1. Monitoring Data for the Team Slide Source: Bradley J. Hilty Penn State Dairy Alliance (814) 865-4683 bhilty@psu.edu

2. Monitoring Data for the Profit Team I. Successful dairy businesses II. Key benchmarks for business III. Targets for teams a. Detecting bottlenecks b. Monitoring monthly c. Using resources IV. Past team successes

3. I. Successful Dairy Businesses

4. Successful dairy businesses must provide: 1. Adequate returns to owner labor and management, in addition to: 2. Adequate returns to capital investments!

5. I. Successful Dairy Businesses --Profitability Factors Profitability - ROA Operations Efficiency Operating Expense Ratio (OER) Capital Efficiency Asset Turnover Ratio (ATR) Return to Unpaid Family Labor & Owner Labor and Management

6. I. Successful Dairy Businesses --Business Management Keys Strategic Management: Doing the RIGHT things! Operations Management: Doing THINGS right!

7. Strategic Management Deals with the “Big Picture”

8. II. Key Benchmarks for Business

9. II. Key benchmarks for business Profitability  ROA – 8-10% Financial efficiency  OER – <75% for corp. <65% other structures Capital efficiency  ATR - >.60 dairy and crops; >1 dairy only

10. Profitability Return on Assets (ROA) >10% Liquidity Term Debt & Lease Coverage Ratio (TDLCR) > 1.20 Solvency % Equity % Equity > 60% Financial Efficiency Operating Expense Ratio OER< 75%-Corp OER<65% -SP/P Capital Efficiency Asset Turnover Ratio ATR >.6 Dairy & Crops ATR> 1.0 Dairy Five “Star” Financial Benchmarks II. Key benchmarks for business

11. Analyzing Reports Key Production Areas Management AreaBenchmarkGoal ProductionMilk/Cow/Day85 Repro StatusDays in Milk175-185 Repro PerformancePregnancy Rate22-24% Udder HealthSCC<200 K Total Cow ManagementCull Rate25-35% Other diagnostic benchmarks are also important. II. Key benchmarks for business

12. III. Targets for Teams a. Detecting Bottlenecks

13. III. Targets for Teams Monitoring the right information helps detect and prevent bottlenecks

14. Busines $ ense What is a Bottleneck? PRODUCTS Production Systems Are Pipelines INPUTS

15. Busines $ ense What is a Bottleneck? INPUTSPRODUCTS A restriction in the product pipeline It is important to detect & correct the most restrictive bottleneck first. Fixing the wrong bottleneck is of no benefit.

16. III. Targets for Teams b. Monitoring Monthly

17. III. Targets for Teams ---Using the right information What factors are critical to success?  Milk Volume Milk per cow per day  DIM  Repro Performance  Udder Health - SCC Cow numbers  Cull Rate  Replacement performance  Repro Performance

18. III. Targets for Teams ---What are key indicators? Milk per cow per day  DMI  Milk Starts  Peak phase milk Components  Prot / Fat Ratio Udder Health  Early Lactation SCC Culling  Transition cow problems

19. III. Targets for Teams ---Monitoring information Milk Production – Daily Feeding data – Daily??  DMI, FE, IOFC SCC / Milk Quality Indicators – Dairy tests PG rate – 21 days Cull Rate – monthly / annually Others – see monthly monitor

20. III. Targets for Teams c. Using resources

21. Monitoring Tool  Monthly Monitor  Available on website or through Dairy Alliance office at:  1-888-373-7232 Monthly Monitor 3.0.xls

22. Publication: Analyzing Your Dairy Business: A Systematic Approach to Using Benchmarks Profit Team Tools Contact the Dairy Alliance Office for copies at: 1-888-373-7232

23. Other Profit Team Tools  Dairy Farm Business Summary Contact the Dairy Alliance Office for more information at: 1-888-373-7232

24. PA Dairy Tool from Penn State Contact the Dairy Alliance Office for more information at: 1-888-373-7232

25. Past Profit Team Successes 2004 data with pilot farms.

26. Pennsylvania Dairy Profit Teams – Pilot Year of Project Some Key Numbers (2004)  Herd Size~ 20555-740  Milk per Cow~ 20,000 12.5 K – 28 K  ROA~ 3.0 %-16.8 % - 23.8%  ATR~. 40.18 -.93 Investment/Cow~ $ 11,000 $4,700 - $20,000  OER~.80.55 - 1.18  Cows/FTWE~ 3717 – 65  Operational COP~ $13.80 $9.15 - $18.78

27. Questions?