ACCOUNTING FOR PROFITS BY DAVID BEKEDAM
WHERE IS THE TRAIN HEADED?
Here we go again! If you didn’t
lock up your milk before the end of last
year, you’re probably staring $14 to $15
milk square in the eyes. While milk prices
remain extremely volatile, I wouldn’t com-
pletely count out the possibility of the price
rebounding; however, with over supply, con-
sistently increasing production, and strong
inventory build-up of butter and cheese, ﬂ at
to lower prices in the foreseeable future may
“These days, many banks are
be a reality.
considering financial sophisti-
Talk is equity burn, once again
Due to this volatility, talk amongst bank- cation of management as part
ers regarding equity burn rates is becoming
common once again. The banks are looking of their assessment of risk,
which impacts your interest
You want more than a milk check from
You want more services that help increase
profit margins. Representation that tells
Capitol Hill what farmers need. Innovation
that takes your milk from farm to table.
That’s More Cooperative.
April 2012 WESTERNDAIRYBUSINESS
I David Bekedam,
CPA, senior manager,
Frazer, LLP, Visalia,
Calif. Contact him by
e-mail at: dbekedam@
frazerllp.com or call,
559-732-4135 Ext. 120.
at the ability of individual dairy operations
to survive another downturn. The ques-
tion in a nutshell, “does the operation have
enough cash and available credit to make it
through a downturn before hitting certain
loan-to-value (LTV) limits?” Dairymen
should be asking themselves how long it
will take before banks are unwilling to
extend any further credit.
Time to gain perspective
With breakevens well above current
milk prices for many dairymen, it’s time
to gain a sense of perspective on the vi-
ability of your business in the year ahead.
Many producers have $65 silage and $280
hay sitting in inventory being fed right
now. We’ve seen the effects for many in
the 4th quarter of 2011 ﬁ nancial state-
ments and are not anticipating 1st quarter
2012 numbers to be any better. If you
aren’t already preparing forward-looking
budgets or cash ﬂ ow projections, don’t
wait any longer.
Preparing cash ﬂ ow projections will not
only help you manage your cash, it will
also give you a glimpse into the future.
Cash ﬂ ow projections should take into
account several historical and future items
of income and expense. For most operat-
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