Download: Texas Dairy Farm Financial Benchmarking Report
Benchmarking turns your own books into a mirror, showing where your dairy is strong and where money leaks. This page explains what to measure and how to build your own comparison, not a downloadable report, and it is general education rather than financial, legal or tax advice. This site does not make or arrange loans.
What does financial benchmarking mean?
Benchmarking compares your numbers with a reference, either your own past years or other dairies of similar size and type. The point is to spot trends and gaps, not to chase someone else's results.
Every dairy is different, so use comparisons as questions to ask, not scores to beat.
In Stephenville and across Texas, herd size, feed sourcing and milk marketing vary, so choose comparison groups carefully.
Which measures matter most?
Start with a few that tell you whether the dairy makes money and can pay its debts. Gather twelve months of data before you calculate anything.
Do not skip the simple ratios. Many dairies learn more from three or four well-chosen numbers, reviewed monthly, than from a dozen reviewed once a year. Pick a handful and stick with them.
- Cost of production per hundredweight of milk
- Feed cost per cow and per hundredweight
- Milk income over feed cost
- Debt payments compared with income
- Working capital and cash reserve
- Labor cost per cow
Where can you find outside data?
Public sources give context. USDA Economic Research Service publishes farm income and cost analysis, and USDA NASS offers surveys and statistics. For regional credit conditions, see the Kansas City Fed's agriculture surveys and the Dallas Fed.
University groups also publish farm management analysis. farmdoc daily is a respected example. Read current figures at each source and note the publication date.
Always cite the year and the herd size category of any outside number you use, and be careful comparing across years. Costs and prices move, and a figure from one season may not describe the next.
How do you build your own benchmark?
Pull your balance sheet, income statement and cash flow, and calculate each measure the same way every year. Ask your accountant to help define terms so you stay consistent.
Compare against your own history first. Then compare with outside averages, remembering that averages include dairies unlike yours. If you are well above or below a norm, ask why before assuming good or bad.
Write notes in the margins about why a number moved. Memory fades, and next year's you will thank this year's you.
How do lenders use these numbers?
Lenders look at repayment ability, working capital, debt levels and trends. Bringing a clean benchmark package to a meeting shows you know your business. Compare lenders by asking about terms, fees, collateral and how they handle tough years.
Options include local banks, credit unions, Farm Credit associations and FSA loan programs, which have their own eligibility. For general borrowing questions, see Farmers.gov loan information and the CFPB.
Do not be shy about asking questions of a lender. A good lender wants to understand your dairy, and your questions show you are a serious borrower.
What should you bring and ask?
Bring recent tax returns, financial statements, a herd and feed summary, a debt schedule and a short plan. Ask each lender what they require, how they set rates and what happens if a payment is late.
In Texas, the Texas Department of Banking regulates state-chartered banks and is a source for questions about state banking. Talk with a licensed professional for personal advice. The farm money guide and the dairy herd guide support the planning side.
Prepare a short story to go with the numbers: what changed, what you did about it and what you plan. Numbers plus a plan make a strong case.
Where can you get help and perspective?
Texas A&M AgriLife Extension offers farm management education, and your accountant is your best partner. Remember, nothing here is financial advice.
For lighter reading, farm.FM has farm economics stories and dairy stories and satire, and a farm.FM story on dairy margins fits the topic.
A benchmark is a tool for decisions. If a number points to a problem, put an action and a date next to it.
Sources and further reading
- USDA Economic Research Service: farm economy data and analysis
- USDA NASS: agricultural statistics and surveys
- Kansas City Fed Agriculture: farm credit and land value surveys
- Dallas Fed: regional economy including Texas and Oklahoma
- Farm Credit: cooperative agricultural lending network
- Texas Department of Banking: state bank regulator
Ask locally: Work with your accountant, your lender and a Texas A&M AgriLife Extension farm management specialist.