When it comes to evaluating debt load, consider using debt per hundredweight of milk instead of debt per cow, says Tim McNamara, vice president-capital markets at AgStar Financial Services in Apple Valley, Minn. After all, dairy producers sell milk, not cows.

McNamara suggests using the following ratios:

  • Debt per hundredweight:  <$20.00       
    To calculate: 
    Total liabilities for the year 
    Total cwt of milk sold per year
  • Debt service per hundredweight: < $2.50
    To calculate:  
    Total principal and interest for year
    Total cwt of milk sold in a year.