Cornell Cooperative Extension’s farm business management educators work closely with dairy farm operators to complete the New York State Dairy Farm Business Summary (DFBS) on an annual basis. This article summarizes 2019 DFBS results for dairy producers from 15 counties across Central NY and the Southern Tier: Broome, Chemung, Chenango, Cortland, Fulton, Herkimer, Madison, Montgomery, Oneida, Onondaga, Otsego, Saratoga, Schoharie, Tioga, and Tompkins.
The DFBS is open to any farm that wishes to participate, and participation is voluntary and confidential. Forty-one dairy farms from this region completed the DFBS in 2018 and 2019. The data summarized below are from farms marketing milk conventionally. Dairies selling organic milk are not included.
Farm Size & Production Yields
In 2019, the 41 participating dairies from our region had an average of 804 cows per farm. Farm size among this group ranged from fewer than 140 cows to more than 1,600 cows. The average number of cows per farm increased by 5% from 2018 to 2019. The average number of heifers per farm also increased, yet the average ratio of heifers to cows declined slightly, from 0.86 heifers per cow in 2018 to 0.83 heifers per cow in 2019.
Dairies in our sample reported 2019 milk production ranging from fewer than 3.0 million pounds to more than 43.6 million pounds per farm. Average milk sold in 2019 was 21.4 million pounds per farm, a 7% increase over 2018. This jump reflects the 5% increase in the number of cows per farm, plus a 2% increase in the pounds of milk sold per cow. Average milk sold per cow was up 382 pounds, from 26,176 pounds in 2018 to 26,558 pounds in 2019.
Average tillable acres per farm increased by 4%, from 1,576 acres in 2018 to 1,632 acres in 2019. On average, dairy producers saw hay yields increase by 3% and corn silage yields decrease by 5% in 2019 compared to the prior year.
Farm Labor
Dairies in our region reported a 3% increase in worker equivalents per farm, on average, from 16.6 FTE in 2018 to 17.2 FTE in 2019. Labor efficiency also increased from one year to the next. The average number of cows per worker was 46.9 in 2019, up 2%, from the previous year. Milk sold per worker increased by approximately 40,000 pounds, or 3%, from 1.20 million pounds per worker in 2018 to 1.24 million pounds per worker in 2019.
The cost of hired labor on dairy farms rose in 2019. The average cost of hired labor was $42,887 per worker, up 4% from 2018. However, the increase in labor efficiency described above partially offset the impact of rising labor costs per worker. As a result, the average cost of hired labor per unit of milk production rose 2%, from $2.85 per hundredweight in 2018 to $2.91 per hundredweight in 2019.
Milk Price & Income Generation
In a boon for the dairy industry, total operating receipts rose by 10%, on average, from 2018 to 2019. Average total operating receipts were $5,769 per cow and $21.72 per hundredweight in 2019, compared to $5,186 per cow and $19.81 per hundredweight in 2018. Higher milk prices in 2019 drove this change. Gross milk sales rose 12%, on average, from $17.17 per hundredweight in 2018 to $19.31 per hundredweight in 2019. Gross milk sales averaged $5,127 per cow in 2019, up $632 per cow from the previous year.
Cost Control
Feed is the largest single expense category for most dairies. In 2019, the average feed and crop expense per unit of milk production fell by 5%, dropping from $7.06 per hundredweight in 2018 to $6.74 per hundredweight in 2019. Yet the average total farm operating expense barely changed, rising from $17.43 per hundredweight to $17.48 per hundredweight over the same period. Increases in spending on machinery repairs, machinery rent and lease, and repairs to land and buildings in 2019 offset most of the cost savings on feed. This suggests that farms may have taken advantage of improved financial performance in 2019 to catch up on deferred maintenance and repairs.
The average total cost to produce milk, which includes operating costs, depreciation, and opportunity costs of labor and capital, increased 1%, from $19.04 per hundredweight in 2018 to $19.26 per hundredweight in 2019. Notably, in 2019 the average gross milk sales of $19.31 per hundredweight exceeded the average total cost to produce milk, which was not the case in 2018.
Net Farm Income & Return on Investment
Net farm income (without appreciation) is a key measure of profit. Net farm income for the 41 farms in our sample averaged $522,011 per farm in 2019, which is equivalent to $649 per cow or $2.45 per hundredweight. This is approximately four times the average profit recorded in 2018. Average net farm income for the same group of farms in 2018 was $123,893 per farm, $162 per cow, and $0.62 per hundredweight.
Rate of return on equity capital (ROE) and rate of return on all assets (ROA) are important measures of profitability. Excluding appreciation, the average ROE was 5.1% in 2019, compared to -0.8% in 2018. The average ROA was also 5.1% in 2019, compared to 0.7% in 2018. These data show that, on average, participating dairies were more profitable in 2019 compared to the prior year.
Final Thoughts
Dairies across Central NY and the Southern Tier achieved increases in productivity (pounds of milk per cow) and labor efficiency (pounds of milk per worker) in 2019, both of which respond directly to management choices. These trends show positive change for operations striving to make the most of their resources and opportunities. However, dairies in this region achieved higher profits in 2019 due in large part to higher milk prices, which depend on forces that are external to the farm. To survive and thrive in an industry characterized by rapid and unpredictable price changes, dairy operators must focus on improving the management practices and outcomes under their influence, while considering strategies to mitigate price risk and other threats that exist beyond their control.