Success for Small Beginning Dairy Farmers

Title Success for Small Beginning Dairy Farmers
Team Cabrera, V.E., Vanderlin, J., Kirkpatrick,
Term 18 months July 2009 - December 2010
Amount $32,000
Sponsor North Central Risk Management Education Center
National Institute of Food and Agriculture<

Overview

This project will train 60 small beginning dairy farmers and help them to apply strategic decision-making regarding financial risks via three workshops across Wisconsin. Follow-ups will be established during workshops to later verify and measure positive application of the learning. To facilitate the adoption of new financial risk management strategies, part of the project will involve the creation of a user-friendly computer decision-making suite (i.e., the Wisconsin Benchmark Dairy Ratio tool) which will be used as an instrument of discussion and learning. The Agriculture Financial Advisor (AgFA©) dataset will be the foundation of these computer tools. Related curricula have been delivered across the state using the FAST tools suite from the University of Illinois. Evaluations have indicated that producers have greatly appreciated these trainings, however, they are requesting similar tools be created for Wisconsin’s specific conditions. (CRIS)

Events

  • UW-Short Course. March 2, 2010, Madison, WI. 12 Attendees.
  • Women in Agriculture Conferences. March 5, 2010, Neenah, WI. (flyer). 13 Attendees.
  • Annnie's Project. Wisconsin Dairy Ratio Tool. March 17, 2010, Monroe & Jacskon Counties, WI. (flyer). 8 Attendees.
  • Annnie's Project. Dairy Expansion Decision Support System. March 17, 2010, Monroe & Jacskon Counties, WI. (flyer). 8 Attendees.
  • Wisconsin Ag Bankers Conference. Wisconsin Dairy Ratio Tool. April 2010, Chula Vista, WI. (WebSite). Booth Display and Demonstration.
  • 2010 National Farm Management Conference. (WebSite). Fargo, June 13-17, 2010. 25 Attendees.
  • 2010 National Joint Animal Meeting. (WebSite). Denver, July 11-15, 2010. 50 Attendees.
  • UW-Extension Agents Boot Camp. (flyer). Wisconsin Dells, August 10-11, 2010
  • Farm Financial Services Update. Fox Valley and Lakeshore. Valders, September 16, 2010

People

Risk Management

Participants will learn to evaluate the risks in their business plans and will develop and implement strategic management plans to mitigate those risks. They will learn to evaluate their financial risk by benchmarking their operation against similar farms financial performance. This will help them pinpoint the areas of their business that need improvement. Participants will also learn to identify their own risk tolerance and use this information in their financial and marketing plans and as they develop and apply viable financial goals for their farms and families. After being introduced to the concepts of financial benchmarking and learning to prepare their farms financial statements, participants will be able to use these skills on a consistent basis after the project activities. As credit tightens and lenders put more constraints on new farm loans, beginning dairy farmers can be viewed by lenders as risky investments. However, farmers who take advantage of the educational programming this project offers can make their applications to lenders more attractive and less risky. As participants implement project tools year after year, they will continually improve their financial position and improve their decision-making skills, which in turn will lower their financial risk and improve their credit standing with lenders.

Producer Demand

Wisconsin has more than 14,400 dairy farmers. Eighty percent of those (11,600) are small dairy operators that manage herds with less than 100 cows (WI Ag Statistics). According to the last Ag Census available (2002), about 26% of these small farmers (3,000) are relatively new or beginning farmers with less than a decade in the business of managing a dairy farm. Small beginning dairy farmers produce about a fourth of Wisconsin dairy products. Small beginning dairy farmers are especially vulnerable to economic and financial challenges as they do not have the economic resources nor the experience to deal with increasing market uncertainties. Small dairy farms are the soul of Wisconsin agriculture and we need to protect them. The Specific Aim of this project is to develop and implement the online Wisconsin Benchmark Dairy Ratio tool. This project will prepare and deliver three full-day workshops to Wisconsin small and beginning dairy farmers related to production and financial decision-making using this tool. Because these workshops will emphasize personal attention, one-to-one counseling to the participants as well hands-on and computer exercise practices, we will limit the number of participants to 20 in each workshop. Higher number of participants would not lead to an effective learning environment.

Calendar

Establish a dedicated website

Aug 2009

Focus groups

Nov-Dec 2009

Develop workshops curricula

Dec-Jan 2009-2010

Promotional campaign

Jan-Feb 2010

Online Wisconsin Dairy Benchmarking Tools

Jan 2010

Conduct Workshops

Feb-Jun 2010

Evaluate application of online tool

May-July 2010

Support the use of online tool

Apr-Dec 2010

Phone follow-ups

Aug-Oct 2010

Mail survey

Nov-Dec 2010

Mail survey

Jan-Jul 2011

Tools

The Wisconsin Dairy Farm Ratio Benchmarking is a tool (spreadsheet or web-based) especially created for this project. It compares dairy farm's financial status with +500 dairy farms in the State of Wisconsin since year 2000. The Agriculture Financial Advisor (AgFA) dataset collected and maintained by the University of Wisconsin Center for Dairy Profitability is the foundation for this benchmarking analysis. This tool calculates 15 financial measures (sweet-15):

  • Liquidity: Current Ratio, Net Working Capital
  • Solvency: Debt Asset Ratio, Equity Asset Ratio
  • Profitability: Net Farm Income, Rate of Return on Farm Assets, Rate of Return on Farm Equity, Operating Profit Margin Ratio
  • Repayment Capacity: Term Debt Coverage Ratio, Replcament Margin
  • Financial Efficiency: Asset Turnover Ratio, Operating Expense ratio, Depreciation Expense Ratio, Interest Expense Ratio, and Net Farm Income Ratio.

Also the Wisconsin Dairy Farm Ration Benchmarking tool performs a DuPont Analsysis.

The user has the possibility to custom-made the analysis by selecting from a series of categories that best describe an operation for a specific year. The dataset contains information from years 2000 to 2008 and the follwoing categories of analysis:

  • Herd Size: <50, 50-100, 100-150, 150-300, >300
  • Income per Cow: <4000, 4000-4500, 4500-5000, 5000-5500, >5500
  • MIlk per Cow per Year: <16000, 16000-19000, 19000-22000, 22000-25000, >25000

The tool presents all information visually in graphs where cumulative distributions are displayed. The cumulative distribution is the proportion of farms for a specific financial measure. The user can know exactly the farm's position with their peers. Additionally, suggested limits (industry standards) are displayed as green and red lines to indicate the farm's financial status compared with widely used standards.

The Wisconsin Dairy Farm Ratio Benchmarking has been a long time requested tool and now is available free of charge:

Wisconsin Dairy Farm Ratio Benchmarking Web-Based system (Play)

Wisconsin Dairy Farm Ratio Benchmarking Spreadsheet system (Download).

A powerpoint presentation about the tool and the financial benchmark included can also be downloaded (here).

Demo (Click to View/Hide the Video)

Link to the video.

This dairy expansion decision support tool (DE-DSS) is designed to help dairy producers explore “what-if” situations as they predict changes in dairy production and expansion. Dairy producers using the tool are able to forecast changes in herd structure for all calves, heifers, and cows.  Together with the herd structure, changes in key Income Over Variable Costs (IOVC) are predicted for better decision-making from a financial standpoint.  Predictions are made for up to 55 months in the future.

This press release explains in single terms what this tool does and how it could be used for practical purposes.

This document is a detailed user's guide manual to understand and use this tool.

The tool is freely available and can be downloaded (here). It requires Excel 2007 with macros.

Here it is a an Article pubished in Progressive Dairyman, 07 April 2010 (Download).

A powerpoint presentation about the tool can also be downloaded (here).

Demo (Click to View/Hide the Video)

Link to the video.

The DE-DSS will be used to complement the Dairy Benchmarking tool in the above mentioned series of workshops throughout the State in 2010.