May 1984 A.E. Ext. 84~17

EASTERN NEW YORK RENTER SUMMARY. - - . c 1983

:& II: c= en

Stuart F. Smith

Linda D. Putnam

Deportment of Agricultural Economics New York Stole College of Agricul ture and life Sciences

A. Statutory Coliege 01 the Stol. Univ .. "ity

Cornell University. Ithaca, New York 148SJ

1983 EASTERN NEW YOB DUllY FABK RENTEIl BUSINBSS 8UMMAJlY

INTllODUCTION

Dairyfarmers throughout lew York State subait business records for summarization and analysis through Cooperative Bxtension's Fara Business Management Program. Averages from a compilation of the individual farm reports are published in ten regional summaries and in one statewide summary.

This special Bastern New York Dairy Su...ry is an average of 30 busi­nesses that are renting substantially all of the fara real estate. The farm income, financial summary, and business analysis sections of this report include comparisons with average data on 204 owned dairy farms in the region. This report is prepared in workbook form for farm renters to use in the systematic study of their fara business operations.

LIST OF TABLES

Table Page

Management Systems, Production Technology, and Farm Size 2

Capital Investment - Farm Inventory 2

Inventory Accounting, Selected Changes 3

Farm Receipts 3

Farm Bxpenses 4

Farm Income Summary 5

Farm Family Financial Situation 6

Financial Measures and Debt Commitment 7

Measures of Size of Business 8

Crop Yields and Milk Sold Per Cow 8

Measures of Labor Bfficiency 9

Measures of Capital Bfficiency 9

Feed Costs and Related Measures 9

Machinery and Labor Costs 10

Other Cost and Receipt Measures 10

Yearly Cash Flow Planning and Analysis 11

Progress of the Farm Business 12

Business records for 30 farms in Columbia, Delaware, Dutchess, Otsego, Rensselaer, Saratoga, Sullivan, and Washington Counties are summarized in this publication.

2

SUMMARY OF THE FARK BUSINESS

Business Characteristics

The CODlbination of resources and management techniques used to put resources to work is an important part of planning. The tables below show important farm business characteristics, the number of fa!.1ll8 reporting these characteristics, and the average level of resources used in produc­tion.

MAN.ltGEMBNT SYSTEMS, PRODUCTION TECHNOLOGY, AND PARK SIZE 30 Eastern New York Dairy Parm Renters, 1983

!IE! of Business- Number Busiuess Records Number Dai!,l Record., Number

Proprietorship 16 Account Book 10 D.H.I.C. 21 Partnership 12 Agrifax 19 Owner Sampler 1 Corporation 2 Other 1 None 8

Barn !IE! Number Hilki!!S Slstem Nwaber Number

Stanchion 25 Bucket & Carry 1 Herringbone 6 Freestall 5 DUmping Station 3 Other Parlor 0 Other 0 Pipeline 20

Labor Porce !!l Parm Averase Land Use !!l Parm Averae

Operator 1. 110. 12 Total acres rented 321 2. 110. 5 Tillable acre. rented 196 3. 1110. 1

PalRily paid 110. 1 Number of Cows !!l Parm Averase Pamily unpaid 11.0. 3 Hired 110. 9 Beginning of year 65

End of year 86 Total 110. 31 Average for year 68

Ca ital Invest_nt-Parm Invento represents the 1I8rket value of resources co_itte am usiness at the beginning and end of the year. Increases in inventory occurs with herd expansion, new 1I8chinery, and building additions and appreciation of land, buildings, and 11vestock.

CAPITAL INVESTMBlCT - PARM INVENTORY 30 Eastern New York Dairy Parm Renters, 1983

My Parm AverageItea 1/1/8~ 1/1/84 1/1/83 1/1184

Livestock $ $ 89,593 $ 81,434 $_-­reed and supplies ---- 20,946 24,582 Machinery and equiPMllt 67,5~1 69,112 Land and building. 10,815 11,077

TOTAL $ $ $188,945 $186.,205

----

3

INVENTORY ACCOUNTING, SELECTED CIWIGES 30 Eaatern New York Dairy Para Rentera, 1983

Itell My Para Average

Livestock Inventory:

Total Change

Appredation.!1

Net Change in Inventor~

$_-­ $-8,159

-8,886

727

Machinery and Equipment:

Depreciation Appreciation.!/31

9,134

2,291

Real Estate:

Value addecJ!!! 681

Depredation

Appredat ion.!1 749

330

l/Change in inventory caused by inflation or deflation of prices. l/Change in inventory caused by change in herd size and/or quality. 3/positive value indicates machinery depreciation charge exceeda actual - decline in market value. 4/Cost of new real estate that can be added to value of new fara. Lost - capital has been deducted.

FARKRECEIPTS 30 Eastern New York Dairy Farm Renters, 1983

Itell My Farm Per Farm Per Cow

CASH RECEIPTS

Milk sales Crop sales Dairy cattle sold Calves and other livestock aales Gas tax refund Government payments Custom machine work Other

Total Cash Receipts

NONCASH RECEIPTS

Increase in livestock inventory Increase in feed and supplies

TOTAL FARK RECEIPTS EXCLUDING APPRECIATION

Livestock appreciation Machinery appreciation Real estate appreciation

TOTAL PARK RECEIPTS

$_-­

$____

$

$

$141,223 1,080 8,832 1,928

60 191

1,411 11058

$155,783

727 3,636

$160,146

- 8,886 2,291

330

$153,881

$2,077 16

130 28

1 3

21 15

$2,291

11 53

$2,355

131 34

5

$2,263

4

FARM EXPENSES 30 Eastern New York Dairy Farm Renters, 1983

Item My Farm Per Farm Per Cow

Hired Labor

Feed

Dairy concentrate Hay and other

Machinery

Hachine hire Machinery repairs Auto expense (farm share) Gas and oil

Livestock

Replacement livestock Breeding fees Veterinary and medicine Milk marketing Cattle lease Other livestock expense

Crops

Fertilizer and lime Seeds and plants Spray, other crop expense

Real Estate

Land, building, fence repair Taxes Insurance Rent

Other

Telephone (farm share) Electricity (farm share) Interest paid Miscellaneous

Total Cash Expenses

Decrease in livestock and/or feed ExpanSion livestock Machinery depreciation Building depreciation Unpaid familY labor @$500/month

TOTAL FARM EXPENSES EXCLUDING INTBRBST OM EQUITY CAPITAL

Interest on equity capital @51

TOTAL FARM EXPENSES

$_-­

$_-­

$_-­

$

$ 10,012 $ 147

37,444 2,960

551 44

1,391 5,397

244 5,122

21 79 4

75

2,228 2,205 2~402

12,109 92

5,883

33 32 35

178 1

87

7,544 2,662 1,687

111 39 25

1,389 2,216 2,003

13,138

20 33 29

193

502 3,238 7,317 2,190

$131,375

7 48

108 32

$1,932

o 559

9,134 749

1.700

0 8

135 11 25

$143,517 $2,111

6,462 95

$149,979 $2,206

-----

-----

Farm Business Profitability

Four common ways to measure the return. fro. a fara bu.ine.s are reported bere.

Net casb fara income reflect. tbe casb available fro. the year'. operation of the business. Labor and management income is the return to tbe operator for his or her labor and management input into tbe business. Labor mana ement, and ownersbi income per operator reflects the combined return to tbe farmer for his her triple role of worker-aanager, financier, and owner. Return on equity capital is computed witb appreciation. To compute tbe rate of return, divide return on equity capital by farm net wortb or equity capital.

FARM INCOME SUHtWlY Eastern New York Dairy Fara Renters and OWners, 1983

30 Dairy 204 Dairy Ite. My Farm Farm Renter. Farm Owners

Casb farm receipts $._-­Cash farm expenses

NET CASH FARM INCOME $_-­

Total farm receipts excluding appreciation $_-­

Total farm expenses

LABOR AND MANAGEMENT INCOME $_-­

Full-time operator-manager equivalents _______

LABOR AND MANAGEMENT INCOME PER OPERATOR-MANAGER $_-­

Total farm receipts Total farm expenses excluding

interest on equity capital

LABOR, MANAGEMENT, AND OWNERSHIP INCOME PER FARM $_-­

Full-time operator-manager equivalents

LABOR, MANAGEMENT, AND OWNERSHIP INCOME PER OPERATOR~GER $_-­

Labor, management and ownership income per farm $_-­

Less value of operator's labor and management*

Return on Equity Capital Including

$155,783 131,375

$ 24,408

$160,146 149,979

$ 10,167

1.53

$ 6,645

$153,881

143,517

$ 10,364

1.53

$ 6,774

$ 10,364

23,007

$185,647 152,233

$ 33,414

$190,384 186,821

$ 3,563

1.29

$ 2,762

$188,100

172,057

$ 16,043

1.29

$ 12,436

$ 16,043

20,026

Appreciation $ $-12,643 $- 3,983 RATE OF RETURN ON $ EQUITY -9.8% -1.3%

*Value of operator's labor and management estimated by operators.

6

Parm Pamily Pinancial Situation

The financial situation is an important part of the farm business summary. It has a direct affect on current cash outflow and future capital investment decisions. A farmer may have a good labor and management income, but high debt payments may restrict management flexibility. Parm net worth is total farm assets less total farm liabilities. Pamily net worth is total assets less all liabilities reported.

PARK PAMILY PINANCIAL SITUATION Eastern New York Dairy Parm Renters and Owners, January 1, 1984

30 Dairy 204 Dairy Item My Parm Parm Renters Parm Owners

Assets

Livestock $ $ 81,434 (includes discounted lease pymts) --- ­ (0)

Peed and supplies 24,582 Machinery and equipment 69,844

(includes discounted lease pymts) (732) Land and buildings 12,467

(includes discounted lease pymts) (1,390) Co-op investments 7,409 Accounts receivable 12,915 Cash and checking accounts 4,170

Total Parm Assets $212,821$_-­

Savings accounts 2,686 Cash value life insurance 631 Stocks and bonds 2,305 Nonfarm real estate 3,933 Auto (personal share) 1,062 All other 22445

$100,965 (73)

34,822 85,326

(857) 231,411

(2,300) 10,258 13,753 2,286

$478,821

3,689 2,246 3,629 4,749 1,243 5,827

$ 21,383

$500,204

$107,352 61,332 3,230 4,287 7,350

$183,551

831

$184,382

$295,270

$315,822

Total Nonfarm Assets

TOTAL ASSETS

Liabilities

Long term Intermediate Financial lease Short term Other farm accounts

Total Parm Liabilities

Nonfarm Liabilities

TOTAL LIABILITIBS

FAIM NET WORTH (EQUITY CAPITAL)

FAMILY NET WORTH

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$

$ 13,062

$225,883

$ 9,312 57,791 2,122 4,210

10,146

$ 83,581

1,546

$ 85,127

$129,240

$140,756

----

----

----

7

Payment ability is the most important consideration in deteraining if and how proposed investments should be financed. The fara business must produce sufficient cash income to meet operating expenaes, to cover family or personal living expenses, to make payments on debts, and to cover cash purchases of capital iteas that occur during the year.

Payment ability is estimated in the following table. Interest paid and income from off-fara work are added to net cash fara income because planned or budgeted debt payments will include interest as well as princi­pal. Estimate family living expenses for your fara to calculate cash available for debt payment and capital purchases made in cash.

Debt payments planned are the scheduled debt payments as of January. Some farms in the group had scheduled debt payments exceeding 50 percent of the milk receipts. put a "big squeeze" living.

C01lllllitting this much cash inflow to debt payments on cash available for operating the business and f

can amily

FINANCIAL MEASURES & DEBT OOMMITKENT Eastern New York Dairy Farm Renters and Owners, January 1, 1984

30 Dairy 204 Dairy Item My Fara Fara Renters Fara OWners

Payment Ability

Net cash farm income Plus interest paid

Plus off-farm income

CASH AVAILABLE FOR DEBT SERVICE AND LIVING

Less family living expenses*

CASH AVAILABLE FOR DEBT PAYMENTS AND CAPITAL PURCHASES

Scheduled Annual Debt Payments

Long term

Intermediate

Financial lease

Short tera

Other farm accounts

TOTAL PAYMENTS PLANNED FOR 1983

Measures of Debt Commitment & Equity Position

Debt payments planned per cow Debt payments planned as

percent of milk sales

Farm debt per cow

Percent equity (total)

$_-­

$

$--- ­$

$

$_-­

$_-­

%

$24,408 7,317

1,298

$33,023

22,296

$10,727

$1,418

18,339

3,058

1,653 $24,468

$285

17% $972

62%

$33,414

17 ,171

1,681

$52,266

20,970

$31,296

$13,737

18,929

3,370

22556

$38,592

$476

23%

$2,266

63%

*Estimated as $10,500 per family plus four percent of cash receipts.

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8

ANALYSIS OF THE FARM BUSINESS

In analyzing a farm business, a manager must consider measures or factors that reflect the performance of specified parts of the farm busi­ness. One method of doing this is to look at factors of size, production, labor efficiency, capital efficiency and cost control. These factors are considered on the following pages.

MEASURES OF SIZE OF BUSINESS Eastern New York Dairy Farm Renters and Owners, 1983

Item My Farm 30 Dairy

Farm Renters 204 Dairy

Farm Owners

Number of cows

Number of heifers

Pounds of milk sold

Worker equivalent

Total work units

Total tillable acres

68

49

985,600

2.58

732

203

79

64

1,182,600

2.83

878

248

CROP YIELDS & MILK SOLD PER COW 30 Eastern New York Dairy Farm Renters, 1983

!!l Farm Averase of Farms Re2orti]f Cr02 Acres Yield Farms Acres Yield~cre

Baled hay 25 (combined

Bay crop silage 16 below) Total Hay Crops 28 118 2.5 tons DK

Corn silage 27 65 11.6 tons Other forage 2 11 2.5 tons DK

Total Forage Crops 28 182 2.9 tons DK

Grain corn 8 37 82.1 bu. Oats 4 33 52.0 bu. Other crops 2 75

Tillable pasture 6 27

Idle tillable land 6 44

Milk sold per cow 14,494 lbs.

1983 average yields for 204 dairy farm owners in Eastern New York included: Milk sold per cow, 14,970 pounds All bay crops, 2.4 tons dry matter per acre Corn silage, 11.8 tons per acre

----

9

MEASURES OP LABOR DPICIENCY Bastern New York Dairy Parm Renters and Owners, 1983

30 Dairy 204 Dairy Ite. Hy Parm 'arm bnters 'ara Owners

Cows per worker 26 28

Pounds of milk sold per worker 382,016 417 ,880

Work units per worker 284 310

MEASURES OP CAPITAL EFPICIENCY Bastern Hew York Dairy Parm Renters and Owners, 1983

I 30 Dairy 204 Dairy

Ite. Hz Para Para Renters Para Owners

Para capital per worker $ $72,172 $158,761

Parm capital per cow $ $2,165 $5,547

Machinery investment per cow $ $804 $1,043

Machinery per tillable acre $ $340 $341

Capital turnover years 1.2 years 2.4 years

PBBD COSTS AND BELATED MEASURES Eastern New York Dairy Parm Renters and Owners, 1983

30 Dairy 204 Dairy Ite. My Parm Para Renters Parm Owners

Dairy concentrate purchased per cow

Dairy concentrate purchased per cwt. of milk sold

Percent dairy concentrate is of milk receipts

Crop expense per cow

Peed and crop expense per cwt. milk

Porage dry matter harv. per cow (tons) Acres of forage per cow

Total tillable acres per cow

Pertilizer and lime per tillable acre

Heifers as percent of cow numbers

$_-­

$_-­

--_% $____

$_-­

$

%

$551

$3.80

27%

$175

$5.31

7.8

2.7

3.0

$37

72%

$535

$3.58

25%

$162

$4.76

7.4

2.4

3.1

$34

81%

10

MACHINERY & LABOR COSTS Eastern New York Dairy Farm Renters and Owners, 1983

30 Dairy 204 Dairy Item My Farm Farm Renters Farm Owners

Machinery: 1Depreciation $

Interest2

3Operating expense

Total machinery

Per cow

Per cwt. of milk

Labor: 4Value of operators $

Unpaid family5

Hired

Total labor $

Per cow

Per cwt. milk

Labor &machinery costs/cwt. milk $

$ 9,134 $12,129

3,418 4,158

12 2154 162124

$24,706 $32,411

$363 $410

$2.51 $2.74

$13,675 $11,482

1,'00 1,341

1°1°12 14,592

$25,387 $27,415

$373 $347

$2.58 $2.32

$5.09 $5.60

lRegular depreciation from last year's tax plus 10 percent of new purchases.

2Five percent of average machinery investment. 3Machine hire, repairs, farm share auto expense, and gas and oil. 4$750 per month. 5$500 per month.

OTHER COST AND RECEIPT MEASURES Eastern New York Dairy Farm Renters and OWners, 1983

Item !!l Farm 30 Dairy

Farm Renters 204 Dairy

Farm Owners

Total livestock expense (exlcuding replacements & overhead) per cow $ $334 $331

Total real estate expenses per cow $ $276 $163

Milk and cattle sales per cow $ $2,235 $2,271 Average price per cwt. milk sold $ $14.33 $14.18

Total cash receipt. per worker $ $60,381 $65,600

11

Y&AB.LY CASB PLOW PLANNING , ANALYSIS

The worksheet below is a valuable tool in planuiOl expansiona and for setting goals for improving the fara business. The average is from 30 Eastern New York dairy fara renters.

Average My Farm, Cows

Item Per Cow Per Cow Total Goal

CASH RECEIPTS Milk sales $2.077 Crop sales 16 Dairy cattle 130 Calves & other livestock 28 Other 40

Total Cash Receipts $2,291

CASB EXPENSES Hired labor $ 147 Dairy concentrate Hay and other

551 44

Machine hire 20 Machine repair &auto expense Gas & 011

83 75

Replacement livestock 33 Breeding fees 32 Vet & medicine 35 Milk marketing (ADA, Dues) 178 Other livestock exp. (incl. $1 Fertilizer & lime

lease) 88 111

Seeds & plants 39 Spray & other 25 Land, bldg. fence repair 20 Taxes 33 Insurance 30 Rent 193 Telephone (farm share) 7 Electricity (fara share) 48 Miscellaneous 32

Total Cash Expenses1 $1,824

Total Cash Receipts $2,291

Total Cash Expenses1 -1,824

Net Cash Flow $ 467

Cash Family Living Expense2 - 328 Amount Left for Debt Service,

Capital Investment & Retained Earnings $ 139

Scheduled Debt Service - 285 Available for Capital Investment $ (146)

Planned Expansion Livestock Purch. Planned Equipment Purchase

Borrowed or Equity Funds Needed

$_-- $_-- $_-­

$_-- $_-- $_-­

$_-- $_-- $_-­

$_-- $_-- $_-­

$_-- $_-- $_-­

$_-- $_-- $_-­

$ $ $_-­

$ $ $

1Interest paid excluded for it is contained in Scheduled Debt Service.

2Estimated: $10,500 per family and four percent of cash farm receipts.

12

PROGRESS OF THE FARM BUSINESS

Comparing your business with that of other farmers is one part of a business checkup. It is equally important to compare your current year's business with that of earlier years to show the progress you are making, and to plan ahead, by setting business targets or goals.

Item 1981 1982 1983 1984 Goal

Size of Business

Number of cows

Number of heifers

Pounds of milk sold

Worker equivalent

Total tillable acres

Rates of Production

Lbs. milk sold per cow

Tons hay D.M. per acre

Tons corn silage per acre

Labor Efficiency

Cows per worker

Lbs. milk sold per worker

Cost Control

Purch. feed as % milk sold

Feed & crop exp./cwt. milk

Labor &mach. cost per cow

Capital Efficiency

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

Farm capital per

Capital turnover

Price

cow $_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

$_-­

Price per cwt. milk

Financial Summary $_-­ $_-­ $_-­ $_-­

Net cash farm income

Labor &agBt. inc./oper.

Parm net worth

Rate of return on equity

Percent equity

Farm debt per cow

$

$

$ ____X

--....;%

$

$_-­

$_-­

$_-­%

%

$_-­

$

$

$ ____X

____X

$

$_-­

$_-­

$_-­%

%

$_-­