Dairy farmers across the United States are finding themselves at a financial crossroads. I don’t have to read a report to tell you that. All I have to do is look at the call log on my phone.
More now than ever before, more and more dairies are reaching out because they have received 90-day notices to find new lenders. The current economic climate makes it extremely challenging to switch from one lending institution to another, especially within tight deadlines set by the banks.
Here is how I’m helping these dairies navigate through their financial challenges and what other dairy farmers can do to position their businesses for a sustainable and profitable future.
1. Cost Management: A major factor impacting dairy profitability is feed cost. Feed expenses can be dramatically reduced by optimizing the use of farm-grown forages and eliminating unnecessary feed additives. With harvest season upon us, take the time for additional planning now and save yourself money in this area for the rest of the year.
2. Labor Efficiency: Labor costs are another significant expense. One approach to reducing labor is for the owner to be more active in doing day-to-day operations. Another is to cross-train employees so they have the skills in multiple areas and you can fill their day with tasks to maximize the value of each hour you are paying them to work.
3. Speak Now: If you haven’t had a conversation with your lender yet about how your dairy farm ranks among the clients in their portfolio, have that meeting now. Find out what you must do to be at the top of their list, and then do those things.
For some dairies, this may be a time when they sit down and look at their financials and choose to exit the dairy farming business at a time when cattle are commanding top dollar. If that’s the case, be sure to have a plan for the debt, not just the sale.
Most importantly, if you are in this situation right now with a 90-day notice letter on your kitchen table, don’t wait. Ask for help and get some outside eyes to enable you to see the opportunities and your next best actions.
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