Dairy Industry Trends in NYS -Benchmarking

Jason KarszesSenior Extension Associate

PRO-DAIRYB21 Morrison Hall e-mail JK57@Cornell.edu Cornell University Phone 607-255-3809Ithaca, NY 14853

Department of Animal ScienceCollege of Agriculture and Life Sciences

Cornell University

New York Dairy Industry

Currently 3rd largest dairy stateNumber of herds decreasingTotal cow numbers decreasingAverage herd size increasingProduction per cow increasingTotal state production increasingLarger % of production concentrated in fewer

herds

2

New York Dairy Industry

Milk sales comprised 44.6% of New York State agricultural gross sales in 2012.

Largest processor of the following dairy productsYogurtCottage cheeseSour cream

Total estimated agricultural impact for state is 37.6 Billion(2014)1

1. Schmit, Todd, “The Contribution of Agriculture to the New York Economy.”, Research & Policy Brief Series, Community & Regional Development Institute, Ithaca, NY, Cornell University, August 2014

3

4

# of Herds

# of Cows, 

Thousand

Total Production, Millions

Milk per Cow

Average Herd Size

2006 5,984 638 12,045 18,879 1072007 5,771 627 12,103 19,303 1092008 5,622 626 12,432 19,859 1112009 5,475 619 12,424 20,071 1132010 5,370 611 12,713 20,807 1142011 5,246 610 12,826 21,026 1162012 5,154 610 13,190 21,633 1182013 5,042 610 13,463 22,080 1212014 4,955 615 13,730 22,325 1242015 4,817 618 14,100 22,816 12820161 4,650 620 14,765 23,815 133

% Change, 5 Year ‐11.4% 1.6% 15.1% 13.3% 14.7%% Change, 10 Year ‐22.3% ‐2.8% 22.6% 26.1% 25.1%

Source: New York Dairy Statistics 2015.1    2016 Data from Progressive Dairyman Annual Statistics 2016

Selected New York Dairy Statistics

# of Herds

# of Cows, 

Thousand

Total Production, Millions

Milk per Cow

Average Herd Size

2011 136 89.2 2,220 24,484 6562012 136 92.6 2,365 25,532 6812013 136 96.7 2,490 25,755 7112014 136 101.9 2,611 25,631 7492015 136 106.2 2,731 25,712 781

% Change, 4 Years 19.1% 23.0% 5.0% 19.1%% Change, NYS 1.3% 9.9% 8.5% 10.3%

% of NYS, 2011 2.6% 14.6% 17.3%% of NYS, 2015 2.9% 17.2% 19.4%

Source: New York Dairy Statistics 2015 and Dairy Farm Business Summary

Selected Dairy Statistics 2011‐2015, Same 136 New York FarmsDairy Farm Business Summary and Analysis Project

DAIRY FARM BUSINESS SUMMARY AND ANALYSIS PROJECT

DFBS History

Started in 1955 Partnership between Cornell Cooperative Extension

Associations, PRO-DAIRY, and the Charles H. Dyson School of Applied Economics and Management in the Cornell SC Johnson College of Business at Cornell University

Program micro-computerized in 1982 Accrual adjustments in 1985, with all extension

educators using micro computer by the late 80’s.

DFBS History

Follows Farm Financial Standards Council recommendations.

10 extension educators around the state utilize the educational program, with coverage in 43 counties in 2015 with 190 farms participating.

Participation also from farms located in 12 different states

DFBS History

Program converted to Web-Based system for the 2003 business yearNew comparison and trend reports with

web-based systemFaster information back to producers

Why Farms Participate

Whole farm financial analysisAre we making any more moneyMeet lending requirementsImprove record keeping system

Standardized analysis techniques Multi-year trends

Why Farms Participate

Accrual adjusted consolidated financial statementFinancial analysisBudgeting

Independent review of dataBenchmarks of farm performance

Why Farms Participate

Identify areas to improveTraining of managementInformation for use with advisorsProvide data to University forResearchExtensionTeaching

Use of Benchmarks on Farm

Compare to past performanceCompare to goalsCompare to budgetLocal or regional dataNational dataOther types of businesses

13

Extension Use of Dairy Benchmarks

PresentationsArticlesPublicationsDiscussion groupsOne-on-one farm visits

14

Focus Areas

ChangesTrendsRelationshipsComparisonsFinancial performance tied to

management practicies

15

‐4

1

6

11

16

21

26

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Dollars per Cwt. Or %

 Reate of R

eturn

20 Years of VariabilityDFBS Farms, New York State, 1997 ‐ 2016

Gross Milk Price, Cwt.

Total Cost to Produce Milk, Cwt.

Purchased Grain & Conc.

% ROA w/o Apprec.

Risk ManagementDebt

CoverageRatio

Debt per Cow

Working Capital % Expenses

Percent Equity

Operating Expense

Ratio48.05 $209 70% 99% .58

7.40 1,179 49 91 .64

5.19 2,163 40 84 .66

4.19 2,560 34 79 .67

3.40 3,067 29 75 .69

2.94 3,629 25 70 .70

2.50 4,039 21 65 .72

2.05 4,630 17 62 .75

1.42 5,370 10 57 .78

0.37 7,241 -1 45 .85

173 New York Dairy Farms, 201417

Risk Management% Return

to All Capital

Debt Coverage

Ratio

Debt per Cow

Working Capital % Expenses

Percent Equity

Operating Expense

Ratio6.6 8.34 $248 65% 98% .68

4.0 2.43 1,199 44 91 .76

2.8 1.58 2,261 35 83 .80

1.9 1.13 2,863 28 77 .82

.9 0.86 3,403 23 72 .84

0 0.63 3,934 18 68 .86

-.9 0.33 4,322 15 62 .89

-2.2 0.07 5,110 11 57 .93

-4.2 -0.21 5,959 6 53 .96

-8.9 -1.63 7,643 -5 40 1.02

168 New York Dairy Farms, 201518

Milk Production

Milk Production

Cost Control

Cost Control

Relationships

Relationships

Relationships

Relationships

Relationships

Performance

ASSET TURNOVER AND PROFITABILITY 173 New York Dairy Farms, 2014

Number of

Number of

Farm Capital (average for year)

Labor & Manage- ment Income Per

Net Farm Income (without

Ratio Farms Cows Per Cow Per Worker Operator appreciation) > .70 57 991 $9,599 $429,494 $1,158,619 $1,688,485 .60 to .69 38 763 11,431 489,577 1,037,767 1,277,883.50 to .59 40 617 13,408 544,046 982,764 1,083,118Less than .50 38 262 15,824 525,978 671,545 348,852

ASSET TURNOVER AND PROFITABILITY 168 New York Dairy Farms, 2015

Number of

Number of

Farm Capital (average for year)

Labor & Manage- ment Income Per

Net Farm Income (without

Ratio Farms Cows Per Cow Per Worker Operator appreciation) > .70 8 974 $6,959 $330,903 -$82,518 $81,232 .60 to .69 16 1,196 10,073 438,997 -280,707 21,532.50 to .59 41 1,064 10,885 491,531 -38,777 301,899Less than .50 103 557 14,366 572,171 -77,720 162,326

Efficiency

MILK SOLD PER WORKER AND NET FARM INCOME 173 New York Dairy Farms, 2014

Pounds of Milk Sold Per Worker

No. of

Farms

No. of

Cows

Pounds Milk

Per Cow

Net Farm Income (without

appreciation)

Labor & Manage-ment Income Per Operator

Under 500,000 18 64 16,481 $49,535 $-7,607 500,000 to 699,999 20 131 19,357 152,412 59,044 700,000 to 899,999 26 403 23,933 503,387 154,728 900,000 to 1,099,999 44 782 24,772 1,191,725 432,094 1,100,000 & over 65 1,100 25,977 2,029,545 788,245

MILK SOLD PER WORKER AND NET FARM INCOME 168 New York Dairy Farms, 2015

Pounds of Milk Sold Per Worker

No. of

Farms

No. of

Cows

Pounds Milk

Per Cow

Net Farm Income (without

appreciation)

Labor & Manage-ment Income Per Operator

Under 500,000 11 58 16,522 $8,026 $-43,435 500,000 to 699,999 16 119 20,069 -6,466 -48,231 700,000 to 899,999 26 450 23,280 76,729 -50,377 900,000 to 1,099,999 40 711 24,368 125,320 -96,794 1,100,000 & over 74 1,146 26,116 311,114 -111,690

Labor

6 Year Trend Numbers

136 farms participating in Dairy Farm Business Summary for six years.2009 – 2015Capture two 3-year cycles Top 20% of farms by ROA w/o

appreciation vs remaining 80% of farmsWhat are the trends and comparison

31

32

 

2010 2011 2012 2013 2014 2015Net Investment Per Cow

Top 20% $582 $1,103 $1,063 $1,011 $1,538 $1,18880% $622 $850 $986 $886 $1,164 $1,223

Farm Capital per CowTop 20% $8,251 $9,064 $9,722 $10,370 $11,202 $11,81580% $9,293 $9,849 $10,567 $11,032 $11,697 $12,365

Tillable Acres per CowTop 20% 1.75 1.79 1.78 1.77 1.77 1.8080% 2.18 2.15 2.18 2.14 2.09 2.09

Net Calf & Cow Income, per Cow(1)Top 20% $328 $373 $421 $410 $552 $62880% $279 $315 $376 $388 $500 $550

Operating Cost to Produce Milk per Cwt.Top 20% $12.26 $14.36 $14.83 $15.29 $15.88 $14.7480% $14.09 $15.91 $16.13 $17.17 $17.83 $16.27

Total Cost to Produce Milk per Cwt.Top 20% $15.02 $17.68 $18.22 $18.90 $19.72 $18.8380% $17.45 $19.49 $19.85 $21.04 $21.99 $20.49

Working Capital as Percent of ExpensesTop 20% 22% 32% 29% 32% 41% 30%80% 17% 19% 19% 19% 25% 19%

% Return on Equity, Without AppreciationTop 20% 16.4% 20.2% 10.8% 15.2% 22.8% 3.8%80% 6.7% 13.4% 4.5% 6.8% 16.1% -1.7%

Top 20% of Farms vs. Remaining 80% of FarmsSelected Measures, Six Year Comparison

Same 136 Farms, 2010 ‐ 2015Dairy Farm Business Summary, New York State

DISCUSSION GROUPSBUSINESS FOCUS

Discussion Groups –Business Focused

Small groups that meet to discuss business5-15 farms in a groupGenerally meet twice a year, overnightLongest tenured group meeting since

1995Objective: Increased understanding of

business and financial management

Benchmarking for Groups

Key component of groupsFull disclosureTwo reportsOne sorted independently to show relationship to

rest of groupSecond not sorted, with names

If going to talk about topic, goal is to have business data benchmarked for meeting

All looking at same things calculated same way

35

36

Total Operator Value 24 105,050 113,300 144,715 171,392 321,300 Operator Value per Month 26 3,618 3,979 4,569 5,993 6,051 Percent Change 27 1.5% 2.0% 3.0% 3.0% 8.0%ROA w/o Apprec, Standard LM Value 28 -11.3% -2.8% -0.3% 2.1% 2.1%Change in ROA 29 -0.03 -0.02 -0.01 0.00 0.00Investment per Cow 30 9,983 10,018 10,299 10,682 11,613 Annual Change 31 (922) (443) (188) (151) 420

% Tillable Land Owned 32 16.0% 30.8% 31.9% 35.2% 36.7%Milk Cow Value, End of Year 33 1,300 1,400 1,500 1,600 1,600 Mach Invest per Cow 34 $1,913 $2,094 $2,111 $2,967 $3,013Annual Change 35 -111 -104 61 171 187

Areas Benchmarked

Financial performance – annual (DFBS)Monthly key production and financial

parameters (DPM)Activity analysis projects

37

Activity Analysis Projects

ObjectivesIncrease understanding of cost and

performance across different areas of businessEncourage adoption of managerial

accounting approachesDevelop tools and approaches for use in

extension educational programming

38

Activities Analyzed

Dairy replacementsMilking centerFeed centerHerd healthReproductionHaylage harvestManure spreadingLabor allocation and cost

39

Private Industry Benchmarks

Additional resources for dairy industry in the Northeast

Providing financial analysis and benchmarking services along with business management consulting

Targeted towards client, but some published information on trends and performance

Key partners with DFBS

40

Farm Credit East

Blue Book(1975?)Large Herd Consulting Project (1988)Annual Financial AnalysisExtensive production and activity data

Dairy Profit Analyzer(2006) Monthly analysisComparison to budget

41

Dehm Associates LLC

The Dairy DashBoardAnnual Financial AnalysisMonthly Financial AnalysisMonthly financial analysisComparison to budget

Started in 1991

42

Summary

Benchmarking is key component to managementNew York dairy industry has a long history

associated with benchmarking on and across farmsContinued educational efforts can support

further adoption of benchmarking

43