Ohio Farmer

Know financial health of your farm operation

The OSU farm business analysis program is designed to help Ohio farmers achieve financial success.

March 19, 2019

4 Min Read
Farmer with data analysis clipboard
COST OF BUSINESS: It is invaluable for Ohio farmers to know the production costs in every part of their business.gpointstudio/Getty Images

In a rural Ohio town, a short drive from Canton, Mark Thomas had been running a 400-cow dairy farm for years.

That, plus row-cropping 2,000 acres, kept him outside, where he wanted to be most days. But the number-crunching side of his job — tabulating production costs, losses and inventory — never thrilled him. He and his wife, Chris, made money, sure. They paid their taxes on time, always. But for a while, they weren’t able to keep as close a watch on their production costs as they could have. And though profits for milk have dipped in recent years, they kept on milking.

Last year, they stopped. Selling off their herd of Holsteins, they switched to raising heifers while continuing with cultivating corn, soybeans and wheat. While it was tough to watch the milking cows leave their barn for good, the Thomases had the financial projections and analysis to show that it was likely the right move.

They used information from several years of analysis done through the Ohio Farm Business Analysis and Benchmarking Program at Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES). Partly funded by a grant from USDA, the program assesses the financial health of a farm operation and generates reports that compare the operation to other comparable Ohio farms.

Paperwork, figures

A decade ago, when the Thomases first participated in the program, they had to dredge up a lot of receipts, bank statements and loan information from a couple of years earlier.

“I’ve said before that I’d rather go through a colonoscopy or a tonsillectomy without anesthesia than go through that again, but we were a whole lot better as a result,” Mark Thomas quips.

Since he first participated in the program in 2009, Mark Thomas has been able to make informed decisions that put his business on a better track — the shift to raising heifers being the most recent decision.

At a time when national farm income is down, on average, and uncertainty abounds about how tariffs might affect foreign demand for corn, and especially soybeans, it is invaluable for Ohio farmers to know their production costs in every part of their business. The business analysis program is designed to help Ohio farmers achieve financial success. Helping farmers in this way is one of the main reasons land-grant institutions such as OSU were created.

The state is home to 75,462 farms, and 83,491 people work in Ohio’s production agriculture sector, according to the most recent data from USDA and CFAES reports. The Ohio Farm Business Analysis and Benchmarking Program is just one of many programs to assist the state’s farmers so that they can continue pursuing, and making a sufficient profit in, what they’re most passionate about.

“We don’t always have good news for the farmer,” says Dianne Shoemaker, a dairy specialist with OSU Extension, the outreach arm of CFAES, and manager of the business analysis program. “But the benefits a farm receives from doing an analysis each year include seeing what is going well, and identifying issues that need to be addressed in a timely manner.”

Multitasking businesses

Most farmers do cash-based record keeping, tracking money coming in and going out, so they might not separate out the contributions and expenses of each individual venture — such as livestock, dairy or crop enterprises, Shoemaker says. The accrual adjustments used in the business analysis program take into account inventory changes, income and expenses when they occur, regardless of when the cash is exchanged.

More often than not, farmers juggle multiple ventures: raising crops and livestock, selling seed and running a pick-your-own produce business, among others. Keeping track of exactly what each of those enterprises is adding to — or taking away from — the business is critical, Shoemaker explains. “It helps farms identify where they’re making money and where they have opportunities to improve.”

Any business that participates works directly with a technician, who helps the business collect the necessary information and then generates the farm analysis. In addition to providing the relevant reports, Shoemaker and the technicians work with the farm’s business owners to interpret and apply the results they see.

Getting a report that compares a farm or enterprise to comparable farm businesses can enable a farmer to know whether he or she could, or should, take a different approach to become more profitable.

“Sometimes farmers have to decide to discontinue an enterprise or sell a farm business, which is always sad, but they are able to make the decision with full information,” Shoemaker says.

The Thomases knew their milk production business wasn’t doing well. At first, they changed what they fed the cows to produce milk that was higher in fat and protein, milk that earned them more. Later, even that wasn’t enough. So, the Thomases decided to sell off their herd in June 2018, when they suspected it would be a good time.

“Then,” Mark Thomas says, “there was a solid market for the cows.”

For more information about the Farm Business Analysis and Benchmarking Program, visit farmprofitability.osu.edu or email Shoemaker at [email protected].

Source OSU Extension, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.



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