FORT WAYNE, Ind. — Dairy producers must think globally when making decisions that affect their businesses, according to a speaker at last week’s two-day Tri-State Dairy Nutrition Conference.

“Like it or not, we’re in a global economy,” noted Gary Sipiorski, an agribusiness consultant with Vita Plus. “It used to be, you worked hard and made money, but that isn’t going to work anymore. You have to put some financial savvy with it. Unless you understand the numbers, it’s not going to work.”

Sipiorski spoke April 24. During his presentation, he listed several rules he considers necessary for a successful dairy operation, including an 8 percent return on assets, a three-year asset turnover rate and more than 30 percent equity.

“You also need to know your cost of production,” he said. “Feed costs are unbelievable.” The cost for farmers to grow corn is about $550 an acre, and for soybeans, $300 an acre, he explained. Those costs don’t include the price of land.

Farmers should expect $6.50 corn and $12 soybeans this year, Sipiorski said. “As long as corn is worth what it is, grain producers are going to make pretty decent money.”

Dairy producers thinking they might make the switch to corn or soybeans should consider the potential profits of each, he said. For example, a farmer selling 200 bushels of corn at $6 a bushel could net $300 an acre for their crop once expenses are taken into account. A soybean farmer could net $190 an acre, with prices at $12 a bushel. Dairy producers, however, could have a milk cow net that works out to $315 an acre, he added.

Land values continue to grow, and a land value record was set recently in Iowa, he said: A dairy producer paid $20,250 an acre for 74 acres in the state.

The amount of available acres of land continues to decline worldwide, while the number of people is steadily increasing, he said. In 1964, there were roughly three-quarters of an acre per person worldwide, but that number dropped to slightly less than one-fourth last year. Meanwhile, there are seven billion people worldwide today and that number is expected to be 9.1 billion by 2050.

Globally, dairy producers need to consider how problems in Europe, including financial instability in several countries, could affect supply and demand, Sipiorski said.

“There’s a lack of an appetite for austerity in Europe,” he stated. “If Europe fails, it creates a problem in China. If China has a problem, it creates a problem for us.”

Other global concerns that could impact dairy producers include oil prices and capital challenges for some banks, he said. The United States is not without issues of its own, he said, adding there are concerns over government, business and consumer spending, housing, jobs and the weather.

Cuts in various agriculture programs such as direct payments and crop insurance are probably coming in the 2012 farm bill, Sipiorski said. One cut already proposed is the closing of 259 Farm Service Agency offices across the country.

“Agriculture is seen as doing well, even though the general economy is seen as struggling,” he said. “Producers have to understand that they must consider what’s happening globally as well as what’s happening nationally. There are certainly risks, but they should know there are good opportunities as well.”