2. Modernizing Wisconsin’s Dairy Farms Train the Trainer Workshop June 20 – 21, 2002 Dairy Expansion Financial Case Studies by Scott Gunderson, Manitowoc County UW-Extension Dairy Agent and Tina Struyk, Sheboygan County UW-Extension Dairy & Livestock Agent

3. Why the transition from tiestalls... to freestalls?

4. Why the transition from tiestalls 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

5. 1 Source: Lakeshore and Fox Valley Farm Management Associations & UW-Extension Center for Dairy Profitability. 1998 Financial Summary of 720 Wisconsin Dairy Farms Based on Herd Size 1 # of Observations 16838386362819 Cows/Farm 30–4950–99100–149150-250251–400401–1500 Profitability Average of Cows Per Group 4068117183320650 Net Farm Income From Operations ($) 27,05 7 52,45588,031113,535230,572324,462 ROROA4.8%7.4%9.2%10.3%11.8%12.7% ROROE3.6%7.2%9.9%12.8%15.1%19.7%

6. # of Observations 16838386362819 Cows/Farm30–4950–99 100–149 150-250251– 400 401–1500 Financial Efficiency Basic Cost Ratio53.5%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 17,98819,20520,36119,77721,44921,170 1 Source: Lakeshore and Fox Valley Farm Management Associations & UW-Extension Center for Dairy Profitability. 1998 Financial Summary of 720 Wisconsin Dairy Farms Based on Herd Size 1

7. Class III Milk Price Month19982000 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

8. 1 Source: Lakeshore and Fox Valley Farm Management Associations & UW-Extension Center for Dairy Profitability. 2000 Financial Summary of 618 Wisconsin Dairy Farms Based on Herd Size 1 # of Observations 45313134 Cows/Farm (range) 17-100101-300301-1732 Profitability Average number of cows per group 62158525 Net Farm Income from operations $28,278$45,614$104,854 ROROA 3.27%4.04%5.44% ROROE 1.73%1.79%2.85%

9. # of observations cows/farm (range) 45313134 17-100101-300301-1732 Basic Cost Ratio50%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 19,68720,08922,205 2000 Financial Summary of 618 Wisconsin Dairy Farms Based on Herd Size 1 1 Source: Lakeshore and Fox Valley Farm Management Associations & UW-Extension Center for Dairy Profitability.

10. Easier to Finance Assume:50-cow Stall Barn Operation Retrofit 100 Cows Turn Key 300 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.

11. 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

12. Costs Associated with Staged-Growth Expansion (Manitowoc County Dairy Farms) Farm 1 From 55 to 100 cows Farm 2 From 60 to 180 cows Farm 3 From 155 to 380 cows Freestall Barn $101,000 101 stalls $201,000 137 stalls $155,000 200 stalls Milking Parlor & Holding Area $ 37,000 Swing 8 $35,000 D-6 flat $75,000 Swing 10 Feed Storage _ $11,500$16,000 Manure Storage & Excavation $6,000 Expanded pit $41,000$38,000 Special Needs Area _ _ $14,800 Miscellaneous $23,800 Mixer & parlor heating $13,000 1,500 gal. tank $8,000 cattle lane Total Cost $167,800$301,500$ 306,800 Investment/Cow $1,598$1,675$807

13. Farm 1

15. Costs Associated with Staged-Growth Expansion (Manitowoc County Dairy Farms) Farm 1 From 55 to 100 cows Farm 2 From 60 to 180 cows Farm 3 From 155 to 380 cows Freestall Barn$101,000 101 stalls $201,000 137 stalls $155,000 200 stalls Milking Parlor & Holding Area $37,000 swing 8 $35,000 D-6 flat $75,000 Swing 10 Feed Storage _ $11,500$16,000 Manure Storage & Excavation $6,000 Expanded pit $41,000$38,000 Special Needs Area _ _ $14,800 Miscellaneous$23,800 Mixer & parlor heating $13,000 1,500 gal. tank $8,000 cattle lane Total Cost$167,800$301,500$306,800 Investment/Cow$1,598$1,675$807

16. Farm 2

18. Costs Associated with Staged-Growth Expansion (Manitowoc County Dairy Farms) Farm 1 From 55 to 100 cows Farm 2 From 60 to 180 cows Farm 3 From 155 to 380 cows Freestall Barn$101,000 101 stalls $201,000 137 stalls $155,000 200 stalls Milking Parlor & Holding Area $37,000 swing 8 $ 35,000 D-6 flat $75,000 Swing 10 Feed Storage _ $11,500$16,000 Manure Storage & Excavation $6,000 Expanded pit $41,000$38,000 Special Needs Area _ _ $14,800 Miscellaneous$23,800 Mixer & parlor heating $13,000 1,500 gal. tank $8,000 cattle lane Total Cost$167,800$301,500$306,800 Investment/Cow$1,598$1,675$807

19. Farm 3

23. Labor Efficiency of Selected Farms Before & After Staged Expansion Farm 1Farm 2Farm 3 BeforeAfterBeforeAfterBeforeAfter Number of Cows5510560180155380 Feeding Time (total hours)51.56284 Feeding Time Cow/Day4.6 min51 sec6.5 min40 sec3.1 min38 sec. Milking Time (total hours)2.521.753.533.75 Milking Time Cow/Milking2.3 min1.1 min1.9 min1.1 min 36 sec.

24. 1998 Financial Trends of Selected Farms (before and after a staged expansion) Farm 1Farm 2Farm 3 Before 55 Cows After 105 Cows Before 60 Cows After 180 Cows Before 155 Cows After 380 Cows Net Farm income from Operation ($) 33,27658,12931,288179,123212,125441,797 ROROA (%) 1.395.43.820.09.815.6 ROROE (%) -2.54.2-.946.710.417.5 Basic Cost Ratio (%) 59.651.858.746.859.652.5 Avg. Basic Costs / Cwt Equivalent ($) 7.897.958.657.188.788.06 Debt to Asset Ratio (%) 37.450.057.061.527.513.3 Milk Sold Per Cow (lbs) 22,13720,56622,28524,08719,55521,984 Net Worth ($) 280,357320,810262,282325,687845,4421,283,236

25. 2000 Financial Trends of Selected Farms (before and after a staged expansion) Farm 1 110 Cows Farm 2 190 Cows Farm 3 430 Cows Net Farm Income from Operation ($) 22,32651,377297,577 ROROA (%)4.127.8415.79 ROROE (%).509.1017.15 Basic Cost Ratio (%)57.053.447.2 Average Basic Costs Per Cwt Equivalent ($) 8.337.657.49 Debt to Asset Ratio (%) 485414 Milk Sold Per Cow (lbs) 22,27925,00622,989 Net Worth ($)390,406582,9041,781,016

26. 2001 Financial Trends of Selected Farms (before and after a staged expansion) Farm 1 125 Cows Farm 2 189 Cows Farm 3* 430 Cows Net Farm Income from Operation ($) 43,82252,497297,577 ROROA (%)7.157.2015.79 ROROE (%)6.747.5717.15 Basic Cost Ratio (%)624647.2 Average Basic Costs Per Cwt Equivalent ($) 9.378.677.49 Debt to Asset Ratio (%) 474814 Milk Sold Per Cow (lbs) 20,49424,78222,989 Net Worth ($)445,931769,4561,781,016 *2001 figures for Farm #3 were unavailable at the time this was printed

27. The average ROROA of all farms from 1995 to 2000 are listed below 2000 3.51% 19997.56% 19989.20% 19975.42% 19965.36% 19955.57% In 2000 27% of the farms had a negative ROROA, while 7% had ROROA of greater than 10%

28. in 2000... the Basic Cost Ratio Was.59... The goal is.55 or lower

29. 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.

30. 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.

31. 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.

32. Dairy Modernization may result in... Improved cow comfort Improved labor efficiency Increased income Improved quality of life

33. For more information on annual Wisconsin Financial Summaries go to the UW-Extension Center for Dairy Profitability at: http://cdp.wisc.edu/