Dairy Industry Trends in NYS - Benchmarking Jason Karszes Senior - - PowerPoint PPT Presentation

Dairy Industry Trends in NYS - Benchmarking

Jason Karszes Senior Extension Associate PRO-DAIRY

B21 Morrison Hall e-mail JK57@Cornell.edu Cornell University Phone 607-255-3809 Ithaca, NY 14853

Department of Animal Science College of Agriculture and Life Sciences Cornell University

New York Dairy Industry

Currently 3rd largest dairy state Number of herds decreasing Total cow numbers decreasing Average herd size increasing Production per cow increasing Total state production increasing Larger % 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

products

Yogurt Cottage cheese Sour 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 18,879 107 2007 5,771 627 12,103 19,303 109 2008 5,622 626 12,432 19,859 111 2009 5,475 619 12,424 20,071 113 2010 5,370 611 12,713 20,807 114 2011 5,246 610 12,826 21,026 116 2012 5,154 610 13,190 21,633 118 2013 5,042 610 13,463 22,080 121 2014 4,955 615 13,730 22,325 124 2015 4,817 618 14,100 22,816 128 20161 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 24,484 656 2012 136 92.6 2,365 25,532 681 2013 136 96.7 2,490 25,755 711 2014 136 101.9 2,611 25,631 749 2015 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 Farms

Dairy 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 year

New comparison and trend reports with

web-based system

Faster information back to producers

Why Farms Participate

Whole farm financial analysis

Are we making any more money Meet lending requirements Improve record keeping system

Standardized analysis techniques  Multi-year trends

Why Farms Participate

Accrual adjusted consolidated financial

statement

Financial analysis Budgeting

Independent review of data Benchmarks of farm performance

Why Farms Participate

Identify areas to improve Training of management Information for use with advisors Provide data to University for

Research Extension Teaching

Use of Benchmarks on Farm

Compare to past performance Compare to goals Compare to budget Local or regional data National data Other types of businesses

13

Extension Use of Dairy Benchmarks

Presentations Articles Publications Discussion groups One-on-one farm visits

14

Focus Areas

Changes Trends Relationships Comparisons Financial 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 Return

20 Years of Variability

DFBS Farms, New York State, 1997 ‐ 2016

Gross Milk Price, Cwt. Total Cost to Produce Milk, Cwt. Purchased Grain & Conc. % ROA w/o Apprec.

Risk Management

Debt Coverage Ratio Debt per Cow Working Capital % Expenses Percent Equity Operating Expense Ratio

48.05 $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, 2014

17

Risk Management

% Return to All Capital Debt Coverage Ratio Debt per Cow Working Capital % Expenses Percent Equity Operating Expense Ratio

6.6 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 0.63 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, 2015

18

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

• f

Number

• f

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 1,083,118 Less than .50 38 262 15,824 525,978 671,545 348,852

ASSET TURNOVER AND PROFITABILITY

168 New York Dairy Farms, 2015 Number

• f

Number

• f

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

301,899 Less 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.

• f

Farms No.

• f

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.

• f

Farms No.

• f

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 – 2015 Capture two 3-year cycles Top 20% of farms by ROA w/o

appreciation vs remaining 80% of farms

What are the trends and comparison

31

32

2010 2011 2012 2013 2014 2015 Net Investment Per Cow Top 20% $582 $1,103 $1,063 $1,011 $1,538 $1,188 80% $622 $850 $986 $886 $1,164 $1,223 Farm Capital per Cow Top 20% $8,251 $9,064 $9,722 $10,370 $11,202 $11,815 80% $9,293 $9,849 $10,567 $11,032 $11,697 $12,365 Tillable Acres per Cow Top 20% 1.75 1.79 1.78 1.77 1.77 1.80 80% 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 $628 80% $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 $14.74 80% $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 $18.83 80% $17.45 $19.49 $19.85 $21.04 $21.99 $20.49 Working Capital as Percent of Expenses Top 20% 22% 32% 29% 32% 41% 30% 80% 17% 19% 19% 19% 25% 19% % Return on Equity, Without Appreciation Top 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 Farms

Selected Measures, Six Year Comparison Same 136 Farms, 2010 ‐ 2015 Dairy Farm Business Summary, New York State

DISCUSSION GROUPS BUSINESS FOCUS

Discussion Groups – Business Focused

Small groups that meet to discuss

business

5-15 farms in a group Generally meet twice a year, overnight Longest tenured group meeting since

1995

Objective: Increased understanding of

business and financial management

Benchmarking for Groups

Key component of groups Full disclosure Two reports

One sorted independently to show relationship to

rest of group

Second 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 0.00

Investment 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 $3,013

Annual 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

Objectives

Increase understanding of cost and

performance across different areas of business

Encourage adoption of managerial

accounting approaches

Develop tools and approaches for use in

extension educational programming

38

Activities Analyzed

Dairy replacements Milking center Feed center Herd health Reproduction Haylage harvest Manure spreading Labor 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 Analysis Extensive production and activity data

Dairy Profit Analyzer(2006)

Monthly analysis Comparison to budget

41

Dehm Associates LLC

The Dairy DashBoard

Annual Financial Analysis Monthly Financial Analysis

Monthly financial analysis Comparison to budget

Started in 1991

42

Summary

Benchmarking is key component to

management

New York dairy industry has a long history

associated with benchmarking on and across farms

Continued educational efforts can support

further adoption of benchmarking

43