CHAMBERSBURG, Pa. — For any business to be successful, those business owners must have a good understanding of their finances. Farming is no exception. One could argue that farmers face one of the most volatile markets that constantly affect their businesses. There are many different factors affecting the finances on a dairy farm. Cost of production, purchased feeds, labor, custom hire, bedding, veterinary services, loan payments, and many others. Which group of cows do you spend the most money on, how much is it costing to produce milk, how much money goes towards producing the crops that you grow, or how much are farmers paying for their purchased feeds? If you can’t answer these questions as they pertain to your own operation, now is the time to find out your farm’s financial numbers!
As tax season is upon us, many farmers have recently delved into their farm records books or those dreaded receipts piling up in a box somewhere. My point being, you have seen some of these figures recently. However, have you ever sat down and put those expenses in their respective groups and tried to determine just how much feed those heifers in the back 40 are costing you? How much did it cost to produce your corn silage harvest, a figure that includes everything from your seed and fertilizer to the bill you received from your custom hired labor to get that perfectly packed trench? How would your feed bill look if you substituted those 50 acres of alfalfa out for some triticale to incorporate into your ration to decrease the tons of corn you purchased last year? What exactly is your breakeven cost of production? How about your income over feed cost (IOFC)? If these questions have your wheels spinning, its time to start breaking down your numbers and finding out exactly where your hard-earned dollars are going.
Penn State Extension has been working with farmers and producers to answer these questions and more. Educators can sit down one-on-one with famers and analyze their financial data to see just where your money is being allocated on your dairy. Members of the Penn State Dairy Team have worked with dairy farms over the years to help determine the vital financial measures that can help show the financial health of the business.
In order to fully understand where your farm stands financially, devoting a morning or afternoon to sit down with an Extension educator from the Dairy Team will help you to determine your costs of production and make more informed decisions that could impact the future of your dairy farm. Knowing what each area of your farm is costing you, enables you to make better management decisions where some improvement may be needed. For more information, contact Cassie Yost at [email protected] or by calling your local Extension office today.
–Cassie Yost, Penn State Extension
