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What Profit Profiler
Can Do For Your
Farming Operation
Understanding the
Business Side of
your Dairy
Compared to Other
Progressive Dairymen
a service provided by
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What is Profit Profiler?
Software model used to evaluate the economic
performance of individual dairy operations.
Subdivides expenses into 4 different categories to
find efficiencies/opportunities within the dairy
business (forages, grains, cows, heifers)
Provides an opportunity to compare your
performance against a number of “Benchmark”
indicators
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Why Do It?
You need to know your own production costs
You should know how you are doing when
benchmarked against other dairies
Very few options to find true costs by
enterprise/expense catagory
Impact of making changes is tremendous
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Why Profit Profiler?
It uses YOUR information – not “average values”
It identifies YOUR strengths and opportunities to make
improvements
It shows what parts of the business are money makers
and which are losers.
You can compare to different groups of dairymen to
be sure
You can use the “What If” feature to see the potential
impact of making changes before having to spend the
initial outlay of cash
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The Process…
Financial Statements
Production Information
Cropping Information
Labour Information
+ Advisor Assistance
Better
Decisions
Useful
Benchmarks
Increase
d Profits
+ “What If”
Options
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What is “Normal”?
2010-11 (55 Herds)
Total Cow Costs 58.9% 48 - 65%
Feed 25.5% 18 - 29%
Labour 10.1% 6.2 - 11.0%
Health & Breeding 3.8%
(expressed as % of Milkrevenue)
Cost /heifer/yr $902 $645-$1038
Forage Cost /Acre $420 $192-$541
Cost to make $1.00 $.825 $.73-$.90
Profit Profiler Results
Average Range (25-90 PCTL)
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What is “Normal”?
2010-11 (55 Herds)
Total Cow Costs 58.9% 48 - 65%
Feed 25.5% 18 - 29%
Labour 10.1% 6.2 - 11.0%
Health & Breeding 3.8%
(expressed as % of Milkrevenue)
Cost /heifer/yr $902 $645-$1038
Forage Cost /Acre $420 $192-$541
Cost to make $1.00 $.825 $.73-$.90
Profit Profiler Results
Average Range (25-90 PCTL)
$79,629 Diff
$34,747 Diff
$36,942 Diff
$66,310 Diff
$123,063 Diff
$147,066 Diff
Based on 100 cows
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> 10500 vs. < 8700 kg
Cost to make $1.00 $. 767 $.859
MilkRevenue /person $484,652 $254,539
Total Investment /cow $34,705 $23,425
Total Debt /kg Fat sold $47.23 $42.50
Comparison by Milk Prod’n
2010-11
# Cows
Avg Milk Sold/Cow
114
8,091
Low
(20 Herds)
263
11,219
High
(21 Herds)
NFI per100 cows $218,471 vs $94,340
Total Cow Costs
Cow Feed Cost
Heifer Costs
53.8% 62.4%
23.3% 26.0%
11.0% 13.1%
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Cost to make $1.00 $. 753 $.878
Milk Revenue /person $604,395 $255,586
Total Investment /cow $29,692 $35,416
Total Debt /kg Fat sold $52.42 $62.33
Comparison by Size
2010-11
# Cows
Avg Milk Sold/Cow
64
8,908
Small
(32 Herds)
379
10,026
Large
(27 Herds)
NFI per100 cows $204,710 vs $98,962
Total Cow Costs
Cow Feed Cost
Heifer Costs
53.2% 61.6%
24.0% 25.8%
10.2% 11.9%
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Cost to make $1.00 $. 692 $.964
MilkRevenue /person $239,021 $284,671
Total Investment /cow $30,188 $28,804
Total Debt /kg Fat $41.56 $55.33*
Comparison by Cost
2010-11
# Cows
Avg Milk Sold/Cow
93
8,781
High
(21 Herds)
237
9,952
Low
(21 Herds)
NFI per100 cows $276,760 vs $28,340
Total Cow Costs
Cow Feed Cost
Heifer Costs
49.7% 66.7%
21.8% 29.7%
10.4% 13.9%
*Debt averages 1.7M
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Overall cost to make $1.00 $. 785 $.864
Comparison by Heifer Program
2010-11
# Cows
Avg Milk Sold/Cow
114
8,708
High Age
(20
Herds)251
10,491
Low Age
(21
Herds)
NFI per100 cows $187,892 vs $109,961
Total Cow Costs
Heifer Costs
55.0% 61.0%
10.4% 12.9
Age @ 1st
Calving
1st
Lact Prod’n (%)
Cost / Heifer / yr
Cost to calving
23.4 28.0
89% 89%
$ 906 $ 917
$1,767 $2,140
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How Can You Use
Profit Profiler?
• Plans for Expansion
• Succession plans
• Evaluate what something is making you rather than
simply what it “costs” per unit
• See where to improve and target these areas
• Know how you stand compared to peers
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WHAT IS THE COST??
• NEW SUBSCRIBER, OR IF IT’S BEEN 3+ YEARS
SINCE YOUR LAST PROFILE.
$2,000.00 + HST
• RENEW EVERY 2 YEARS
$1,500.00 + HST
• RENEW ANNUALLY
$1,000.00 + HST
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Email: profitprofiler@gmail.com
Phone: (855) 442-3400 Fax: (613) 283-1867
Thank You!!
www.profitprofiler.ca
Editor's Notes
Hello Everybody.
My name is Mark Schokking. I am the President of Farm Financial Management Inc. and we are the Company who acquired the rights to the Profit Profile program previously operated by Canwest DHI and Bill Grexton.
I would like to acknowledge Bill at this time for the use of a number his slides being used in this presentation.
The name of our presentation is “What PP can do for your farming operation”
What is Profit Profiler?
Own production costs.
Ie) cost/kg butterfat produced
Cost to get a replacement into the milking string
Actual cost of forage & home-grown grains used in dairy
Many times the cash crop side of an enterprise is subsidizing the dairy side or vice-versa
Very few options to find TRUE costs by enterprise/expense category:
This shows where the largest opportunities for improvement are
Your typical 100 cow dairy herd can easily have revenues greater than $800,000
The range between dairies can be up to $150,000 of NFI.
Typically we are seeing lost savings of $1,000 being left on the table
2nd Why Profit Profiler?
Profit Profiler is a program that uses your values exclusively to create the benchmarks. The values it creates are YOURS – even those that are not measured by any other program but should be known – like home grown feed cost, total cow cost, heifer raising costs, labour costs
It shows your strengths (and everyone has some) as well as the areas of the business where at least 20 other dairymen are doing a better job. This is not to depress you but to show you that others have done it – so you can too. It gives you the “focus you need to know where to make changes.
Some costs even if you had a real value – are hard to compare – like heifer costs. You need to consider not only the cash cost but the opportunity cost and the results of the heifer program. Profit Profiler can help you here
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Rather than make a decision based on 1 single comparison, you can compare your values to a number of groups to see where your opportunity truly lies.
Better still looking at your own values over a couple of years will give you a better idea how you compare.
Don’t forget the value of What IF – see the impact based on your OWN #’s before making a commitment.
A brief overview of the process –
Your advisor helps the dairyman collect production, financial, cropping and labour information and makes sure the information is allocated correctly and consistent to how other herd’s information is collected
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They then put it into the “box” to get useful benchmarks that compare the herd to a peer group. Now we can see where the herd is ahead or behind other dairymen and shows which areas to focus on to make improvements.
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Using the “What If” feature allows us to see the impact of making changes – based on the herd’s own cost of production and allows the dairyman to make better decisions going forward which should result in higher profits
Here’s an example to show the impact of measuring the right things
You see a purchased feed cost of $850 / cow /year. Is this good or not? How do you know?
*
Here are the costs of 2 other herds to compare to – 1 is a jersey herd and the other is a Holstein herd that is trying to maximize his protein:fat ratio and get maximum income / kg of quota.
Does that help any? … - just a little
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Well let’s compare these 3 herds on a /HL milk sold. Which one is best (lowest). The Jersey herd is by far the worst - - but that is not a fair comparison because jerseys have higher % components in their milk and so another way is needed.
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Let’s look at the cost / kg Fat. Well now the Jersey is way ahead (lower cost) so it must be that this is a good measure. … But that is not fair to the 3rd herd who is trying to maximize protein sales within his quota limitation.
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Looking at cost / $ of Milk Revenue is the best way to look at a cost (essentially expressed a % of sales). In this example there is very little difference between these herds. None of the other measures showed that.
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However even this single measure (many dairymen think Purchased feed cost the best measure of cow costs) is not the best- It does not consider the home grown feed cost OR the variation between what % is grown vs purchased. All it measures is the amount purchased. A true comparison needs to look at the entire feed cost AND all the other costs.
To minimize the confusion of a lot of numbers and a lot of paper, the results are presented on 3 pages – comparing the herd from
a business to business viewpoint,
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a cost of production viewpoint
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and showing production and investment values.
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In addition, the key 12 measures are shown in graphic format. The taller the bar, the better you are in this measure. Every farm has strengths where they are high and areas where they can make improvements. This program will point our both.
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Finally the “What IF” I made a change option allows you to see specifify the potential size of a management change – in financial terms. It uses your values to achieve this.
Each report has the herd’s user ID at the top – for confidentiality reasons no names are ever printed on any report – as well as a description of the group the herd is being compared to. This gives a better idea of what the “peer group” is like
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There are over 25 groups to choose from for comparison purposes. Simply click on the group any you can see another comparison
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Every report shows your results,
*
the average of the peer group and
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for a number of key measures, how your business ranks within that group.
JUST FOR THE FUN OF IT, I PUT TOGETHER A FEW SCENARIOS FOR DAIRY FARMS AND VARIED THE FOLLOWING:
SIZE OF THE QUOTA BASE
NUMBER OF COWS TO FILL QUOTA
THE FORAGE QUALITY
REDUCED SPENDING ON PURCHASED FEED COST
THIS ONE IS A FARM WITH:
100 COWS
125 KGS QUOTA
EXCELLENT FORAGE QUALITY
THIS FARM IS:
100 COWS
95 KGS QUOTA
EXCELLENT FORAGE QUALITY
SCENARIO 3 IS:
119 COWS
125 KGS QUOTA
MEDIUM FORAGE QUALITY
SCENARIO 4 IS:
115 COWS
125 KGS QUOTA
EXCELLENT FORAGE QUALITY
FOCUS IS ON SPENDING LESS $$/COW OR $/T
Overall – here are some results from 55 2010 and 2011 herds done at this point in time.
The cow measures are expressed as cost / milk revenue – or cost as % of milk revenue which is probably the best way to measure a cost. Previous measures like / HL or KG quota do not take into account differences between breeds and production levels as we have noted. This process allows a producer to add expense which produces results and shows the real impact instead of just an increase in cost per…
One thing to note is how wide the range in costs between the 25th and 90th PCTL is - there is so much potential for improvement – both in costs and in production and labor efficiency. Remember there are still 35% of the herds with costs even wider than this range
The values in red that are appearing are the ranges we have just seen – expressed as $ for a 100 cow herd.
The size of these dollar amounts tells me that there is lot of potential for making changes that will have a great impact on the bottom line. Most of these changes do not have the impact of thousands of dollars but of tens of thousands of dollars.
While no one can expect to go from “worst to first”, even progress part of the way can have an impact of many thousands of dollars.
When we look at high vs low production herds over a 2 year period, we see quite a difference in milk sold per cow (which is different than DHI 305 Day milk measure).
This is the result of a combination of milk actually produced and the number of cows late in lactation or dry- – some herds in the low group had high 305 day milk but with long calving interval sold less per cow. It is also interesting that the higher production herds had considerably more cows.
The High Production group is all herds selling more than 10,500 kg /cow and the low production group is those herds selling less than 8,700 /cow.
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Cow costs were 8.6 cents different for each $ of milk revenue. Heifer costs were another 2 cents different.
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This followed right to the bottom line where the high production herds were 9.2 cents more profit for every dollar of farm revenue.
The other big difference is milk sold per person – almost 2X as much. When labour is the 2nd highest cost (behind feed), this has quite an impact on the bottom line.
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The difference in net income is staggering – considering all ”labour” costs are included in the costs already. This value is to be used for debt and profit – and there is very little difference in debt /kg fat sold.
When we look at large (&gt;250 cows) vs small (&lt;100 cows) herds over a 2 year period, we see quite a difference in milk sold per cow – advantage larger herds. Again, this is the result of a combination of milk actually produced and the number of cows late in lactation or dry.
*
Cow costs were 8.4 cents different for each $ of milk revenue
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That plus the 1.7 cent difference for heifer costs made the overall farm cost over $.12 cheaper than the smaller herds.
In this case labor efficiency as expressed by Milk revenue per person, is almost 2.4 X higher for large herds. On a per unit basis, labor costs is much lower.
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The difference in NFI /100 cows is similar to the difference shown on the production slide
When we look at a comparison of herds based on overall cost of production (expressed as “Cost to make $1.00 of Income”) over a 2 year period, we first see less of a difference in milk sold per cow (but still is &gt; 1,100 kg) than previous comparisons. Here the efficiency of producing milk played a more important role.
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Cow costs were 17 cents different for each $ of milk revenue
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That plus the 3.5 cent difference for heifer costs made the overall farm cost $.272 /$1.00 of revenue LESS for Highly Efficient herds than High Cost herds.
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If that NFI is brought back to a basis of 100 cows, the low cost herds made 9.8X more net income of high cost herds.
Of concern is that the average debt of the High Cost group is 1.7 Million. $28,000 can not possibly hope to service this debt. (if all the profit was used to reduce the debt, it would take 60 years to eliminate it – not very likely
Many of these herds are likely terminal unless dramatic changes are made
From a different look, we have compared herds that had age at 1st calving less than 24.5 months and those that had it over 27 months.
You can see that the milk sold per cow and herd size was quite different. It would make you think that the differences in management carry over into the heifer area as well
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The cow costs and heifer costs both show significant differences,
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When we look at heifer measures, we see that the “late calvers” also had the same level of production from the 1st lactation animals as the “early calvers” (89% of herd average). In other words the next generation seemed to follow in the steps of the older animals - which is not good.
It cost the “late calvers” slightly more /heifer /yr but almost $400 more to get them to freshen and into the milking line. A move to feed better earlier and calve earlier would probably not cost more per heifer as older heifers feed cost /day after 24 months of age is quite high and this savings could allow younger animals to receive better care. The result would probably be higher production in 1st lactation and beyond with no more cost.
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The difference in overall cost to make $1.00 and net farm income /100 cows is shown and is quite significant.
