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Dairy Farm Income and Cash Flow Calculations (pdf)
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2020 Net Farm Cash Income Projected to Rise
Robert Tigner, Agricultural Systems Economist, Educator
USDA’s Economic Research Service (ERS) is forecasting 2020 net farm income to rise by $19 billion from 2019. Net farm cash income is projected to rise by $4.9 billion. If these projections are accurate, this would put both measures above their 2000-2019 averages by small amounts.
So, if cash receipts are declining where did the higher incomes come from? Farm Program and ad hoc payments to farmers will rise from 2019 by near 100%. The red section of the chart below became the largest portion of farm program payments in 2020 which includes Payments from the Corona Food Assistance Program and the Paycheck Protection Program.
Another part of net income is expense. ERS projects the change of expenses by category. The categories projected to increase account for 69% of farm and ranch expenses while 31% of farm and ranch expenses are projected to decline. The net result is that 2020 farm and ranch expenses are projected to decline by 1.3% or $4.6 billion.
USDA ERS – Farm Sector Income Forecast. (n.d.). Retrieved September 3, 2020, from https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast/
2019 Farm Bill: Dairy FAQ
Robert Tigner, Ag Systems Economist Educator
What is DMC?
- DMC stands for Dairy Margin Coverage. DMC evolved from previous dairy income support programs. DMC is a direct descendant of MPP-Dairy. Over its evolution, dairy policy has moved from certainty, set minimum price, to income risk that is insured by DMC.
Is DMC permanent?
Dairy Revenue Protection (Dairy-RP) Program
Kim Clark, Dairy Extension Educator
In August this year the USDA unveiled the Dairy Revenue Protection (Dairy-RP) program in conjunction with the Risk Management Agency. This program is designed to insure against unexpected declines milk sales on a quarterly basis at a guaranteed coverage level. The revenue will be based upon futures prices for milk and dairy commodities with the coverage level elected by the producer.
April 2018 Dairy Budget
Robert Tigner, Agricultural Systems Economist, Educator
Periodically I revise the livestock costs section of my Iowa-Nebraska dairy budgets. To do this I use the University of MN FinBin farm financial database. The costs revised are drawn from the 200-500 cow benchmark data published by the U of MN Center for Farm Financial Management. The last time these costs were revised was May 2015. Livestock costs rose $2.465 per cwt. compared to 3 years ago. Due to this revision, comparison to previous month’s dairy budgets is more difficult. The intent of the budget is to indicate whether net returns to dairy farms is increasing or decreasing month to month.
February 2018 Dairy Budget
Robert Tigner, Agriculture Systems Economics, Educator
The February 2018 Iowa-Nebraska dairy budget turned very negative for February. I was unable to complete a January budget. The 20,000 pound freestall budget shows a loss of $1.91 per cwt economic return while the 24,000 pound budget was negative by $0.22 per cwt.
December 2017 Dairy Budget
Robert Tigner, Agricultural Systems Economist, Educator
The December 2017 dairy budget utilizes the Central Federal Milk Market Oder minimum prices as published on their website. This occurs about the 10th of every month. I also use various monthly USDA price reports to obtain feed prices, cull cow prices and to calculate corn silage value. Revisions to feed and fixed costs will occur for the January budget. Thus comparison from December 17 to January 18 will not be possible.
October 2017 Dairy Budgets
Robert Tigner, Agricultural Systems Economist, Educator
The 20,000 pound dairy budget break even declined slightly for October, $0.0454 per cwt. The return to management improved slightly by $0.1012 per cwt even though the PPD dropped by $0.69 per cwt.
September Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
There was very little change in the budgeted breakeven price for Sept 2017 compared to August. All of the following comparisons will be utilizing the 20,000 pound freestall budget. Total income declined by $0.104 per hundredweight but feed cost declined too, 8.55 cents per hundredweight. Total variable costs were down at 8.7 cents per hundredweight. Return to management declined by 1 cent per hundredweight to $1.81.
June Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
June produced some change in both the income and expense side of the Nebraska and Iowa dairy budgets. Dairy income rose by 69.77 cents/cwt. due to a rise in both butterfat and protein price, which offset a drop in butterfat and protein content. PPD also increased by 13 cents per cwt. But the income rise also saw a rise in feed costs, up by $1.10565 per cwt. All feed costs rose except cottonseed which were flat. All of this net a decline in returns to management of $0.39 per cwt. Returns to management remained positive at $0.48 per cwt.
April 2017 Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
Attached is the April 2017 milk production budgets for Iowa and Nebraska. The budgets deteriorated compared to March.
March 2017 Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
Returns to management for milk produced in the Central milk market order declined 42 cents/cwt in March 2017 but were still positive at $1.57/cwt. The largest decline was in income with a drop of protein income. As you may know the protein price dropped during March, $-1.31555/cwt of 20,000 pound cows, but the PPD increased by $0.48/cwt. Feed costs were slightly lower but less than 1 cent/cwt. The Central Order March butterfat price was virtually the same as February's, down less than 1 cent per pound.
February 2017 Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
Even though the butterfat price and PPD dropped in February compared to January 2017, returns to milk production in all four dairy budgets remained positive for returns to management.
January 2017 Dairy Budgets
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
January 2017 dairy budgets net return to management increased by 29 cents/cwt compared to Dec 16 for the 20,000 pound freestall model while the 24,000 model saw a 42 cents/cwt increase. January feed costs were 17 cents/cwt higher but gross income was 46 cents/cwt higher. Total variable costs were 10.5 cents/cwt higher.
November Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
The November 2016 dairy budgets turned out more positive than October’s. Gross income for the 20,000 pound freestall dairy budget increased by $0.23 per cwt and feed costs rose $0.018 per cwt. All together that budget had a net gain of $0.19 per cwt for a positive return to management.
Communicating with Lenders: Suggestions for Famers & Ranchers
Robert Tigner, Nebraska Extension Educator-Agriculture, Red Willow County
The last few years have been tough for many farmers, feeders and ranchers due to a cost-price squeeze. I reviewed the 2015 Nebraska Farm Business INC financial standards measures. Average 2015 Net Farm Income was $51,293 which doesn’t sound terrible until you get deeper into the numbers. The farms are broken into 10 equal groups, deciles, ranked by Net Farm Income. The bottom four deciles of farms were unprofitable with the lowest decile averaging -$109,508 net farm income. At the beginning of 2016, the bottom three deciles had negative working capital with the lowest decile averaging -$244,880.
October Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture
My October 2016 dairy budgets showed poorer financial performance compared to September. Gross income declined by $200.79 annually or just over $1 per cwt for the 20,000 pound freestall budget.
August Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture
Good thing milk protein price rose! The total gross income in the August 20,000 pound dairy budget rose by just over $154. The income from protein rose by $409 while the negative PPD led to $168 loss in income. Gross feed cost declined by about $161, most of that from the decline in hay prices. All 3 of the 4 budgets show a positive return to management. Only the 20,000 pound tiestall budget had a negative return to management for August 2016.
July Dairy Budget
Robert Tigner, Nebraska Extension Educator-Agriculture
Compared to June, the July 2016 NE-IA dairy budget showed a very good improvement. The improvement came from both increased income and reduced feed costs. Gross income rose by over $20 per month per cow and feed costs dropped by about $13.25 per cow per month. For a total improvement of $33.25 per cow per month. The higher income came from increased butterfat, protein, other solids and quality price. However, the cull cow price dropped as did the PPD. All feed prices dropped, except fat. The net improvement is $1.73 per cwt. The 24,000 pound budget showed positive returns to labor and management, $0.93 per cwt, which means the budget is paying all variable costs and fixed costs.
Dairy Farm Income And Cash Flow Calculations
Jeffrey F. Keown, Extension Dairy Specialist
Dairy farmers needing to know their income and costs per cow and per herd can use this information and the interactive worksheet to calculate their cash flow.