Extension Risk Management conference

1. Extension Risk Management conference • The Cornell Dairy Farm Business Summary and Analysis Program • MarianeKiraly • Cornell Cooperative Extension • Delaware County, New York

2. Cornell’s Dairy Farm Summary Program • A flagship program for more than 50 years • Is supported and promoted by Cornell’s Applied Economics and Management Department-The Dyson School, and County Cooperative Extension Associations in New York State • Is administered by Dr. Wayne Knoblauch, Professor of Farm Business Management, Cornell University • Is a free program to NY State dairy farms and can also be accessed by farms across the country free of charge • A comprehensive review of a non-NY farm summary by Cornell is $100

3. How the Dairy summary reduces risk • Producers work with Extension Educators from January to April to complete the year-end analysis. The report can be required by USDA FSA, Farm Credit and other lenders. • It provides up-to-date data on: • Profitability • Cash flow • Balance Sheet • Trend analysis • Repayment ability • Capital and labor efficiency • Crop and dairy cow aspects

4. Data collection: another opportunity to interface • This year-end look at a farm business invariably brings up other opportunities to assist the farmer • Extension Educators generally complete the summary data input sheets with the farmer one-on-one • Experienced farmers can fill out the information sheets themselves or on-line as they become more familiar with the data • Most look forward to the final report as it is the “report card” that gives them a comprehensive look at their dairy business

5. The visit, interaction & results • In general, farm summary participants are asked to have their year-end books available, milk testing data, milk check summary report, machinery and land inventories, crop information. • Educators ask questions to get at other data such as worker equivalents, supply inventories for accrual basis reporting, unusual circumstances and off-farm income in order to get a full and accurate picture of the farm business. • Follow-up with other resources is a regular outcome.

6. Analysis of summary data • The 18 page report shows an analysis that encompasses these important measures: • Milk sold, pounds; Milk sold/cow • Worker equivalent; Milk sold/worker • Hay DM per acre; Corn silage per acre • Cows per worker; Milk sold per worker, pounds • Grain and concentrate purchased as a % of milk sales • Dairy feed and crop expense per cwt. milk • Labor and machinery costs/cow • Total cost of producing milk per cwt. • Operating cost of producing milk per cwt. • Net milk price

7. Example summary data

8. Other important measures • Net farm income with and without appreciation • Net farm income per cow with and without appreciation • Labor and management income per operator • Rate of return on equity capital with and without apprec. • Farm net worth, end of year • Debt to asset ratio • Farm debt/cow • Debt coverage ratio

9. Analysis of data • These measures can be overwhelming to a first-time participant, so the Educator generally goes over the report with the farmer to explain the measures and what they mean. • Strengths and weaknesses are pointed out and goals are developed for the next year. However, it is important to note that goals should be SMART goals (specific, measurable, attainable, realistic and timed). • The Educator will be sure that the goals do not make the farmer feel that he/she isn’t doing a good job and that it’s more of a “let’s see if we can improve this…” kind of approach.

10. Typical goals for first-time farmers Improving the grain purchased as a % of milk sales • Easy to calculate on a monthly basis • Can make a big impact on a farm’s bottom line • Is usually associated with a common benchmark like 25% Operating Cost of Producing Milk/Cwt • Is a number that everyone really wants to know • Is commonly referred to in dairy publications • Gives producers a good idea of the margin on their farm These measures get farmers to buy-in to complete a farm summary annually

11. Carbonless 2-copy goal sheet

12. Written goals • Goals that are written down are much more likely to be attained • The farmer and educator both keep a copy of the goal sheet to review together the next year. • The farmer posts the goal sheet in the farm office in a prominent location • It is reviewed the next year and a new sheet is completed • Goals generally become more detailed and complex the longer the farm is in the program

13. Additional Follow-up • The farmer has the Summary report within a week or so and has reviewed it and taken note of the comments. • Any errors are corrected at that time and the data sheet is sent in to Cornell • The farm’s summary is evaluated and becomes part of the NYS Summary data • Regional Summaries are printed, along with size-specific summary reports that are sent out to Educators • Regional Summary data can then be compared to individual results for evaluation purposes

14. Risk reduction with the farm summary program • Regular Summary participants will see trends based on the summary report and can react to them in a positive manner • Records become a priority along with analysis so that the farmer sees an accurate picture of the farm business • Benchmarks can be compared on a regular basis • Daily decision-making is based on timely information, analysis and goal setting • Interaction with Extension opens the door to other educational opportunities for the farmer

15. Risk reduction results • Farmers learn that they “can’t manage what they can’t measure” • Dairy farmers get into better record-keeping habits in order to measure accurately • Decision-making is based on analysis, not just a “gut feeling” • Banks are more confident in lending to farmers that have a good handle on their farm business • Farmers are more successful when they make SMART goals and follow-up annually

16. The reality • Dairy farmers may not take the initiative to get involved in the Dairy Farm Summary Program unless they are required to do so by a bank. • Many times, the farm business is in serious trouble by the time an Educator is asked to complete a summary. • A new business is usually more receptive to participation and that is always the best time to start the program. • It’s much easier to start off with a complete summary program in order to make the best use of farm records and catch weaknesses before they threaten to derail the farm business.

17. The third year and beyond • By the 3rd year, farmers have a true commitment to the program as they can see the benefits of summary and analysis • Farmers have learned to look for and use the Summary tools to reduce financial risks by: • Knowing their cost of production • Understanding their debt exposure measures • Using accurate and timely information to make decisions • Sharing the report with lenders to increase credibility and communication • Becoming better managers of their farm businesses

18. How can educators take advantage of this program? • Pick up a brochure and get familiar with the program • Choose a dairy farmer who could use some assistance-someone who may be new to dairy or who might be having cash-flow issues • Spend time helping to complete and input the data into the Top Dairies Program on-line • Generate a report and analyze it with the farmer • Develop goals for the next year • Note progress of the farm business and interact often

19. On-Line summary resources • www.dfbs.cornell.edu will link you to the sign-in page to create a password • U.S. Top Dairies screen appears • There are instructions and worksheet downloads so anyone can put in their own data • Educators that have a group of farms can see them all in a database • Data is submitted on-line and can be reviewed • Reports can be developed for comparison to other similar farms

20. Sample summary • A sample summary has been provided as additional information for attendees of this conference and will be made available to you • I have a few copies of that summary along with brochures about the Cornell Dairy Farm Summary Program • I also have a sample of the annual summary reports that are distributed to educators, farmers, and financial institutions

21. Thank You! Questions?