Calculating Dairy Farm Operating Profit

Fill in the  income and expenses in the table located on the Business Planning Section located in the Dairy Site titled Dairy Operating Profit, using information which is in your financial accounts.

Net Milk Revenue

•  Milk sales less DairyNZ levy (include any colostrum sales and milk insurance claims). Include Milk Dividends.

Net Livestock Income (Stock Sales – Purchases)

• Total revenue from dairy livestock sold less the total cost of dairy livestock purchased during the year.

• To ensure that stock adjustments to be made later will be correct, make the following changes to livestock sales and purchases:

a. If stock has been purchased early in the season then add them to the opening stock numbers, and deduct their purchase price from stock purchases.

b. Stock purchases made late in the season should be deducted from the closing stock numbers and again their purchase price should be deducted from stock purchases.

c. Large numbers of stock sales made late in the season should also be added back into stock numbers and their sale price deducted from stock sales.

Other Dairy Revenue

• Dairy farm revenue, other than from milk and livestock sales. This includes items such as rebates that cannot be netted off a specific expenditure category (e.g. trading company rebates), rent for farm houses/cottages (check that any rent from farm staff for accommodation is netted off wages paid) and other revenue. Revenue from land leased out is included if there is no lease expenditure to offset. Also include revenue from other use of dairy farm assets e.g. small amounts of contracting and prize money for dairy livestock. Note: rent received from staff for accommodation should be netted off Wages.

Dairy Herd Attribution Paul Harrop

Off Farm Income

•  We are interested in profit from your dairy farm. Income which is not generated from the dairy assets should not be considered in Dairy Operating Profit. Operating Profit does not include income from dividends (other than milk dividends)/shares or off-farm assets such as a rental property.

Expenses

•  Expenses should be included in Operating Profit as they appear in your financial accounts.

a. Do not adjust for capital expenditure on fertiliser, repairs and maintenance or reg rassing.

b. Exclude large one off expenditure items (such as fertiliser and R&M) caused by severe weather events resulting in civil defence status.

Overheads

•  Overheads include administration, farm insurance, ACC and rates.

•  Include lease of land used to support the dairy operation, i.e. a run-off, where the lease is paid to an external party. If the lease is paid to a related entity, that entity will need to be included in the calculations. Also include machinery leased/hired for R&M purposes.

•  Do not include leases for milking land, cows, vehicles and plant – these are all excluded from Operating Profit

Do not include the cost of interest. When comparing Operating Profit between farms,we are focusing on the operational efficiency of the farm and not how a business is funded.

Depreciation

Include depreciation related to dairy farm assets (buildings, improvements, plant, machinery and vehicles). Include depreciation recovered and loss on sale of dairy fixed assets (only on sale of assets to external parties). Exclude depreciation on off-farm assets or any private portions of depreciation on buildings and vehicles.