4 Tips to Prepare for Dairy’s Next Downturn

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Although producers are still gun shy to admit that things are looking up for the dairy industry, a considerable improvement in milk prices has seemed to lift their spirits. While most farmers are not out of the water yet, the worst of low milk prices could be over and better days may lie ahead. 

However, with every up comes a down. During a World Dairy Expo Sharing Wisdom Educational Session titled "Recovering from a Downturn," four industry professionals and dairy leaders helped producers navigate how to build a road to recovery. Here are some pieces of advice they shared:

“Don’t obsess about when the next downturn will be,” says Linda Keene Hodorff, a Wisconsin dairy farmer. “You need to be smart when things are looking good and plan for the future.

“As I look back at the downturn in 2009 and 2010, we were trying to think, ‘How can we do this? We’ve already tweaked things so much!’ So, we brought all of our employee team together and said, ‘We’re not looking at terminating anybody, but times are tough. We’d like everybody on the farm to try and think of something that you do in your responsibilities that would save 3% on the dairy.’ That to us seemed like a manageable number. It wasn’t threatening to people, but it really got some creative thinking going around on the dairy and we ended up having some discussions that we would not have had otherwise.”

“Thoughts directly control feelings, which directly control your behavior or activity,” says Monica Kramer, a behavior health counselor for Eyes on the Horizon Consulting. “So, if your thought is during a downturn, ‘I’m not going to be able to do this. I can’t do this again. This is never going to work.’ How are you going to feel? Defeated, overwhelmed, frustrated, right? 

“So how does that play out in our day-to-day activities? If it doesn’t rejuvenate and it doesn’t help us have more energy to get out there and keep trying, plus it doesn’t help us plan. The work really needs to happen in our thinking.

“If something doesn’t feel right emotionally, peel the layers back like an onion until you get to the thought that is causing that feeling. Then say to yourself, ‘Is there in thing I can do about what is causing this feeling?’ If the answer is ‘Yes,’ then make a plan. If the answer is ‘No,’ then it is really about acceptance and learning how to be indifferent. Sometimes that means letting things go. But no matter how the cycles are, if we are in an upswing or a downswing, really pay attention to how your thinking is controlling your feelings, and in turn, how you are functioning.”

“To get ready for the next downturn, look at your balance sheet and see how you can possibly rebuild it,” says Ashley Arrington, agriculture analyst and risk management consultant for AgriAuthority.

Look at the level of equity you have, your working capital and equity depletion. As we know, working capital and equity do get depleted somewhat during the downturn, so see what your ratios were before and what they are now, then set a goal or a level that you would like to get back to.”

“Make sure to focus on what you can control,” says Robb Bender, a nutrition consultant for GPS Dairy Consulting. “I see so many producers who get tunnel vision and who are so focused on the fact that milk prices are poor, that things aren’t going well, that they are losing money and meanwhile they are overlooking an area that could save them money or increase revenue. Just making sure to focus on the things you can control and for the rest, if you can’t control it, don’t worry about it.”

For more tips on how to survive a downturn, read: