Dairy Farm Operating Profit

Dairy Operating Profit is the Dairy Revenue less Dairy Expenses where non-cash adjustments have been made to ensure that businesses are being compared on an equivalent basis.

Non- cash adjustments include:

• The value of change in dairy livestock numbers

• Unpaid labour and management (Labour adjustment)

•  The ownership of run-offs (Run-off adjustment)

• Depreciation

•  The value of change in supplementary feed inventory

Operating Profit Calculation

Dairy Gross Farm Revenue (Dairy GFR)

Milk & Net Dairy Livestock Stock Sales (cash)

+ Other Dairy income (cash)

+/- Value of Change in Dairy Livestock Numbers (non-cash)

Less

Operating Expenses

Farm Working Expenses (Cash)

+/- Feed Inventory Adjustment (Closing feed less opening feed inventory)

+ Owned Runoff Adjustment (if runoff is owned and not leased)

+ Labour Adjustment (for unpaid family management and labour)

+ Depreciation (non-cash as per accounts)

= Equals Dairy Operating Profit

50% Sharemilkers – use your own set of accounts to calculate Operating Profit. This can be compared with other 50% sharemilkers, but not farm owners.

Variable Order Sharemilkers – Combine the accounts of the farm owner and the sharemilker to calculate Operating Profit for the farm. This can be compared with other owner- operator farm

The following diagram shows the adjustments made to the cash income and expenses to calculate Operating Profit.