Your Dairy Buyout Bid: Factors to Consider
Nott, Sherrill B.; Knoblauch, Wayne A.; Casler, George L.
This paper has discussed, in general terms, the items to consider in preparing your bid to enter the whole herd buyout program. To make a sound economic estimate, you need to establish your base hundredweight of sales. We suggest you prepare a summary of your farm financial accounts for 1983, 1984, and 1985. It will be easier if they are in the form of income and net worth statements. You need a detailed inventory of your dairy animals and equipment, including their adjusted cost basis plus an estimate of the cash they will bring when you sell them. Besides past performance, you need to have a good estimate of what you would do with your barns, machinery, and land if only the livestock is sold. What can you earn in nondairy farm enterprises? Or, if you sell everything, what can you earn off the farm? Even if you have other income opportunities, can you live in the future with the sellout provisions your lender may require? Finally, don't forget the cash drain which will be caused by income tax payments.
A.E. Ext. 86-05
Charles H. Dyson School of Applied Economics and Management, Cornell University