ratings Features Cows Heifers Bldgs. Mach. Land Good Return ++ + - - - - - + Quick Cash +++ - - • - - ■ + Reproduce +++ ++ • - - - - - - - ■ Gets Better - + • - - - Holds Value ? ++ - - - +++ A LESSON WELL LEARNED... LANCASTER FARMING'S CLASSIFIED ADS GET RESULTS! Fisher’s Barn Cleaning Compressed Air & White Washing Fly Spraying Aaron S. Fisher 420 Strasburg RD Paradise, PA 17562 717-687-9510 7 15 am -730 am or leave message A This Tractor Has A Lifetime Warranty Ingersoll Big Wheel Tractors Out Pull or Push The Competition JO $ 48 95 Lawn Care Equipment Center, LLP DAIRY FARM MANAGEMENT BASICS A Farm Management Course by Glenn A. Shirk Penn State Extension Agent Lancaster County, Pennsylvania ATTENTION DAIRY FARMERS! FARMERS do we not have the product? (THE POWER IS IN THE TANK) AMERICAN RAW MILK PRODUCERS ARMPPA is now working with farmers who want to price their milk before it leaves the farm David Better, 160 Cedar Hill Road, Peach Bottom, PA • Time 8:00 p.m. TIRED of low milk checks? TIRED of unpaid bills? TIRED of hearing “THERE'S A SURPLUS... BECOME MORE EFFICIENT...MAKE MORE MILK... TIRED of the small 10$ to 15$ incentives to stay where you're at? Don't we need ourselves? ARE WE NOT WORTH MORE THAN CENTS? PRICING ASSOCIATION “ARMPPA” We are now in 18 states and still growing!! ' ARMPPA is not a milk plant, but simply a price setting agency striving to work with all existing milk handlers. LAST 40 YEARS PRICING HISTORY (Based on M&W series and Basic Formula Price) 1963 - $3.11 1973 - $6.30 1983 - $12.49 1993 - $ll.BO 1997 - $12.05 MEETINGS ARE AS FOLLOWS: June 25. 1998 LANCO/ARMPPA, Brunnerville Fire House, Brunnerville, PA Call if any questions and more meetings are in July East Coast ARMPPA Office -1-877-367-6455 Dairy Farm Management Basics - Lesson 3 Table 1. Cost of Servicing $ 1000 of Debt per Cow 5 Year Loan Interest Ann. Cost Cost per Cwl. of Milk at Various Productions Rates Per Cow 15.000 J7.OQQ 19.000 21.000 21000 6 232 1.54 1.22 1.10 1.01 8 243 1.62 1.43 1.28 1.16 1.06 10 255 1.70 1.50 1.34 1.21 1.11 12 267 1.78 1.57 1.40 1.27 1.16 lO Year Loan Interest Ann. Cost Cost per Cwt. of Milk at Various Productions Rates Per Cow 15.000 17.000 19.000 21.000 23.000 6 133 .89 .78 .70 .63 .58 8 146 .97 .86 .77 .70 .63 10 159 1.06 .94 .84 .76 .69 12 172 1.15 1.01 .91 .82 .75 l5 Year Loan Interest Ann. Cost Cost per Cwt. of Milk at Various Productions Rates Per Cow 15.000 17.000 19.000 21.000 21000 6 101 .67 .60 .53 .48 .44 8 115 .77 .68 .61 .55 .50 10 129 . 86 76 68 .61 .56 12 144 .96 . 85 .76 .69 .63 When profit margins improve, debt levels can be increased about $l,OOO or so temporarily, to take advantage of opportune times to remodel or expand. Then, the goal should be to pay down debts quickly to a lower, more comfortable level and build additional equity before making the next jump. In other words, expand only at a rate you can afford. Don't get strapped so tight that you have no financial maneuverability. - Cattle are your best investment! See Table 2. Cows give a good quick return. Feed a cow today, and you get milk tomorrow. Cows also reproduce; no other asset does that! Heifers increase in value with age; most other assets depreciate in value. - Keep the stalls filled with healthy, productive, profitable cows. When buying cattle to expand the herd, think about how many of them will be culled within the first few months. Also think about how you are going to fill those empty stalls over the next 2-3 years, while you wait for their offspring to become old enough to enter the milking herd. Also ask yourslef, why is the cow being sold, and do I really want her in my herd? In other words, be careful not to purchase problem cows that you'll regret later. - Machinery and building pruchases are expenses that should be minimized, but do invest in equipment and facilities that are essential to animal health, animal performance, animal longevaity, and to improving the overall efficiency of the operation. June 30. 1998
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