AgChoice Releases 2017 Dairy Benchmark Results
July 11, 2018
The benchmark included 93 Pennsylvania dairy farms.
AgChoice Farm Credit recently completed the Dairy Success and Profitability Review (Dairy SPR), a financial benchmark program. In its seventh year of the program, the benchmark included 93 dairy farms.
Participating benchmark dairy farms provide financial information and key production data for analysis. The benchmark sorts farms into three peer groups: 99 cows or fewer, 100 to 299 cows and 300+ cows. AgChoice provides individual farm data analysis and a comparison to the peer group average. Farms also receive results from the top 25 percent of benchmark operations.
While program data showed an improved year for Pennsylvania dairy farms as compared to 2016 and 2015, only about two-thirds of participating operations showed a profit. Benchmark farms’ profits ranged from ($6.98)/cwt. to $6.76/cwt. Table 1 shows additional detail on the range of information from 2017 Dairy SPR results.
Table 1 – Range of farm information from 2017 Dairy SPR results
|
|
Low
|
High
|
Average
|
Top 25%
|
|
Average Cow Numbers
|
54
|
1,928
|
294
|
202
|
|
Milk Shipped Per Cow
|
11,165
|
28,373
|
23,973
|
22,815
|
|
Gross Milk Price
|
$17.41
|
$25.14
|
$19.00
|
$19.24
|
|
Net Cost of Production
|
$12.71
|
$28.54
|
$18.16
|
$15.52
|
|
Net Margin – Profit1:
Per Cow
Per Cwt.
|
($1,320)
($6.98)
|
$1,724
$6.76
|
$204
$0.83
|
$869
$3.71
|
|
Net Residual Income – Cash Flow2
Per Cow
Per Cwt.
|
($1,690)
($7.18)
|
$1,243
$7.51
|
$66
$0.28
|
$280
$1.26
|
1Profit: Uses depreciation expense and not principal payments; Ability to maintain equity
2Cash Flow: Uses principal payments; Ability to meet all obligations including debt
Debt on Dairy SPR farms increased by $262 per cow compared to 2016, now at more than $5,414. Capital spending, or reinvestment in the business, continues to be a major cost to dairy operations. This year’s Dairy SPR benchmark results revealed that capital expenditures for the average farm was $772 per cow. The five-year average of capital spending is $828 per cow. While dairy farmers may fund some of these purchases by cash flow or profits, most farmers purchase with re-borrowed principal.
This year, AgChoice conducted an additional analysis on 21 benchmark farms that comprised the top 25 percent. Results showed that farms with the highest net margin typically exhibit strong cost control or balance across multiple areas, including labor efficiency, high production, high milk price and/or cost control.
“To be successful, today’s producers must focus on the five keys to profitability – gross revenue, production efficiency, capacity, industry skills and cost control,” said Mike Hosterman, AgChoice dairy consultant.
A tool shared at the annual Dairy SPR meeting analyzed 16 benchmarks for each farm in those five areas, creating a personalized report card to assess areas of strength and weakness.
Hosterman continued, “The value in Dairy SPR and any benchmark program is the year-after-year comparisons of your individual farm, as well as comparisons to farms in your peer group and those leading the industry. This information provides guidance on areas of focus to improve your farm’s profitability.”
Any dairy producer can participate in the Dairy SPR benchmark program offered by AgChoice Farm Credit. Enrollment for next year’s program opens in November 2018. For more information, please contact your local AgChoice Farm Credit office or call 800-998-5557.