Three Things We’ve Learned From Low Milk Prices

Through any adversity comes learning. Without learning through adversity, we would never adapt and continue on with our lives and business.

The past few months have been a PhD-level course in managing through adversity. Low milk prices, rising labor costs, increased interest rates and even weather disasters have affected our ability to maintain a profitable dairy operation.

So what have we learned? What are we going to do to be better positioned to weather the next economic downturn?

  1. You don’t have to be big to be profitable (but it really helps). Larger dairies have the luxury of spreading costs over a wide range of assets. They are also flexible enough to shift resources to maximize cash flow opportunities, even in low milk price periods.

But small dairies can be profitable, too. If one of the following occurs:

  • The farm is paid off
  • There is significant offfarm income
  • They have a tie to consumers, either through selling a product, offering tours, or some other outreach that helps drive income.
  • You have superior genetics and are able to market those genetics off the farm.

If your dairy is under 200 cows and doesn’t have any of these things, you are probably about to be out of business. If you’re still alive, you should strongly consider accomplishing one of the tasks above to be able to weather the next downturn.

For an explanation of this evolution, read this story featuring Curt Covington, executive vice president of Farmer Mac.

  1. Dairies that survive keep cash flowing. Too many times the knee jerk reaction when prices fall is to reduce expenses at all cost. When that happens willy-nilly, production usually falls and cash flow turns from a river to a trickle. 

Never cut an expense that cuts production more than the cost of the expense. That seems pretty logical, but desperate times should not call for that desperate of a measure.

Because when prices are low, cash flow is king. Cash is what pays bills, and paying bills leads to survival.

Mike Hutjens, Illinois dairy extension specialist, shares five things not to do from a nutrition standpoint.

  1. There are alternatives to dairy farming. While one farmer suicide story is too many, this spring was overload. Too many producers saw only one way out of the financial mess, more than I can remember in my 25-plus years in the dairy industry.

Remember that even in your darkest hour, dairy farming still is just a business. It’s not your life. I know dozens of ex-farmers who had to sell the cows or face financial ruin only to realize that, yes, there is life after cows. Dairy farming might be a way of life for some, but there are other ways of life out there. You need to stop and count your blessings.

If you or someone you know needs help to prevent a suicide from happening, see these resources.

What have you learned from low milk prices? Send me a note at mopperman@farmjournal.com.

 

 

 

 

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Submitted by JaniceValerio on Wed, 06/06/2018 - 05:40

It was really interesting to read this post. Milk is one important thing that never can be avoided from day to day life. Because it is consumed as a drink in many ways such as juices, coffees, teas etc. so price of the milk really bother us. So we must know about the variation in prices of milk. You explained well about why this variation occurs. If you are looking for any essay writing help just contact best essay writing service for best academic essays.

Submitted by JaniceValerio on Wed, 06/06/2018 - 05:41

It was really interesting to read this post. Milk is one important thing that never can be avoided from day to day life. Because it is consumed as a drink in many ways such as juices, coffees, teas etc. so price of the milk really bother us. So we must know about the variation in prices of milk. You explained well about why this variation occurs. If you are looking for any essay writing help just contact https://triumphessays.com best essay writing service for best academic essays.

Submitted by Steve schlabach on Wed, 06/06/2018 - 09:35

Dairy Herd Management do you realize if everyone under 200 cows goes out of business you might be out of business also? Shame on you for taking what we’re facing so lightly like it’s not that big of deal like we just go do something else so easily........ why don’t you advocate for us instead dumping more crap on us

Submitted by Sara on Thu, 06/07/2018 - 07:28

Stupid article. Just another magazine that thinks bigger is better. Running down the small family farms as if we are not worth anything. I will be unsuscribing. Shame on you.

Submitted by Brad Meyer on Thu, 06/07/2018 - 15:20

I do not like this article at all. For one, dairy farmers don't have time to have another job. How does having another job make
your farm profitable? Instead of talking about suicide prevention we should be encouraging small farms by telling them things WILL get better. Even though I am a dairy farmer over 200 cows, this article makes me angry. We should be talking about solutions to keep dairies under 200 cows on the farm and in the dairy business.

Submitted by Tom on Fri, 06/15/2018 - 02:21

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