Status of Wisconsin Agriculture 2010 - Agricultural & Applied ...

Percent
40
36
32
28
24
20
16
12
8
4
0
Changes in Dairy Farm Equity
Related to Financial Stress
USDA’s Agricultural Resource Management
Survey estimated total Wisconsin
dairy farm assets at the end
of 2008 at $20.8 billion and total
debt at $3.1 billion, leaving total
equity at $17.7 billion. Equity was
split 1/3-2/3 between dairy farms
with more than $500,000 in sales
and those with less than $500,000 in
sales in 2008.
Wisconsin dairy farm balance sheets
weakened in 2009 from the combination
of a loss in asset value and an
Income Variables for Wisconsin Dairy Farms by Size Class, 2008
Percent of Gross
Returns to Assets
(Left Axis)
Percent of
Interest Expense
(Left Axis
increase in debt. The value of assets
fell for three main reasons: (1) the
value of dairy cows and heifers
decreased because of much lower
milk prices; (2) the value of land
and buildings dropped because of
lower earning value; and (3) dairy
farmers were forced to sell some
assets (e.g., financial assets) to offset
negative cash flow.
We estimated the loss in the value of
the state’s dairy cow inventory by
subtracting reported USDA-NASS
Wisconsin replacement cow prices
in October 2009 ($1,200) from those
Interest Expense as a
Percent of Gross Returns
to Assets (Right Axis)
0
$1,000,000 or more $500,000–$999,999 $250,000–$499,999 $100,000–$249,999 Less than $100,000
2008 Sales
Estimated Wisconsin Dairy Farm Assets and Debt by Sales Class,
December 31, 2008. $Million
Sales Class Assets Debt Equity
$1,000,000+ 4,227 1,164 3,063
$500,000 - 999,999 3,358 621 2,737
$250,000 - 499,999 5,695 662 5,033
$100,000 - 249,999 5,812 531 5,282
< $100,000 1,741 161 1,580
Total 20,833 3,139 17,695
Source: Agricultural Resource Management Survey
in October 2008 ($1,940). This
yielded a $740/cow loss in value,
which we reduced slightly to
account for higher expected replacement
cow prices later in 2009, then
multiplied by the number of dairy
cows in the state in November 2009
(1.258 million cows). This gave us
an estimated loss of cow value of
about $850 million.
To estimate the loss in the value of
heifers, we assumed a ratio of 46
heifers per 100 cows, which comes
to about 575,000 heifers on Wisconsin
dairy farms in 2009. 2 We applied
a loss in heifer value of $600 to
derive an estimated total loss of
about $350 million. Combined with
the estimated loss in cow value, this
STATUS OF WISCONSIN AGRICULTURE 2010—THE WISCONSIN FARM ECONOMY 5
20
18
16
14
12
10
8
6
4
2
Percent
2 USDA reports dairy heifers by state only for
January. The January 2009 Wisconsin heifer
count was 650,000. The U.S. heifer/cow ratio
reported for July was 5 heifers per 100 cows
less than the U.S. ratio in January. We
reduced the January Wisconsin ratio by the
same amount to derive July heifer numbers.