# Calculating Your Milk Production Costs and Using the Results to Manage Your Expenses

Save this PDF as:

Size: px
Start display at page:

Download "Calculating Your Milk Production Costs and Using the Results to Manage Your Expenses"

## Transcription

1 Calculating Your Milk Production Costs and Using the Results to Manage Your Expenses by Gary G. Frank 1 Introduction Dairy farms producing milk have numerous sources of income: milk, cull cows, calves, crop sales, CCC milk assessment refund, cooperative dividends, property tax credit on income taxes, crop-related government payments and more. In addition, on most dairy farms the cost of producing crops sold for cash cannot be separated from the cost of producing crops fed to the dairy herd. This large number of income sources makes determining the cost of producing milk more difficult than just dividing costs by the hundredweight of milk sold. The most meaningful divisor when calculating cost of milk production on a dairy-crop is an output (income) equivalent unit. This measure is calculated by summing the income from the sale of all products produced on the farm and then dividing by the price of milk. The resulting value is the milk production (hundredweight) required to generate an equivalent income. That is, if the farm produced only milk, how much milk would it have had to produce in order to have an identical income. A farm's total income (including cash sales of crops and changes in the value of feed and cattle inventories) must be included when calculating output equivalent units. This method does not generate satisfactory results when cropping enterprises income exceed 20 percent of total income. Example: if you plan to use this method and your total income is \$200,000, your crop sales should not exceed \$40,000 and total non-dairy income should not exceed \$60,000. Calculating Your Hundredweight Equivalent Production The first step in calculating your CWT EQ is to calculate your total income. Using Worksheet No. 1, calculate your total income (lines 1 through 6), then divide line 6 by line 7 to arrive at the hundredweight equivalents of milk sold by your farm. This is the critical value. (Note: This method may give unsatisfactory results if your dairy enterprise income is less than 70 percent of your total income. In that case, you will need to do a more detailed and time consuming cost of milk production calculation.) Worksheet No. 1 Example Your Farm 1. Total Schedule F Income \$125,709 (Schedule F, line 11) 2. Form 4797 Income 1 \$ 12,143

2 3. Change 2 in Feed Inventory -\$ 4, Change 2 in Livestock Inventory \$ 10, Other \$ 0 6. Total Farm Income \$144,225 (On this worksheet, add lines 1 through 5.) 7. Average Milk Price 3 \$ Hundredweight Equivalents (CWT EQ) of Milk Produced 11,215 Critical Value (On this worksheet, divide line 6 by line 7) 1 Form 4797 usua lly contains only income from the sale of culled raised dairy livestock. In those cases, simply enter the income reported. However, Form 4797 can contain the "one-time" sale of some other asset(s), such as an old plow. If your Form 4797 contains these items, subtract the amount of their sale from the total Form 4797 income before recording it on line 2. 2 Change equals the ending amount minus the beginning amount. The best way to get this value is to ask yourself if there was any change in the quantity of this item on hand during the year in question. If the answer is "yes" then follow with the question, "how much? and multiply that figure by a long run average price. This method avoids having to determine the absolute inventory level at the beginning and end of the year in question. 3 If you wish to compare your costs to the costs of other farms, use the US average all milk price for the year in question. It was \$13.74, \$12.27, \$13.15, \$12.86, \$13.03 and \$12.86 in , respectively. Using these prices allows you to compare your costs to the averages presented here regardless of the actual price you received for your milk. Or you can divide your total milk income (before any deductions for hauling, marketing, etc.) by the number of hundredweight of milk you sold during the year to calculate the average milk price on your farm. However, then you can only accurately compare your costs this year to your costs in previous years. Calculating Your Basic Cost per Hundredweight Equivalent Basic Cost is defined as your total accrual adjusted costs excluding all wages and benefits, (both paid and unpaid) all interest costs, (both cash and non-cash) and all depreciation. This cost is similar to the Cost of Goods value used by non-farm businesses in evaluating the performance of their businesses. Worksheet No. 2 is used to calculate Basic Costs per CWT EQ. It starts by adjusting the expenses you reported on Schedule F for changes in accounts payable and prepaid expenses (lines 1 to 4). Next the wages, benefits, interest, and depreciation claimed on Schedule F are subtracted (lines 5 to 7). The result (line 8) is your "Total Basic Costs." (Note: Since the Schedule F does not include a cost for unpaid wages and benefits (unpaid labor and management) nor a cost for non-cash interest (opportunity interest), these costs must not be subtracted in this computation.) 2

3 Worksheet No. 2. Example Your Farm 1. Total Schedule F Expenses \$111,306 (Schedule F, line 35) 2. Change 1 in Accounts Payable \$ 1, Change 1 in Prepaid Expenses \$ 1, Total Allocated Costs \$111,649 (On this worksheet, add lines 1 and 2, then subtract line 3) 5. Total Interest Paid \$ 8,470 (Add Schedule F lines 23a and 23b) 6. Wages and Benefits Paid \$ 12,682 (Only those reported on Schedule F; to obtain this value add Schedule F lines 17, 24, and 25) 7. Depreciation Claimed \$ 15,346 (Schedule F line 16 minus Depr. claimed on livestock) 8. Total Basic Costs \$ 75,151 (On this worksheet, line 4 minus lines 5, 6, and 7) 9. Basic Cost per CWT EQ \$ 6.70 (On this worksheet, line 8 divided by line 8 on Worksheet No. 1) 1 Change equals the ending amount minus the beginning amount. Chart No. 1, from a study of 928 farms belonging to the Lakeshore and Fox Valley Farm Management Associations, shows that 150 farms had basic costs of production per CWT EQ in the \$7.01 to \$7.50 range and that 55 percent of the farms in this study had basic costs of \$7.50 or less. Another example: 29 farms had basic costs in the \$9.51 to \$10.00 range and 95 percent of farms had basis costs of \$10.00 or less. Chart No. 1 3

4 Number of Farms <\$4.00 Number of Farms in Various Basic Cost Ranges and the Cumulative Percentage \$5.00 \$6.00 \$7.00 \$8.00 \$9.00 \$10.00 \$11.00 \$12.00 Basis Cost of Production per CWT EQ Average = \$7.41 >\$ % 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00%.00% Frequency Cumulative % After you calculate your basic cost per CWT EQ, compare it to (mark it on) Chart No. 1. This will show you how your basic costs compares to the other farms in this study. A reasonable goal for basic cost per CWT EQ is \$7.00 or less. This goal is based on a milk price of about \$13.00 and average dairy-crop farm mix of land (3 acres per cow) and capital (owning most of your own tillage, planting, and harvesting equipment). If your basic farm costs are above \$7.00 per CWT EQ, you should place some effort into cost containment. Comparing Your Schedule F Expenses to Averages Effective cost containment requires direction and focus of your financial management resources. One way to obtain direction is to compare your farm s costs to an average farm s costs. The 1995 average costs, by category, are shown in Table 1. The 928 dairy farms used to calculate these averages had a combined total of more than 70,000 cows and produced more that 1.3 billion pounds of milk. These averages were calculated by dividing the total income on each farm by the US average milk price for 1995 (\$12.86) to obtain the farm s CWT 4

5 EQ. That CWT EQ was divided into the amount of expense in each cost category and averaged. In order for you to use this table, you will need to go to your Schedule F and divide the expenses you have in a category by the CWT EQ you calculated on Worksheet No. 1 (line 8). Enter the results in the space provided and compare your value to the value in the Average column. 2 Table 1 Study Farms' Cost per CWT EQ in Selected Expense Categories Cost Per CWT EQ Your Item Average Low 20% Farm Car & Truck \$0.05 \$0.05 Chemicals Custom Hire Feed Purchase Fertilizer and Lime Freight and Trucking Cost per CWT EQ Your Your Item Average Low 20% Farm Farm Utilities \$0.28 \$0.25 Vet Fees & Medicine Breeding Fees Other Expenses Non-cash Adjustments Basic Costs / CWT EQ \$ 7.41* \$5.66* Fuel and Oil Farm Insurance Marketing Fees Rent/Lease Equipment Rent/Lease Other Repairs & Maintenance Seeds & Plants Purch Supplies Purchased Taxes Mortgage Interest & Other Interest Emp Benefit Program Labor Hired Depreciation Other Costs / CWT EQ \$ 3.55* \$3.55* ====== ==== ======= Total Cost / CWT EQ \$10.96* \$9.21* * Totals may not add due to rounding. The average column on Table 1 will help you identify categories of expense that are above average. For instance, if your insurance costs are \$0.40 per CWT EQ and the average is \$0.18, you should investigate why this difference exists. Your investigation can lead to one of three results. First, you have miscoded some of your expenses. Second, you are managing the category of expenses correctly and the difference that exists is explainable (you have high insurance costs because you live in a flood plain). Third, you are managing the category of expenses incorrectly and do not know it. It is this third observation that will give you insights into reducing your costs. 5

6 Examine each category that is above average, try to find out why it is above average and if there is anything you can do about it. If there is, do it! Closely examine a category even if it is only 2 or 3 cents above average. There are over 20 categories and a couple of pennies on each adds to over a half dollar quickly. Production costs can be reduced by increasing production, if the cost of producing the additional output is less than your current average cost. In addition, some categories are related to one another. Example: low fertilizer costs may lead to high purchased feed costs. Information in the low 20% column on Table 1 should be used when setting long term goals. It contains the costs of the 181 farms in this sample with the lowest basic cost per CWT EQ. Basic Costs are Satisfactory, But... You have checked over all your costs and they are in range, but you are still not cash flowing and/or profitable. Where should you look next for financial management opportunities? Three possibilities are: One: Total interest paid per CWT EQ Sum the amounts on lines 23a and 23b, Schedule F, and divide this sum by line 8 from Worksheet No. 1 (your hundredweight equivalent production). The goal is \$1.35 per CWT EQ or less. If your total interest paid is greater than \$1.35 you will likely need to restructure debt or get interest concessions to stay in business. Two: Labor and Management costs (including family living draw) per CWT EQ Sum the amounts on lines 17, 24, and 25, Schedule F, and your family living expenses (draw) in excess of what you paid yourself or your dependents (as defined by Federal Tax Code). Divide this sum by line 8 from Worksheet No. 1. The goal is \$3.00 per CWT EQ or less. If your labor costs are greater than \$3.00 per CWT EQ you will need to get more productivity for each unit of labor or reduce the pay of existing workers. Three:Principal and down payments per CWT EQ Unfortunately, there is not a nice, concise source to look at to find your total principal and down payments. You will need to find them, sum them, and divide the sum by line 8 from Worksheet No. 1. The goal is \$1.65 per CWT EQ or less. This measure is not clean cut because it is split into two components: an amount for principal payments against current loans and an amount for down payment on new investments. If you use all \$1.65 per CWT EQ as principal payments, you may have to borrow all of the moneys needed for any new investments. 6

7 You may be wondering how these goals were obtained and how they figure into the big picture. The interest paid goal is a combination of acceptable debt load per cow and interest rates. Use of either of these alone isn t sufficient because of the number of financing options available and used by dairy farmers. The labor paid goals were derived from a family s presumed abilities and needs. Those were presumed to be: one - a family can provide the labor for a 50 cow dairy; two - 50 cows should produce at approximately 10,000 CWT EQ per year; and three - a family can not live on less than \$30,000 per year (when buying health insurance and paying the required social security and income taxes). Therefore a least \$3.00 per CWT EQ is thought to be needed for labor. The goal for principal and down payments is based on the assumption that a farm must have the ability to repay existing debts in 5 to 8 years. The average investments and indebtedness per cow are \$5,000 to \$8,000 and 30 percent, respectively. These values translate into a debt per cow of \$1500 to \$2500. In order to repay that debt in 5 to 8 years the manager needs to repay approximately \$300 of debt per cow per year. As stated above, some of these moneys may be used as down payment on new investments plus new borrowing may occur, so the farm will not likely be debt free in 5 to 8 years. However, if applying all available dollars to current debt would not reduce it to zero in 5 to 8 years, this area of financial management needs attention. In addition, the amount of investment per CWT EQ is important. That goal is \$32.50 or less, when the assets are valued on a market basis. If your investment is greater than the goal, you have three options. One, reduce your investment without reducing output (example: sell some land). Two, increase output without increasing investment or basic costs per CWT EQ (example: increase production per cow). Three, expand (example: if the amount invested per additional CWT EQ is less that your current investment, the average investment per CWT EQ will decrease.) All three of the solutions mentioned in the previous paragraph revolve around the output of the farm business in question. The size (output) of a farm business is important because even an efficient (low basic costs per CWT EQ) farm business needs an adequate size to cover family living and other fixed costs. Basic costs were defined as your total accrual adjusted costs excluding all wages and benefits, both paid and unpaid; all interest, both cash and non-cash; and all depreciation. Therefore, if the basic cost is subtracted from the average milk price you obtain the dollars per CWT EQ available to cover those costs. (In this example: \$ \$6.70 = \$6.16) Multiplying that dollar value by the CWT EQ produced on this farm will yield the total dollars available to cover those costs. (In this example: \$6.16 X 11,215 = \$69,084.) This value may be enough to support a family, additional labor needs, interest, and capital on a 50 cow dairy, but a 25 cow dairy (5,608 CWT EQ of production) that is just as efficient may not survive because it would only have \$34,545 to cover the costs of the same items. 7

8 Calculate this total dollars available to cover non-basic costs each year and compare the amount to both previous years and needs. Summary Does this all add up? The summary below shows that if one category of expense is not meeting its goal, then some other area must exceed its goal or that farm business may not be able to meet its financial obligations. Farm businesses that start with \$8.50 or more in basic costs can still be providing a living for the family that is operating it. However, that can only be accomplished by having a very low debt load and/or low labor and management charges (family living). Basic Costs: \$7.00 Interest Costs: \$1.35 Labor and Management Costs: \$3.00 Principal and Down Payments: \$1.65 Total: \$13.00 If the sum of Basic, Interest, Labor, and Management costs exceed their goals, then there will be additional moneys available to the manager of this dairy business for principal and down payments. In this case, the manager should be inquiring about investment strategies for those surpluses. Some individuals like to invest in agriculture and they will likely expand. Others may like some liquid off-farm investments; they should invest in stocks, bonds, and CD s. Still others like non-liquid off-farm investments; they should invest in rental properties - houses, apartments, or recreational. A key concept: Don't start expanding until you have understood how to control your basic costs. Expansion may help you control your basic costs, but don't count on it. Expand only after basic costs are in order. Remember, all investments (farm and non-farm) have risks associated with them. The biggest risk in agriculture is price and that risk is beyond your control. Therefore, measure twice and cut once. It is easier to find and correct your mistakes on paper than to correct them after the cement has been poured. This analysis of production costs should be considered a first step. Some farm mangers may want to calculate the production cost of a bushel of corn, a ton of hay or corn silage, etc. In order to do this they will need more detail in their farm accounting records. Some of the detail they will need is cash income and expense by enterprise, non-cash income and expense by enterprise, capital use by enterprise, and labor and management required by enterprise. There is a spreadsheet program (ENTERPR.WK1 - for Lotus and Quattro users and ENTERPR.XLS - for Excel users) available from the Center for Dairy Profitability to assist in this task. The cost is \$ The address is: 6175 Observatory Dr., Madison, WI

9 Endnotes: 1 Agricultural economist specializing in farm management in the Center for Dairy Profitability, Cooperative- Extension, University of Wisconsin-Madison. 2 Caution: If you have changes in accounts payable or prepaid expenses, you will need to adjust the appropriate categories to reflect those changes. Example: you had an increase in the amount due at the feed mill of \$5,000. The feed expense you entered on your Schedule F would not have included that \$5,000. Therefore, in order to get the correct answer for the category Feed Purchased per CWT EQ, you will need to add that \$5,000 to the amount on the Feed Purchased line before dividing by the CWT EQ value calculated above. 9

### Cost of Production versus Cost of Production by Gary Frank 1 August 17, 1998

Cost of Production versus Cost of Production by Gary Frank 1 August 17, 1998 Introduction Cost of production per unit is the cost associated with production divided by the number of units produced. The

### Farm Financial Management

Farm Financial Management Your Farm Income Statement How much did your farm business earn last year? There are many ways to answer this question. A farm income statement (sometimes called a profit and

### How much did your farm business earn last year?

Your Farm Ag Decision Maker Income Statement File C3-25 How much did your farm business earn last year? Was it profitabile? There are many ways to answer these questions. A farm income statement (sometimes

### Appendix I Whole Farm Analysis Procedures and Measures

Appendix I Whole Farm Analysis Procedures and Measures The whole-farm reports (except for the balance sheets) include the same number of farms, which were all of the farms whose records were judged to

### Enterprise Budgeting. By: Rod Sharp and Dennis Kaan Colorado State University

Enterprise Budgeting By: Rod Sharp and Dennis Kaan Colorado State University One of the most basic and important production decisions is choosing the combination of products or enterprises to produce.

### Establishing and Using a Farm Financial Record-Keeping System

PB 1540 Establishing and Using a Farm Financial Record-Keeping System Delton C. Gerloff, Associate Professor, Agricultural Economics Robert W. Holland Jr., Assistant Area Specialist - Farm Management For

### How much financing will your farm business

Twelve Steps to Ag Decision Maker Cash Flow Budgeting File C3-15 How much financing will your farm business require this year? When will money be needed and from where will it come? A little advance planning

### Line 1b. In 2011, he sold steers he had bought for resale. He enters sales of \$13,596. This amount is also written on the total line 1c.

Schedule F (Form 1040), Profit or Loss From Farming Note. Schedule F has numerous changes for 2011. In addition, there are a number of lines that the IRS has decided not to use in 2011, but appear on the

### Setting up your Chart of Accounts

FARM FUNDS WORKSHEETS Setting up your Chart of Accounts Supplies Supplies are any inputs that will be used on a field, group of livestock, or equipment. Setting up a supply will set up the related expense

### Cost of Production. Cost of Production. Cost of Production!

Cost of Production Versus Cost of Production And then there is, Cost of Production! Ken Bolton and Gary Frank Introduction September 2009 Historically business advisors have encouraged farm managers to

### Would you like to know more about the

Your Net Worth Ag Decision Maker Statement File C3-20 Would you like to know more about the current financial situation of your farming operation? A simple listing of the property you own and the debts

### Agriculture & Business Management Notes...

Agriculture & Business Management Notes... Preparing an Income Statement Quick Notes... The income statement measures the profitability of a business over a specific period of time. Cash reporting of income

### Farm Tax Record Book SAMPLE

Farm Tax Record Book TABLE OF CONTENTS Farm Receipts... Milk Sales and Deductions Worksheet... Government Payments Worksheet... Commodity Certificates... Sale of Livestock Worksheet... Farm Expenses...0

### Farm Business Analysis Report BEEF SUMMARY

Extension No. M M-356 ESQ No. 490 1977 Farm Business Analysis Report BEEF SUMMARY Department of Agricultural Economics and Rural Sociology Cooperative Extension Service The Ohio State University Columbus,

### Balance Sheet of Wisconsin Dairy Farms by Gary Frank 1 August 11, 2001

Balance Sheet of Wisconsin Dairy Farms - 2000 by Gary Frank 1 August 11, 2001 Introduction One of the most important indicators of financial progress in a farm business is the Balance Sheet, sometimes

### BUSINESS TOOLS. Preparing Agricultural Financial Statements. How do financial statements prove useful?

Preparing Agricultural Financial Statements Thoroughly understanding your business financial performance is critical for success in today s increasingly competitive agricultural, forestry and fisheries

### Two-Generation Farming

Two-Generation Farming Transferring Machinery and Livestock Contents Methods of transferring ownership... 2 Income tax considerations... 4 Transferring machinery... 6 Transferring breeding livestock...

### FLUE-CURED TOBACCO BUDGET INFORMATION Eric Eberly, Retired Extension Agent, Farm Business Management

FLUE-CURED TOBACCO BUDGET INFORMATION Eric Eberly, Retired Extension Agent, Farm Business Management Introduction The flue-cured tobacco budget is an estimate of the costs to produce 2500 pounds of marketable

### Using the Partial Budget To Analyze Farm Change

1 Fact Sheet 547 Using the Partial Budget To Analyze Farm Change Many changes proposed by a manager on a farm affect only part of the business. Therefore, a complete farm budget is not needed to determine

### The financial position and performance of a farm

Farm Financial Ag Decision Maker Statements File C3-56 The financial position and performance of a farm business can be summarized by four important financial statements. The relationship of these statements

### Balance Sheet or Net Worth Statement

Balance Sheet or Net Worth Statement Assets = Liabilities + Owner Equity Owner Equity = Assets - Liabilities Balance Sheet Assets Liabilities Owner Equity Assets Everything owned that has value including

### Cash Flow Projection for Operating Loan Determination

E-19 RM-7.0 02-09 Risk Management Cash Flow Projection for Operating Loan Determination Danny Klinefelter and Dean McCorkle* A cash flow statement can be simply described as a record of the dollars coming

### Farm Financial Statements Net Worth Statement Statement of Cash Flows Net Income Statement Statement of Owner Equity

Farm Financial Statements Net Worth Statement Statement of Cash Flows Net Income Statement Statement of Owner Equity Recording Transactions in the Date Cash Journal Description Value Amount (bu., lb.,

### The data for this report were collected by Iowa Farm Business Association consultants and compiled by Iowa State University Extension and Outreach.

2015 Cash Iowa Rental Farm Rates Costs for Iowa Ag Decision Maker Returns 2015 Survey File C1-10 The farm record data utilized in this report were obtained from the Iowa Farm Business Association. The

### Breaking Barriers for Beginning Farmers and Ranchers (NIFA-USDA # )

Breaking Barriers for Beginning Farmers and Ranchers (NIFA-USDA #2010-49400-21729) Fundamental Record Keeping and Financial Statements Jose A., Ph.D. Assistant Professor of Agribusiness Department of Agricultural

### Agriculture & Business Management Notes...

Agriculture & Business Management Notes... SPA Standardized Performance Analysis For Sheep Producers -- A Worksheet Approach -- Sheep producers have been challenged to be lower cost producers, to become

### Preparing A Cash Flow Statement

Preparing A Cash Flow Statement By: Norm Dalsted and Rod Sharp Colorado State University It is highly unlikely you would attempt to drive to Detroit, Michigan, without first consulting a road map. You

### Developing a Cash Flow Plan

Oklahoma Cooperative Extension Service AGEC-751 Developing a Cash Flow Plan Damona Doye Regents Professor and Extension Economist Brent Ladd Extension Assistant Oklahoma Cooperative Extension Fact Sheets

### Suggestions for Setting up Expense and Revenue Accounts in Quick Books Pro for Cow- Calf and Retained Ownership Ranches

Suggestions for Setting up Expense and Revenue Accounts in Quick Books Pro for Cow- Calf and Retained Ownership Ranches The business accounting system first must provide the data for compliance reporting

### Suggestions for Setting up Expense and Revenue Accounts in Quick Books Pro for Cow- Calf and Retained Ownership Ranches

Suggestions for Setting up Expense and Revenue Accounts in Quick Books Pro for Cow- Calf and Retained Ownership Ranches The business accounting system first must provide the data for compliance reporting

### Computerized Farm Records

Computerized Farm Records Peg Brune ~ Dodge, NE 402-693-2801 Email: brune@skyww.net Agricultural Bookkeeping: Quickbooks or Quicken???? Accounting: Accountants prefer Quickbooks, mostly because a lot of

### Budget Considerations for Various Herd Sizes of Meat Goat Enterprises in Tennessee PB1793

Budget Considerations for Various Herd Sizes of Meat Goat Enterprises in Tennessee PB1793 2 The development and publishing of this document was funded in part by USDA Rural Development in agreement with

### Cash to Accrual Income Approximation

Cash to Accrual Income Approximation With this program, the user can estimate accrual income using the Schedule F from his/her federal income tax return. Fast Tools & Resources Farmers typically report

### Growth in Dairy Farms: The Consequences of Taking Big Steps or Small Ones When Expanding

Growth in Dairy Farms: The Consequences of Taking Big Steps or Small Ones When Expanding Presented by Bruce L. Jones, Director UW Center for Dairy Profitability University of Wisconsin Through the years

### The key tools of farm business analyses

10 The key tools of farm business analyses This chapter explains the benefits of accurately documenting farm assets and liabilities, as well as farm costs and income, to monitor the business performance

### Balance Sheet. Financial Management Series #1 9/2009

Balance Sheet Prepared By: James N. Kurtz, Extension Educator Financial Management Series #1 9/2009 A complete set of financial statements for agriculture include: a Balance Sheet; an Income Statement;

### Business Planning for Livestock Producers. James McWhorter UF/IFAS Highlands County Livestock Agent

Business Planning for Livestock Producers James McWhorter UF/IFAS Highlands County Livestock Agent Introduction Why create a business plan Components of a business plan Financial statements Five C s of

### Assessing and Improving Farm Profitability

1 Fact Sheet 539 Assessing and Improving Farm Profitability Is my farm making money? This is a question farm managers think about often. To stay in business, the farm must generate a profit, at least in

### Section II: Problem Solving (200 points) KEY

ARE 495U Assignment 2-10 points Create 5 or more marketing plan questions that need to be answered related to FF. 2013 North Carolina FFA Farm Business Management Career Development Event Section II: Problem

### AGRICULTURAL ECONOMICS. Preparing a Projected Cash Flow Statement. Introduction. What Information Is Provided? EC-616-W

AGRICULTURAL ECONOMICS EC-616-W Preparing a Projected Cash Flow Statement Freddie L. Barnard, Professor Elizabeth A. Yeager, Assistant Professor Department of Agricultural Economics Purdue University Introduction

### Agriculture & Business Management Notes...

Agriculture & Business Management Notes... Preparing and Analyzing a Cash Flow Statement Quick Notes... Cash Flow Statements summarize cash inflows and cash outflows over a period of time. Uses of a Cash

### Costs and Returns on Dry-Land Wheat Farms

Costs and Returns on Dry-Land Wheat Farms (Waico- Gautttif., QietfOti, 1952) D. Curtis Mumford Agricultural Experiment Station Oregon State College Corvallis Circular of Information 541 April 1954 Costs

### AGRICULTURE FINANCIAL STATEMENT Borrower # AND LOAN APPLICATION Telephone #

AGRICULTURE FINANCIAL STATEMENT Borrower # AND LOAN APPLICATION Telephone # For the purpose of obtaining credit from Ramsey National Bank (RNB) and any future credit granted by the RNB, or to support an

### Cash Flow Analysis Worksheets

Cash Flow Analysis Worksheets Trent Teegerstrom Introduction This article describes the cash budget and analysis worksheets available for downloading at the Department of Agricultural and Resource Economics

### Cost and Revenue Considerations in Farm Management Decisionmaking

1 Fact Sheet 546 Cost and Revenue Considerations in Farm Management Decisionmaking Most productive agricultural resources are scarce. Consequently, to obtain the use of these productive resources, one

### Costs to Produce Hogs in IllinoisC2007

Costs to Produce Hogs in IllinoisC2007 University of Illinois Farm Business Management Resources FBM-0150 Costs to Produce Hogs in IllinoisC2007 Dale H. Lattz Extension Specialist, Farm Management Department

### What Is Your Level of Profitability? -by- Tom Kriegl UW Center for Dairy Profitability

What Is Your Level of Profitability? -by- Tom Kriegl UW Center for Dairy Profitability Ver 1.47 Introduction The following illustrates an approach that has helped farm families appreciate the impact of

### MANAGEMENT DAIRY FARM BUSINESS SUMMARY NEW YORK STATE You can t manage what you can t measure. But if you measure it, you can improve it!

DECEMBER 2013 R.B. 2013-01 DAIRY FARM MANAGEMENT BUSINESS SUMMARY NEW YORK STATE 2012 You can t manage what you can t measure. But if you measure it, you can improve it! Wayne A. Knoblauch Cathryn Dymond

### STANDARDIZED PERFORMANCE ANALYSIS

STANDARDIZED PERFORMANCE ANALYSIS SPA-6 COW-CALF ENTERPRISE FINANCIAL PERFORMANCE MEASURES WORKSHEET (SPA-FCC) * 6-16-06 SPA is a standardized cow-calf enterprise production and financial performance analysis

### Crop-Share and Cash Rent Lease Comparisons Version 1.6. Introduction

Crop-Share and Cash Rent Lease Comparisons Version 1.6 Alan Miller and Craig L. Dobbins Spreadsheet can be found at http://www.agecon.purdue.edu/extension/pubs/farmland_values.asp Introduction This spreadsheet

### Farm and Ranch Financial Management: Cash vs. Accrual Accounting

B-5077 Farm and Ranch Financial Management: Cash vs. Accrual Accounting Danny A. Klinefelter Professor and Extension Economist-Management The Texas A&M University System This publication is based on the

### Determining the Profitability of an Aquaculture Business: Using Income Statements and Enterprise Budgets

Southern Regional Aquaculture Center SRAC Publication No. 4402 March 2012 PR VI Determining the Profitability of an Aquaculture Business: Using Income Statements and Enterprise Budgets Carole R. Engle

### Internal scanning involves looking inside the

Internal Scanning File C6-45 June 2007 www.extension.iastate.edu/agdm Internal scanning involves looking inside the farm business and identifying strengths and weaknesses and assessing the businesses resources

### Preparing Agricultural Financial Statements

Preparing Agricultural Financial Statements Thoroughly understanding your business financial performance is critical for success in today s increasingly competitive agricultural environment. Accurate records

### Stocker Grazing or Grow Yard Feeder Cattle Profit Projection Calculator Users Manual and Definitions

Stocker Grazing or Grow Yard Feeder Cattle Profit Projection Calculator Users Manual and Definitions The purpose of this decision aid is to help facilitate the organization of stocker or feeder cattle

### Replacement Heifers Costs and Return Calculation Decision Aids

Replacement Heifers Costs and Return Calculation Decision Aids The purpose of these replacement heifer cost decision aids is to calculate total production costs and return on investment (ROI) to evaluate

### Tax Return Questionnaire - 2013 Tax Year

Print this form out, take some time to fill it out, and bring it with you when you come to the office. This will save you time and money, and help us help you more effectively. Tax Return Questionnaire

### Evaluating Financial Performance and Position 1

Oklahoma Cooperative Extension Service AGEC-790 Evaluating Financial Performance and Position 1 Damona Doye Regents Professor and Extension Economist Measures of financial performance reduce a large amount

### 3. If you received any interest from a "Seller Financed" mortgage, provide: Name and Address of Payer Social Security Number Amount

Print this form out, take some time to fill it out, and bring it with you when you come to the office. This will save you time and money, and help us help you more effectively. Tax Return Questionnaire

### COM PREHENSIVE GUIDE TO FARM FINANCIAL MANAGEM ENT AGRICULTURE. Module 7: Cash Flow Statement Analysis

COM PREHENSIVE GUIDE TO FARM FINANCIAL MANAGEM ENT AGRICULTURE P R O G R A M S A N D S E R V I C E S Module 7: Cash Flow Statement Analysis Course Map 7-1 Cash Flow Statement Analysis Introduction The

### Factors Impacting Dairy Profitability: An Analysis of Kansas Farm Management Association Dairy Enterprise Data

www.agmanager.info Factors Impacting Dairy Profitability: An Analysis of Kansas Farm Management Association Dairy Enterprise Data August 2011 (available at www.agmanager.info) Kevin Dhuyvetter, (785) 532-3527,

### Agricultural Income Tax Issues - An Educational Module Offered by the University of Wyoming

Agricultural Income Tax Issues - An Educational Module Offered by the University of Wyoming Important Aspects of Financial Records Prepared by Jeffrey E. Tranel John P. Hewlett Rodney L. Sharp Keeping

### Stocker, Feeder or Finished Cattle Retained Ownership Closeouts Profitability Analysis User Manual

Stocker, Feeder or Finished Cattle Retained Ownership Closeouts Profitability Analysis User Manual The purpose stocker, feeder or finished Cattle feedyard closeout spreadsheets is to summarize data using

### Management and Marketing Series Series No. 19 (Revised)

Agricultural and Resource Economics C O L L E G E O F A G R I C U L T U R E & L I F E S C I E N C E S Management and Marketing Series Series No. 19 (Revised) July 2004 Dairy Cow Leasing Geoff Benson, Ph.D

### Using Enterprise Budgets to Compute Crop Breakeven Prices Michael Langemeier, Associate Director, Center for Commercial Agriculture

October 2015 Using Enterprise Budgets to Compute Crop Breakeven Prices Michael Langemeier, Associate Director, Center for Commercial Agriculture Enterprise budgets provide an estimate of potential revenue,

### SELF-EMPLOYED HOUSEHOLDS Section 104 Page 1

SELF-EMPLOYED HOUSEHOLDS Section 104 Page 1 104.1 Purpose This section describes the special policies that apply to households that have self-employment income. 104.2 General Information All the policies

### Contents. Acknowledgements... iv. Source of Data...v

Kentucky Farm Business Management Program Annual Summary Data: Kentucky Grain Farms - 2011 Agricultural Economics Extension No. 2012-17 June 2012 By: Amanda R. Jenkins Michael C. Forsythe University of

### AGRICULTURAL LOAN APPLICATION

AGRICULTURAL LOAN APPLICATION REQUESTED LOAN AMOUNT PURPOSE APPLICANT TYPE INDIVIDUAL JOINT CORPORATION PARTNERSHIP OTHER REQUESTED LOAN TYPE OPERATING LINE OF CREDIT TERM EQUIPMENT REAL ESTATE INDIVIDUAL

### This article illustrated deferred tax liabilities for a cash crop farm in west central Indiana. The

September 2014 Computation of Deferred Liabilities Michael Langemeier, Associate Director, Center for Commercial Agriculture This article is one of a series of financial management articles that will examine

### Repayment Capacity Analysis

Repayment Capacity Analysis With this program, the user can estimate the cash needs required to meet living, debt, and investment payments plus evaluate the risks and returns for seven different types

### Estimation of Deferred Taxes

Estimation of Deferred Taxes With this program, the user can estimate current and noncurrent deferred taxes. Deferred Taxes Deferred taxes represent the federal income, state income, and Social Security

### Farm Accounting Using QuickBooks

Farm Accounting Using QuickBooks Users Manual Stanley Schraufnagel Jenny Vanderlin TABLE OF CONTENTS Page Introduction and Acknowledgements. i Chapter 1: Accounting Basics 1 Chapter 2: Getting Started.

### Missouri Soybean Economic Impact Report

Missouri Soybean Economic Report State Analysis March 2014 The following soybean economic impact values were estimated by Value Ag, LLC, as part of a Missouri Soybean Merchandising Council funded project.

### Measuring Financial Performance: A Critical Key to Managing Risk

Measuring Financial Performance: A Critical Key to Managing Risk Dr. Laurence M. Crane Director of Education and Training National Crop Insurance Services, Inc. The essence of managing risk is making good

### Developing a Balance Sheet 1

Oklahoma Cooperative Extension Service AGEC-752 Developing a Balance Sheet 1 Damona Doye Extension Economist and Regents Professor Randy True Former Extension Assistant A good information system contributes

### and resources that are needed to operate a dairy farm. One of the practices commonly used

Dairy Cow Leasing Written by Bruce L. Jones Associate Professor and Extension Farm Management Specialist Department of Agricultural Economics University of Wisconsin -- Madison Dairy farmers have a limited

The Farm Record Book This Farm Record Book is designed to provide a farmer with an organized system for recording expenses, income, land use and treatment, social security and income tax information. Inventory

### Using Enterprise Budgets in Farm Financial Planning

Oklahoma Cooperative Extension Service AGEC-243 Using Enterprise Budgets in Farm Financial Planning Damona Doye Regents Professor and Extension Economist Roger Sahs Extension Assistant Oklahoma Cooperative

### Understanding budgets and the budgeting process R. L. Smathers

ALTERNATIVE AGRICULTURAL ENTERPRISES PRODUCTION, MANAGEMENT & MARKETING Understanding budgets and the budgeting process R. L. Smathers As a business owner, the primary problem you face is a limited supply

### Farmland Lease Analysis: Program Overview. Navigating the Farmland Lease Analysis program

Farmland Lease Analysis: Program Overview The farmland lease analysis program is used to aid tenants and landlords in determining the returns and risks from different farmland leases. The program offers

### Creating a Resource Inventory

Creating a Resource Inventory As a farmer, producers use resources such as land, labor, machinery, breeding stock, management and financial capital to produce commodities for sale. An accurate inventory

### CHAPTER 4. FINANCIAL STATEMENTS

CHAPTER 4. FINANCIAL STATEMENTS Accounting standards require statements that show the financial position, earnings, cash flows, and investment (distribution) by (to) owners. These measurements are reported,

### CHAPTER 10 Financial Statements NOTE

NOTE In practice, accruals accounts and prepayments accounts are implied rather than drawn up. It is common for expense accounts to show simply a balance c/d and a balance b/d. The accrual or prepayment

### Instructor Discussion Outline for Can I Survive in Ag. PowerPoint Presentation Sample Transaction Description

Instructor Discussion Outline for Can I Survive in Ag. PowerPoint Presentation By Duane Griffith Extension Farm Management Specialists Montana State University Sample Transaction Description To view the

### Accounting Basics, Part 3

Accounting Basics, Part 3 The Income Statement, Balance Sheet and Basic Financial Analysis Part 3 What s Here Introduction Financial Statements Income Statement Balance Sheet Sample Statements Impacting

### Closeout. Procedures

2008 Farm Record Analysis Closeout Procedures December 18, 2008 ii Introduction This manual was developed to assist in the standardization of data collection and entry for Farm Business Management Annual

### Cash Flow Budget: What Will It Tell Me? *

Purdue Extension Knowledge to Go Cash Flow Budget: What Will It Tell Me? * How much financing will your farm business require this year? When will money be needed, and from where will it come? A little

### Assessing and Improving Your Farm Cash Flow

Fact Sheet 541 Assessing and Improving Your Farm Cash Flow What Is Liquidity? Liquidity refers to the ability of your farm to generate enough cash to meet financial obligations as they come due without

### Income Statement A Financial Management Tool

E-484 RM5-6.0 09-08 Risk Management Income Statement A Financial Management Tool Danny Klinefelter* An income statement measures the success of a business, in terms of net income or loss, for a period

### SOURCES AND USES OF FUNDS ON KFMA FARMS

KANSAS FARM MANAGEMENT ASSOCIATION Your Farm - Your Information - Your Decision N E W S L E T T E R Volume 6, Issue 3 March 2012 SOURCES AND USES OF FUNDS ON KFMA FARMS A flow of funds report, often referred

### 1420 n. CLAREMONT BLVD., SUITE 101-B TEL (909) 398-4737 CLAREMONT, CALIFORNIA 91711 FAX (909) 398-4733

1420 n. CLAREMONT BLVD., SUITE 101-B TEL (909) 398-4737 CLAREMONT, CALIFORNIA 91711 FAX (909) 398-4733 www.nicholscpas.com Email: info@nicholscpas.com January 12, 2015 RE: 2014 Tax Returns It is hard to

### Breakeven Analysis. Takes the user to the data input worksheet of the tool.

Breakeven Analysis This program allows the user to calculate breakeven price and yield levels and prepare projected net farm income and cash flow statements. The Breakeven Analysis program assists farm

### Gary A. Hachfeld, David B. Bau, & C. Robert Holcomb, Extension Educators

Balance Sheet Agricultural Business Management Gary A. Hachfeld, David B. Bau, & C. Robert Holcomb, Extension Educators Financial Management Series #1 7/2013 A complete set of financial statements for

### GETTING STARTED IN THE MEAT GOAT BUSINESS

GETTING STARTED IN THE MEAT GOAT BUSINESS Bulletin I, Vol. II An Enterprise Budget For Meat Goat Producer s: Its Characteristics and Importance By Gilbert Queeley and Angela McKenzie-Jakes Extension Animal

### Meat Goat Budgeting and Marketing

Meat Goat Budgeting and Marketing Meat goats are goats grown for meat production, and they are the predominant type of goats raised in the United States and Mississippi today. Meat goat producers are faced

### REVIEW EXERCISE ANSWER KEY

I. TRUE-FALSE. Circle the best answer. REVIEW EXERCISE ANSWER KEY F 1. A cash flow projection shows the expected profitability of a farming operation for the coming year. By definition, profitability is

### Analyzing a Farm Business Prepared by: MAFRD Farm Management Specialists

Prepared by: MAFRD Farm Management Specialists A guide to help producers prepare, analyze and interpret farm business plans in order to make informed management decisions. Many farm producers prepare a

### Forage Economics, page2. Production Costs

Forage Economics Geoffrey A. Benson, Professor Emeritus, Department of Agricultural and Resource Economics, and James T. Green, Jr., Professor Emeritus, Department of Crop Science, NC State University