Farm Margin Tool

The Farm Margin mobile application is the first step in calculating a dairy's break even cost of production.
Farm Margin Tool - Tools and Apps
Language: English

Description

Accessing the Farm Margin Tool

Directions for using the Farm Margin Tool

Setup Farm

To start new click on "Add New Farm"

Red asterisks mean information has to be entered into those cells.

Add a Scenario

Back on the home page, click the "Add" button to enter in a scenario.

For the "Annual" question, select Yes if information is entered for a complete year. Select No if information is on a monthly basis.

The Total Non-Milk Income (all sources) should include ALL income excluding milk sales.

Data Entry

Click on the boxes with the "+" sign to expand the topic area. Depending on the farm not all fields will have a value and may be left blank. Below are the topic areas requiring more than a simple data entry.

Miscellaneous

Select the appropriate expense and make sure it is identified as a dairy expense or overhead expense. There are a maximum of six miscellaneous fields that can be added to a scenario.

Prepaid and accounts payable adjustments:

Add any prepaids or payables for the categories of crop expense, overhead expense, direct dairy expense, or purchased feed expense. Be sure to identify them as accounts payable or prepaid.

Crops:

For crops (above) if you know the percent of overheads going to crops, enter that number.

If you do not know the percent overheads going to crops, enter all the crops raised on farm, the acres, if it is double cropped, and the number of cuttings.

Results

Click the "Calculate" button. Make sure to click "Save Scenario" or it will be lost.

This example is for 2014. This farm's break-even IOFC/cow is $14.07. In 2014 this herd's IOFC averaged $11.86/cow, so he lost $2.21/cow.

The $14.52 margin is comparable to the Dairy Margin Protection Program. If this producer insured at the $8.00 margin, he would still need to protect $6.25/cwt.

Further Information

The Farm Margin Tool is the financial component of the The Profitability Assessment (PA) Dairy Tool, which is currently being revised.

The next step is the evaluation of animal production including reproduction, milk quality, milk production and components. Once the major bottleneck is determined then a drill down can be performed to determine the best course of action to correct the problem.

The production assessments and some of the drill downs will be completed in 2016.

Example Farm using Penn State Farm Margin Monitor Tool

Getting Started

If you are a first time user of this app please register. If you have previously registered to use this app please click here.

Setting up a Farm

Upon login, you’ll be taken to the Manage Farms page. Here you’ll have the option of either updating an existing farm, going into the scenarios of an existing farm, or create a new farm. Here is an example new farm:

Click submit to save the new farm or any updates to an existing farm. Red asterisks mean information has to be entered into those cells. Not that cow numbers, percentage of feed to heifers and dry cows, and owner draw are set at the farm level. They are used in any scenarios within the farm, and will need to be updated at the farm level.

Scenarios

Once the farm is created, a scenario needs to be created for the farm margin analysis. Back on the home page, click the “ADD” button to enter in a scenario. Information needed to successfully complete the farm margin analysis include a recent schedule F tax form, the annual principal and interest, any prepaid or accounts payable values, and the cropping plan (or a precalculated percent of overhead to crops).

For the "Annual" question, select YES if information is entered for a complete year. Select NO if information is on a monthly or year-to-date basis.

The Total Non-Milk Income (all sources) should include ALL income excluding milk sales.

The data entry is divided into 7 sections: crop and feed expenses, transportation, labor, business costs, miscellaneous, prepaid and payable adjustments, and crops. When entering values, not all fields will have a value, depending on the farm. Here are the additional data entries for the example:

Miscellaneous

In the Miscellaneous section you may select the type of expense or type in a custom expense. Be sure to select the appropriate type (dairy or overhead) for each expense. The number of additional miscellaneous expenses is limited to six.

Prepaid and Accounts Payable

In the Prepaid and Accounts Payable section, there are several things to remember. First, select the correct expense category from one of four options:

  • Crop expenses
  • Purchased feed expenses
  • Dairy direct expenses
  • Overhead expenses

Next, enter either or both beginning and ending values. Finally, select if the entry is a prepaid entry or an accounts payable entry.

Crops

In the Crops section, you can enter the crops acres and number of cuttings for each crop in the operation. Also identify the appropriate double crop if acres have more than 1 crop harvested in a given season. This will be used to determine the percent of overhead to crops. Alternatively, you can manually enter that percentage if it has been pre-determined from another tool (like a the Penn State Cash Flow Tool).

Results and Summary:

Once everything is completed, click on the calculate button. This will populate the results table, as seen below. Be sure to click on the Save Scenario button prior to navigating to other sections of the tool. Otherwise all data entered will be lost.

This example is for 2014. This farm’s break-even IOFC/cow is $14.07. In 2014 this herd’s IOFC averaged $11.86/cow, so he lost $2.21/cow. The $14.52 margin is comparable to the Dairy Margin Protection Program. If this producer insured at the $8.00 margin, he would still need to protect $6.25/cwt.

The Farm Margin Tool is the financial component of the The Profitability Assessment (PA) Dairy Tool, which is currently being revised. The next step is the evaluation of animal production including reproduction, milk quality, milk production and components.

Once the major bottleneck is determined then a drill down can be performed to determine the best course of action to correct the problem. The production assessments and some of the drill downs will be completed in 2016.

This app will provide your dairy's break-even income over feed cost/cow based solely on the lactating cows and the margin/cwt for all animals (comparable to the Farm Bill's Dairy Margin Protection Program).

Based off of the Excel spreadsheet version developed by the Extension Dairy Team, it has been streamlined to make it more user friendly for the producer and consultant.

This tool uses information from the Schedule F tax form, and basic cow and cropping information.

This is a web based platform and will operate on a desktop computer, iPad, and tablet. This new version will be free until January 1, 2017.

For a more in-depth example of using the tool, you may use the following instruction manual .

Instructors

Dairy Business Management Dairy Nutrition

More by Timothy Beck 

Dairy Herd Management Dairy Cattle Nutrition Dairy Feed Management Dairy Cattle Feed Management Dairy Business Management Dairy Cattle Business Management

More by Virginia A. Ishler 

Data and Records Management Dairy Profitability and Management Dairy Genetics and Reproduction

More by Robert C. Goodling, Jr. 

Heather Weeks

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