Dairy Records and Models for Economic and Financial Planning

Abstract

Managers are challenged to translate farm goals into specific strategies within organizational areas such as production and finance. To the extent that the goals include profitability, economic criteria should be used to determine the strategies. The economic criteria should be evaluated with data that are specific to the individual farm rather than assuming average relationships between production practices and profitability, which may or may not be relevant in specific economic situations with constraints. Farm data from production and financial records can be used to analyze past performance, and then these data can be integrated with decision models to yield predictions about future performance that are critical for cash, credit, and financial planning. Information gathered regularly on current milk production, stage of lactation, age, reproductive status, health, feeding practices, performance, costs, and market prices, including forecasts, can be continuously included for management monitoring and control. Economic analysis includes opportunity costs and risk assessment. An example of a current operational system is given that analyzes past performance but also uses simulation and optimization models to forecast and analyze alternatives. Optimization, although never perfect, is considered to be a valuable part of the system to generate alternative strategies to reach farm goals and to make the system more than merely descriptive.