Dairy Farm Management Business Summary New York State 2006
Knoblauch, Wayne A.; Putnam, Linda D.; Karszes, Jason
Business and financial records for 2006 from 240 New York dairy farm businesses are summarized and analyzed. This analysis demonstrates the use of cash accounting with accrual adjustments to measure farm profitability, financial performance, and costs of producing milk. Traditional methods of analyzing dairy farm businesses are combined with evaluation techniques that show the relationship between good management performance and financial success. The farms in the project averaged 350 cows per farm and 23,083 pounds of milk sold per cow, which represent above average size and management level for New York dairy farms. Net farm income excluding appreciation, which is the return to the operator's labor, management, capital, and other unpaid family labor, averaged $41,144 per farm. The rate of return to all capital invested in the farm business including appreciation averaged 4.0 percent. Differences in profitability between farms continue to widen. Average net farm income excluding appreciation of the top 10 percent of farms was $322,100, while the lowest 10 percent was a negative $183,853. Rates of return on equity with appreciation ranged from positive 16 percent to negative 27 percent for the highest decile and the lowest decile of farms, respectively. Large freestall farms averaged the highest milk output per cow and per worker, the lowest total cost of production and investment per cow, and the greatest returns to labor, management and capital. Farms milking three times a day (3X) were larger, produced more milk per cow and had higher net farm incomes than herds milking two times per day (2X). Operating costs per hundredweight of milk were $0.54 per hundredweight higher for 3X than 2X milking herds, while output per cow was 4,153 pounds higher. In 2006, farms supplementing the herd with bovine somatotropin (bST) attained higher rates of milk production per cow, had larger herds and were more profitable than farms not supplementing with bST for most measures of profitability. Farms adopting intensive grazing generally produced less milk per cow than nongrazing farms but had lower costs of production and higher profitability. One should not conclude that adoption of these technologies alone were responsible for differences in performance.
Charles H. Dyson School of Applied Economics and Management, Cornell University