The Cash Flow Impact of the New Milk Price Assessments on Selected Groups of New York Dairy Farms

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Using 1981 production, revenue, and cost data from Cornell University's sample of 553 New York dairy farms, the cash flow impact of the new national two phase price assessment program was analyzed. Cash available for family withdrawal (net cash farm income plus interest paid less scheduled debt payments) was used as the annual measure of cash flow. Farms were subdivided by type of business organization, age of primary operator, debt per cow, milk sold per cow, and herd size in order to examine their cash position with and without the assessments. Research shows that many New York dairymen experienced tight cash situations prior to the assessment program (through 1981 and 1982). For them the deductions may only serve to make a bad situation worse. While these analyses suggest serious cash shortages for most dairymen upon imposition of the assessments, many of them will undoubtedly be able to find ways to stay in business: increased productivity, cost control, family living expense reduction, increased reliance on off-farm income, assets sold or savings drawn out, and debt restructured. Debt per cow was found to have the greatest effect on available cash. Output per cow was also important. As herd size increased, the farm's cash position was magnified

the cash available to profitable operations was enhanced while the cash shortages experienced by stressed farms were exacerbated. In general, younger farmers had tighter cash situations. Finally, these analyses suggested that the assessments had the greatest absolute and percentage effects on the cash positions of the larger herds. How this program might ultimately affect the structure of New York dairy farming, however, cannot be determined from this research.

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A.E. Ext. 83-02


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Charles H. Dyson School of Applied Economics and Management, Cornell University



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