5/16/2023 0 Comments Checkbook dc![]() Understand the makeup of the benchmark you are reviewing to assure the metrics being evaluated are the same or similar to those of your dairy business.Comparing your dairy’s production (milk and crops) to industry benchmarks allows for ongoing comparisons of per-unit efficiencies (per cow and/or per acre).“For dairy business owners having a thoughtful awareness on dairy industry trends, production benchmarks, and business ratios remain ever so vital,” he says.Īccording to Gerrits, seven key points that illustrate the importance of the utilization of benchmarking and industry ratios to best position dairy operations for future success are: ![]() After coming off record all-milk prices this year could be relatively challenging for producers, many dairies are also asking how they can keep their dairy in a good financial position. Starting the year off with strong farm financials, dairies are planning what’s next for their operation and looking at what their future landscape includes. Where do you see yourself going this year? A line of credit or possibly an increase in the line of credit may be in order to cover the coming months of anemic milk income. Lender meeting. A lender meeting should be set early in the year, sharing yearend balance sheets for 20, accrual adjusted cash income statements, monthly projected cash flows and a business plan. Even though milk income arrives twice a month, a monthly cash flow should be done to reflect months when expenses exceed income. Any anticipated family living withdraws should be added. Any capital additions should also be noted in the month they will occur. This also includes interest, principal, and general operating expenses. ![]() This is addressing cash coming into the checkbook and “only cash” expenses leaving the checkbook. ![]() This does not reflect true profitability, which, if done, ends up on the balance sheet looking like an increase in net worth.Ĭash flow projection. With the current future milk markets, it is very important that every dairy producer complete a cash flow projection. Simply bumping the land value because farms in the county have sold at a high price is simply land ‘appreciation’. Working capital is and will be very important as we currently anticipate a declining milk price curve.Ĭonservative land values. One thing to be aware of with land value having a strong upward movement is to still keep the land value at a conservative value. This year’s profitability helped in paying down loans and building working capital. More information in this area will be forthcoming as accrual-adjusted cash income statements are finished. Profitability in 2022 was anywhere from $3 per cwt. Feed and grain inventories are up as well. Working capital. What the balance sheets are showing thus far is aggressive prepaid expenses in feed purchases and cropping expenses. As lenders review balance sheets, independent dairy financial consultant Gary Sipiorski recommends the following advice to best help position yourself for a good start for the first half of the year. A different story is unfolding in 2023 with a decline in milk prices, while expenses continue to remain elevated. Take a quick glance at year-over-year financials and it's easy to notice the shift of the tides.
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