Due to low milk prices the last 18 months, it has been financially difficult for all of us. However, it is during this time that I have learned some valuable lessons.
1. Don’t go overboard on cost control. In the past few months I have seen many dairies eliminate “so called extras” from the diet. If these “extras” are not cost-effective now, were they ever? I also have seen dairies reduce feed inputs on replacement animals, only to see a reduction in growth rates and delayed calving. Feed cost and return on feed should be irrelevant to milk price. Even though feed is the largest expense on the dairy, it is also the fuel that drives the economic engine. Never forget that maintaining an efficient and productive herd is the only way to improve the bottom line.
2. Communication is key. Letting vendors know your financial situation and making arrangements to avoid conflicts over payments has been a positive experience. If you are honest, and do what you promise, most vendors will work with you.
Improved communication with my lender has been helpful, too. My banker visits the farm quarterly to review our operation and budgets. This has allowed him to better understand the current financial statements, and decisions are discussed jointly. In addition, the records required by him has made me a better manager, which hopefully will have even greater benefits when the milk price improves.
3. Scrutinize all purchases. Capital purchases outside of replacement cattle have been scrutinized closely. Many have been postponed. However, buying replacement animals to maintain herd capacity is paramount to the monthly cash flow.
4. Step up maintenance. Equipment repairs can be costly, and in some cases repairs won’t cut it. Therefore, routine equipment maintenance has become a priority in an attempt to avoid costly repairs and early replacement.
5. Coach employees. I have spent more time working with all employees to ensure they have the tools and skills needed to perform their tasks efficiently each day. This has allowed me to see his/her strengths and weaknesses. And an added benefit is a good rapport, comfort level that has developed where employees now offer suggestions. This has helped grow our team spirit. Remember, good employees can’t be bought, they have to be created.
6. Nurture the ties that bind. Oftentimes, we are too busy running the farm to make time for our neighbors and friends. But when times get tough, these may be the ones who will lend a helping hand. I have found my farmer friends more than willing to help with equipment, knowledge, or their time when possible to help us overcome a problem. These relationships take time and effort, but they are indispensable.
Remember to respect your family with quality time. Allow them to know your concerns and seek their input to help you survive emotionally during hard times. Where family labor is employed on the farm, relationships can suffer when financial difficulty arises. Stress can take a huge toll on you and your family. Don’t let the pressures of the job rob you of the relationships of a lifetime.
7. Consider other directions. For some of you the current economic situation will lead you to exit the business. Do you have an exit strategy? Seek professional help — accountant, lawyer — to avoid getting caught with unforeseen tax or legal obligations.
Do not look at leaving the dairy business as an end to a career. Instead, look for opportunities that you did not see before. For example, renting the farm to someone wishing to expand their business, or growing feed for another dairy operation.
All businesses have economic cycles, and hopefully ours will turn upward soon. There are no guarantees in this business, or in any other business in the country. One must take the lessons learned this year and use them so that we will all be better managers for the future.
Paul Johnson is a veterinarian and dairy producer in Climax, Ga.