A dairy producer I know and respect is contemplating a major expansion project. Therefore, he is asking a lot of questions about milk prices, feed cost and interest rates over the next three to five years. It is encouraging to watch him do this homework. He understands that a good deal of planning and research needs to be done before any decisions are made about major projects, like expansions.
However, it has become clear that this producer plans to build the new dairy near the existing operation.
This will pose some significant future challenges. This operation is at the fringe of an urban area that has been growing at robust rates the last couple of decades. Area land prices are quite high, and the pressure to manage and control manure increases as more residential properties spring up around the dairy. Land needed to build the new operation is going to be expensive, and manure application that doesn’t upset residents will become even more of a challenge.
The decision to locate the new dairy near the existing operation is illustrative of what I call “century-farm syndrome.” This occurs when farmers become tied to a location or area because that is where the family has been farming for about 100 years.
While farmers should be proud that their families have farmed a particular piece of land for several generations, they should not let the past lock them into future business decisions.
Instead, the goal of this dairy producer should be to make decisions that best position his family’s dairy business to succeed in the long run. Rather than try to expand his dairy operation in the face of urban sprawl, he might be wise to initiate a long-term plan that would transition his dairy from its current location to a new region where land is more affordable and there are fewer people to complain about farming operations.
This transition can begin with the dairy producer building a dairy operation that is completely independent of the existing operation.
In this case, less-expensive land is the main benefit of locating a new dairy in another area. The producer in question would probably have to pay $5,000 to $10,000 per acre for land near the “home” farm. Alternatively, the producer could most likely purchase land for $1,500 to $3,000 an acre in an area 200 to 300 miles from the existing dairy.
Opportunities for future generation
Siting the new dairy at an alternative location also gives the younger members of the family dairy business an opportunity to manage a dairy operation independent of parents and other relatives. This is not to say the new dairy would not be a part of the family dairy business or that the senior family members would not have a major say in how things are done at the new dairy. The day-to-day operations at the new dairy would be the responsibility of the more junior family members who are being groomed to ultimately take over the family dairy.
I understand that family farms are both businesses and homes for farm families. But farm families have to remember that sometimes businesses have to relocate in order to position themselves to survive and prosper in the future.
This relocation does not have to occur overnight. Instead, it can occur over time as the business passes from generation to generation.
These type of changes are probably inevitable for most dairy farms that will be in business in the years to come.
Bruce Jones is a professor of farm management at the University of Wisconsin-Madison.