modernizing wisconsin’s dairy farms train the trainer workshop june 20 – 21, 2002 dairy...

Modernizing Wisconsin’sDairy Farms

Train the Trainer Workshop

June 20 – 21, 2002

Dairy Expansion Financial Case Studiesby

Scott Gunderson, Manitowoc County UW-Extension Dairy Agent

and

Tina Struyk, Sheboygan County UW-Extension Dairy & Livestock Agent

Why the transition from tiestalls . . .

to freestalls?

Why the transition fromtiestalls to freestalls?

Labor Efficiency* Milk 2-3 times more cows per hour per milker* Feeding - Once a day TMR - push in 3-4 times per day* Less time spent bedding stalls

Improved cow comfort Improved operator health and

safety Increased $$

Improved quality of life

1Source: Lakeshore and Fox Valley Farm Management Associations & UW-Extension Center for Dairy Profitability.

1998 Financial Summary of 720Wisconsin Dairy Farms Based on Herd

Size1# of Observations

168 383 86 36 28 19

Cows/Farm 30–49 50–99 100–149

150-250 251–400 401–1500

Profitability

Average of Cows Per Group

40 68 117 183 320 650

Net Farm IncomeFrom Operations ($)

27,057

52,455

88,031 113,535

230,572

324,462

ROROA 4.8% 7.4% 9.2% 10.3% 11.8% 12.7%

ROROE 3.6% 7.2% 9.9% 12.8% 15.1% 19.7%

# of Observations

168 383 86 36 28 19

Cows/Farm 30–49 50–99 100–149

150-250

251–400

401–1500

Financial Efficiency

Basic Cost Ratio 53.5%

51.5% 54.4% 53.6% 54.4% 55.5%

Average Basic Costs Per CWT EQ (excludes labor, interest and depreciation)

$8.21 $7.90 $8.35 $8.23 $8.34 $8.52

Average Investment Per Cow

$9,147

$8,574 $7,551

$6,066 $6,864 $5,473

Average lbs. Milk Sold Per Cow

17,988

19,205 20,361

19,777 21,449 21,170



Size1

Class III Milk PriceMonth 1998 2000

Jan $13.25 $10.05

Feb $13.32 $9.54

March $12.81 $9.54

April $12.01 $9.41

May $10.88 $9.37

June $13.10 $9.46

July $14.77 $10.66

August $14.99 $10.13

Sept $15.10 $10.76

Oct $16.10 $10.02

Nov $16.84 $8.57

Dec $17.34 $9.37



Size1# of

Observations453 131 34

Cows/Farm (range) 17-100 101-300 301-1732

Profitability

Average number of cows per group

62 158 525

Net Farm Incomefrom operations

$28,278 $45,614 $104,854

ROROA 3.27% 4.04% 5.44%

ROROE 1.73% 1.79% 2.85%

# of observations

cows/farm (range)

453 131 34

17-100 101-300 301-1732

Basic Cost Ratio 50% 52% 50%

Average Basic Costs Per CWT EQ (excludes labor, interest and depreciation)

$7.35 $7.83 $8.05

Average lbs. Milk Sold Per Cow

19,687 20,089 22,205


Size1


Easier to FinanceAssume: 50-cow Stall Barn Operation

Retrofit100 Cows

Turn Key300 Cows

Parlor $50,000 $250,000

Freestall Barn $100,000 $300,000

Excavating $5,000 $25,000

Well & Electrical

$5,000 $15,000

Total $160,000 $590,000

Cost per Cow $1,600* $1,967**Unknown costs: extra cows or springers, skid steer, and TMR mixer, etc.

Staged growth allows producers

to gain experience with:

Information management systems Managing

freestalls

Managing more cows and replacements

Drive-by TMR feeding

Various feed storage options

Managing employees

Costs Associated with Staged-Growth Expansion

(Manitowoc County Dairy Farms)Farm 1From 55 to 100

cows

Farm 2From 60 to 180 cows

Farm 3From 155 to

380 cows

Freestall Barn $101,000 101 stalls

$201,000

137 stalls

$155,000

200 stalls

Milking Parlor & Holding Area

$ 37,000Swing 8

$35,000D-6 flat

$75,000 Swing 10

Feed Storage _ $11,500 $16,000

Manure Storage & Excavation

$6,000Expanded pit

$41,000 $38,000

Special Needs Area

_ _ $14,800

Miscellaneous $23,800Mixer & parlor

heating

$13,0001,500 gal.

tank

$8,000cattle lane

Total Cost $167,800 $301,500

$ 306,800

Investment/Cow $1,598 $1,675 $807

Farm 1Farm 1



cows


Farm 3From 155 to

380 cows


$201,000

137 stalls

$155,000

200 stalls


$37,000swing 8

$35,000D-6 flat

$75,000 Swing 10

Feed Storage _ $11,500 $16,000


$6,000Expanded pit

$41,000 $38,000

Special Needs Area

_ _ $14,800


heating

$13,0001,500 gal.

tank

$8,000cattle lane

Total Cost $167,800 $301,500

$306,800

Investment/Cow

$1,598 $1,675 $807

Farm 2Farm 2



cows


Farm 3From 155 to

380 cows


$201,000

137 stalls

$155,000

200 stalls


$37,000swing 8

$ 35,000D-6 flat

$75,000 Swing 10

Feed Storage _ $11,500 $16,000


$6,000Expanded pit

$41,000 $38,000

Special Needs Area

_ _ $14,800


heating

$13,0001,500 gal.

tank

$8,000cattle lane

Total Cost $167,800 $301,500

$306,800

Investment/Cow

$1,598 $1,675 $807

Farm 3Farm 3

Labor Efficiency of Selected Farms

Before & After Staged ExpansionFarm 1 Farm 2 Farm 3

Before

After Before

After Before After

Number of Cows 55 105 60 180 155 380

Feeding Time (total hours)

5 1.5 6 2 8 4

Feeding Time Cow/Day

4.6 min

51 sec

6.5 min

40 sec

3.1 min

38 sec.

Milking Time (total hours)

2.5 2 1.75 3.5 3 3.75

Milking Time Cow/Milking

2.3 min

1.1 min

1.9 min

1.1 min

1.1 min

36 sec.

1998Financial Trends of Selected Farms

(before and after a staged expansion)

Farm 1 Farm 2 Farm 3Before 55 Cows

After 105

Cows

Before 60 Cows

After 180

Cows

Before 155 Cows

After 380 Cows

Net Farm income from Operation ($)

33,276

58,129 31,288 179,123

212,125

441,797

ROROA (%) 1.39 5.4 3.8 20.0 9.8 15.6

ROROE (%) -2.5 4.2 -.9 46.7 10.4 17.5

Basic Cost Ratio (%)

59.6 51.8 58.7 46.8 59.6 52.5

Avg. Basic Costs / Cwt Equivalent ($)

7.89 7.95 8.65 7.18 8.78 8.06

Debt to Asset Ratio (%)

37.4 50.0 57.0 61.5 27.5 13.3

Milk Sold Per Cow (lbs)

22,137

20,566 22,285 24,087 19,555

21,984

Net Worth ($) 280,357

320,810

262,282

325,687

845,442

1,283,236



Farm 1110 Cows

Farm 2190 Cows

Farm 3430 Cows

Net Farm Income from Operation ($)

22,326 51,377 297,577

ROROA (%) 4.12 7.84 15.79

ROROE (%) .50 9.10 17.15


57.0 53.4 47.2

Average Basic Costs Per Cwt Equivalent ($)

8.33 7.65 7.49


48 54 14


22,279 25,006 22,989

Net Worth ($) 390,406 582,904 1,781,016



Farm 1125 Cows

Farm 2189 Cows

Farm 3*430 Cows

Net Farm Income from Operation ($)

43,822 52,497 297,577

ROROA (%) 7.15 7.20 15.79

ROROE (%) 6.74 7.57 17.15


62 46 47.2

Average Basic Costs Per Cwt Equivalent ($)

9.37 8.67 7.49


47 48 14


20,494 24,782 22,989

Net Worth ($) 445,931 769,456 1,781,016

*2001 figures for Farm #3 were unavailable at the time this was printed

The average ROROA of all farms

from 1995 to 2000 are listed below• 2000 3.51%

• 1999 7.56%• 1998 9.20%• 1997 5.42%• 1996 5.36%• 1995 5.57%

In 200027% of the farms had a negative ROROA,

while 7% had ROROA of greater than 10%

in 2000 . . .

the Basic Cost Ratio

Was .59 . . .

The goal is .55 or lower

The market value of

Machinery & Equipment

per cow on dairy farms with 151 or more cows was about half of its value per cow on

small farms.

The market value of

Buildings

per cow was relatively constant, with a slight increase for herds

with greater than 250 cows.

New facilities are the likely cause.

Total

Farm Liabilities

Remained relatively constant at $2,500 per cow until herd sizes of 151 cows

or greater were reached.After that the TFL was $3,350 per cow.

Dairy Modernization may result in . . .

• Improved cow comfort• Improved labor

efficiency• Increased income• Improved quality of life

For more information on annual Wisconsin Financial Summaries go to the UW-Extension Center

for Dairy Profitability at: http://cdp.wisc.edu/

modernizing wisconsin’s dairy farms train the trainer workshop june 20 – 21, 2002 dairy...

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