Dairy farm competitiveness: evaluation tools and tips for dairies of all sizes

Abstract

Dairy farms cannot be competitive – nor can there be a viable future for the next generation – if they are not profitable. How do farms know they are profitable? What basic tools are needed to answer important financial questions? How can a farm im­prove profitability? These are important questions for farms of all sizes and levels of financial expertise. Veterinarians have the unique opportunity to discuss the impact of excellence in both cow and business management with their clients. With ba­sic production information and financial documents including balance sheets and accrual-adjusted income statements, farms can easily calculate and monitor critical measures utilizing tools such as the 15 Measures of Dairy Farm Competitiveness. State farm business analysis programs as well as some lenders and consultants provide opportunities for more in-depth analysis. Benchmarking financial performance against personal goals, industry standards and similar farms is a powerful tool allow­ing the farm manager opportunities to identify negative trends in sufficient time to initiate corrective actions. To effectively use benchmarks, the user must understand what each bench­mark is actually measuring and how it is calculated, before comparing an individual producer’s numbers to help their cli­ent meet their profitability goals.