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Financial Planning for Dairy Herd Expansions

Department of Agricultural Economics, Michigan State University, East Lansing 48823

ABSTRACT

Many dairymen are expanding or modernizing their dairy farm businesses. Dairy farm expansion usually involves a number of changes in many areas of the farm business resulting in the need for more detailed data on costs and returns. Computer programs have been developed to simplify the task of forecasting effects of proposed farm changes. These computer programs help (1) to motivate farmers to state systematically some crucial assumptions about planned changes, (2) to enable dairymen to examine the consequences of those assumptions to see if the changes appear financially feasible and desirable, and (3) to provide benchmark projections for determining if selected business changes are going according to plans. Use of the new programs should help dairymen develop new skills in business planning and in acquiring and controlling the use of credit. These skills are increasingly as important as the production skills at which many dairymen excel.

¹ Present address: Department of Agricultural Economics, Clemson University, Clemson, South Carolina 29631.