Review of the 2007 Farm Financial Data for Dairy in Minnesota

Margot Rudstrom, Regional Extension Educator-Ag Business Management

April 8, 2008

Each year the Minnesota State Colleges and Universities (MNSCU) Adult Farm Business Management and the Southwest Minnesota Farm Management Association complete farm financial record analysis. The 2007 data are now available online at http://www.finbin.umn.edu. The database is maintained by the Center for Farm Financial Management at the University of Minnesota.

Most of you have probably heard in other media reports that farm profits are up, especially for crop farms. The information being reported represents the median for farms in the farm financial records database. The median can be thought of as the middle. If all of the data are put in order from lowest to highest, the median is the number that is in the middle of that range.

Returns were up in dairy, thanks in part to high milk prices in 2007. The median milk price in 2007 for the farms was $18.78 per hundredweight (cwt) compared to $12.86 per cwt in 2006. The high milk price was offset somewhat by higher input costs. Feed cost showed the biggest increase, rising from $5.52 per cwt of milk in 2006 to $7.04 per cwt of milk in 2007. Feed costs are expected show an increase in 2008 with the high corn, soybeans and wheat prices. Figure 1 shows the median farm milk sales, total expenses and net returns before payments to labor and management.

Figure 1: Median Farm Milk Sales, Expenses and Net Returns in $/cwt.

There were slight differences in median net return in 2007 between farms that had 100 cows or less and those with more than 100 cows. Organic dairies are not included in this comparison. The smaller farms had higher direct costs and lower overhead costs than the larger farms. This was the result of higher feed costs on the smaller farms and higher labor costs on the larger farms. It is interesting to note that there was no difference in the median milk sales between the smaller and larger farms (Table 1).

Class III futures prices are very strong. At the close of trading on April 2, 2008, the average futures prices for March through December 2008 was $18.13. The average Class III futures price for January through December 2009 was $17.83. The high milk prices will be tempered with high feed commodity prices. December 2008 corn futures settled at $6.08 while November 2008 soybean futures settled at $11.70. The message to producers is “protect your margins”.

Take some time to check out the farm financial records database website and all of the information that is available. This site provides benchmark financial information for farm producers, educators, lenders and other agricultural professionals. You can also use the site to find data from farms that are similar in herd size to yours, by the livestock or crop enterprise that is important to you and by particular years. This is a wonderful tool for producers in Minnesota, which is provided by MNSCU Farm Business Management and the University of Minnesota Extension Farm Business Management.