Know your numbers to better know your financial standing.
by Patti Hurtgen, Hoard's Dairyman Online Media Manager
Gary Sipiorski shared his wealth of banking experience within the dairy and agricultural community on the Hoard's Dairyman webinar on Monday, November 11. During his "Farm financial business checkup" presentation he covered 15 important financially-driven calculations to help producers better understand the "health" of their dairy operation.
"The numbers have changed since I was a teenager carrying milk pails," chuckled Gary, "but the formulas, have not. Thirty years ago it was not uncommon for half the milk check to go to expenses, now that number is closer to 85 percent. There is less wiggle room these days. Taking good care of cows and crops is still important, but attention needs to be paid to the economics of the business unit."
Here are the 15 calculations, ratios and data to consider:
1. Ownership Equity
2. Asset turnover
3. Current equity liquidity
4. Investment per cow
5. Debt per cow
6. Debt coverage (what percent of your income goes toward principle and interest)
7. Gross income per cow ($5,000 per cow, milk, cull cow and bull calf sales)
8. Milk sold per cow
9. Operation costs
10. Feed costs
11. Cropping costs
12. Heifer raising
13. Labor cost
14. Livestock costs (vet and breeding)
15. Cost of production
Gary went over what ranges are desirable for each of the above 15 items. Knowing these numbers is important to keep the business running on solid ground today, but to also plan for retirement and/or for the next generation.
This webinar and past ones can be viewed at www.hoards.com/webinars. Watch and learn about calculating the economics of your dairy so you are prepared when you visit your lender or financial institution. The November webinar was sponsored by Danisco Animal Nutrition (part of DuPont) (www.animalnutrition.dupont.com).
Next month's webinar
Joe Lauer will present "Growing high yield and high quality corn silage in the northern Corn Belt" at noon (Central time) on Monday, December 9. Profitable corn production is extremely important in these regions. Farmers facing fluctuating prices and rising production costs must be well informed about new technologies to maximize yield and profitability. This webinar is designed to provide technical insight and practical advice for those producing their own corn silage. Kuhn North America (www.kuhnnorthamerica.com) is the sponsor for December. Register at www.hoards.com/webinars.
The author is the online media manager and is responsible for the website, webinars and social media. A graduate of Modesto Junior College and Fresno State, she was raised on a California dairy and frequently blogs on youth programs and consumer issues.
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