Financial Management

Data is the New Crop: Why Financial Companies are Betting on Farm Information

Thu, 02 Apr 2026 13:04:28 GMT

For decades, agricultural lending was a straightforward calculation of acreage and appraisals, but lender’s role is evolving as the global economy shifts toward renewable energy and digital infrastructure.

Farmer Mac President and CEO Brad Nordholm, who has spent 45 years at the intersection of agricultural and energy finance, sees how the farm of the future could look more like a high-tech power plant than a traditional row-crop operation.

At the International Dairy Foods Association (IDFA) Dairy Forum earlier this year in Palm Springs, Calif., Nordholm laid out how Farmer Mac is navigating the disconnect in today’s land market and why the industry is betting big on the integration of data and energy.

The Data Advantage: Why Lenders Crave Farmer Information

One of the most significant shifts in modern finance is how lenders view information. Financial companies are keen on farmer data because it transforms speculative lending into predictable project finance.

According to Nordholm, when Farmer Mac looks at high-growth areas like broadband, data centers or renewable natural gas (RNG), it isn’t making speculative bets. Instead, it is looking for data-backed certainty. Lenders value farmer data for three primary reasons:

Securing forward commitments — Data allows producers to prove revenue streams 10, 15 or 20 years into the future. By showing forward commitments from customers, a farm operation stops being a gamble and starts being a bankable asset.
Bridging the land-price disconnect — There currently is a gap between high land prices and lower cash flows in sectors like corn and soy. Nordholm notes that Farmer Mac no longer lends solely on an appraisal of $10,000 an acre. Instead, it uses data to size debt based on pro forma cash flows. This data-driven approach protects both the lender and the farmer from overleveraging.
Risk management tools — Unlike the 1980s, today’s data allows for sophisticated risk management. From forward-pricing sales at the beginning of the growing season to utilizing fixed-rate loan products, data provides a suite of tools that creates resilience against inflation and market volatility.

“Financial data are the only way a lender can determine a farm’s profitability and financial soundness,” says independent dairy financial consultant Gary Siporski. “As long as a farm wants to borrow money, lenders will demand data.”

Powering the Grid: From Methane to Data Centers

The dairy industry is uniquely positioned to benefit from the electrons-and-molecules era. Nordholm highlights the massive growth in anaerobic digesters and RNG. With retail and wholesale electric rates climbing, capturing methane to produce heat and electricity is no longer just a sustainability play; it’s an economic necessity.

“We don’t allocate capital because someone says, ‘I’m sustainable,’” Nordholm explains. “We ask: Does this investment improve efficiency? Does it result in less waste?”

For dairy producers, this means looking at manure and energy management as a core financial performance metric.

This energy demand is also being driven by a massive backlash against data centers taking power off the traditional grid. The new generation of data centers is going behind the meter, looking to wind, solar and batteries — often located on or near agricultural land — to guarantee 100% assurance of their energy needs.

Why This Isn’t the 1980s

Despite sad stories in row crops like cotton and sorghum, Nordholm remains optimistic. The liquidity being stored during recent good years is helping operators ride through the current stress. More importantly, the financial system has evolved.

“In the 1980s, almost all loans were variable rate,” Nordholm recalls. “Today, the ability to lock in fixed rates and use data to manage input costs means the industry is far more resilient.” While the electric power situation will remain a challenge for the next five years, the combination of a growing global population and America’s world-class financial and transportation systems keeps the long-term outlook bright.

For the modern producer, the message is clear: Your most valuable crop might not be what you harvest, but the data and energy you produce alongside it.

The Dairy Margin Revolution: Why You’re Not Just in the Milk Business Anymore

Wed, 01 Apr 2026 16:26:36 GMT

In the 2016 film The Founder, there is a pivotal moment where Ray Kroc is told a hard truth that would change the course of business history: “You’re not in the burger business; you’re in the real estate business.” Most people thought McDonald’s became a global titan by flipping more patties or perfecting the kitchen assembly line. In reality, the breakthrough was a shift in how the business was structured. The burgers created the traffic, but the real estate underneath the golden arches provided the wealth.

For today’s U.S. dairy producer, a similar paradigm shift is underway. Curtis Bosma of HighGround Dairy says the most successful producers are realizing they are no longer in the milk business or the efficiency business. They are in the margin business.

The Metric Trap

For decades, dairy farmers have been taught to optimize a specific set of operational metrics: milk production per cow, butterfat and protein percentages, feed efficiency and pregnancy rates. While these are critical indicators of how a farm operates, Bosma argues none of them actually measure profitability.

“Dairies are not in the efficiency business,” Bosma notes. “Dairies are in the margin business.”

The problem is even if a producer does everything perfectly — hits 100 pounds of milk, maintains a 30% preg rate and keeps the cows healthy — the market can still force a negative financial outcome. Looking at the last 10 years of Income Over Feed Cost (IOFC) data, the volatility is staggering. We have seen margins swing from more than $14.00/cwt to as low as $4.00/cwt. In this environment, Bosma points out even an elite dairy producer must shift their focus from the parlor to the profit-and-loss statement.

The 2026 Landscape: A Surplus of Success?

The current state of the industry is a paradox of high performance and market pressure. The February 2026 USDA Milk Production report showcases the U.S. dairy herd is the largest size since 1993, with an increase of 211,000 head year-over-year.

While this efficiency is a testament to American ingenuity, it creates a heavy load for the market to carry. Nowhere is this more evident than in the cheese sector. December output hit a record 1.238 billion pounds. While exports have been stellar — exceeding 110 million pounds in seven different months of 2025 — the sheer volume of supply is capping the upside. HighGround Dairy projects that without a major fundamental shift, cheese prices will struggle to push past $1.60/lb. in the first half of 2026.

The Year of Protein and the GLP-1 Tailwind

While cheese and butter have faced supply-heavy headwinds, the whey market is telling a different story. We are currently living in “The Year of Protein.”

Demand for Whey Protein Isolate (WPI) and WPC-80 is at record highs, driven by a structural shift in consumer behavior. Interestingly, Bosma points to a GLP-1 tailwind. As weight-loss medications like Ozempic and Mounjaro become more prevalent, users are actively seeking out high-protein, nutrient-dense foods to maintain muscle mass while losing weight. This isn’t a passing fad; it’s a structural change in the American diet that favors dairy components.

However, even this gold rush has a ceiling. As WPI prices climb, lower-income importing nations may pull back, shifting production back to dry whey. For 2026, the expected sweet spot for dry whey is between $0.60 and $0.70/lb.

The Beef-on-Dairy Gold Mine

Perhaps the most significant supplemental income stream for the modern U.S. dairy is beef-on-dairy calves. The U.S. beef cow herd has hit a record low since 1965, sitting at just 27.9 million head. A combination of the 2022 drought, high cattle prices incentivizing liquidation and an aging beef operator demographic has created a massive supply hole.

For dairy producers, this is a strategic gift. Beef revenue per hundredweight of milk has climbed from roughly $1.00 in 2019 to nearly $5.00 in 2026. Feeder cattle futures are trending near $370/cwt.

The elite operator isn’t just treating these calves as a byproduct; they are managing them as a core revenue pillar. By using Livestock Risk Protection (LRP) to floor the value of unborn calves and cull cows, dairies are bulletproofing their bottom line against the inevitable cycles of the milk market.

Feed: The 2025 Surplus Versus The 2026 Risk

On the input side, the 2025 corn crop was the largest ever recorded, yielding 17.021 billion bushels. This has led to ending stocks at their highest levels since 2018, providing some relief on the feed bill.

However, Bosma warns against complacency. As of February 2026, approximately 41% of corn production areas are experiencing some level of drought. While the 2025 surplus provides a buffer, the 2026 crop is far from guaranteed. Similarly, alfalfa hay acres and production have been on a steady decline since 2000, making high-quality forage a persistent challenge for the Western and Midwestern milksheds.

The Elite Operator Mindset: Strategic Versus Operational

To navigate this complexity, Bosma suggests adopting an “Elite Operator Mindset.” This requires a clear division of labor within the farm’s leadership:

Employees Operate: Following established protocols for milking and feeding.
Managers Review Tactics: Adjusting rations and allocating labor to achieve specific, short-term outcomes.
Owners Strategize: This is where the “Margin Business” is won. Owners must focus on long-term, high-impact decisions like risk management, succession planning and capital investment.

“Make better decisions faster,” Bosma advises. “70% certainty is enough — move fast, correct often.”

Ken McCarty of McCarty Family Farms in Kansas says his operation has seen a total transformation in how it views its calf crop.

“It wasn’t that long ago that a bull calf was almost a liability or an afterthought,” he says. “Today, depending on the market, those beef-cross calves can represent nearly 50% of our total calf revenue. It’s no longer a side project; it’s a core pillar of our financial stability that helps us weather the volatility of the milk check.”

Owning Your Financial Position

Finally, the path to clarity and control requires producers to understand who is looking at their financial statements and why.

The Banker wants to know if you can repay the loan (cash flow coverage).
The Accountant wants to know how to reduce the tax bill (depreciation).
The Business Owner (You) must ask: “Am I earning a return on my labor, my land and my capital?”

The tools to manage these margins are more accessible than ever. Dairy Revenue Protection (DRP) and Livestock Risk Protection (LRP) are no longer optional luxuries; they are the “real estate” of the modern dairy.

Reclaim the Legacy

The goal of shifting from an efficiency mindset to a margin mindset isn’t just about the money— it’s about clarity and control. It’s about ensuring the markets do not determine your legacy.

By thinking like an elite operator, understanding the structural shifts in the beef and protein markets and aggressively using risk management tools, producers can bridge the gap between “flipping burgers” and building a durable, scalable empire. The dairy engine may be changing, but the mission remains the same: protecting the land, the cows and the family’s future, one margin at a time.

Lock in Gains: How LRP Can Help Protect Beef-on-Dairy Profits

Wed, 18 Mar 2026 19:20:23 GMT

Record-high beef-on-dairy prices have reshaped the balance sheet for dairy farmers, turning a once-small revenue source into a major part of the bottom line. But without protection, those gains could disappear just as fast, underscoring how quickly momentum can shift in today’s cattle markets.

Experts caution today’s opportunity demands a more deliberate approach.

Mike North, president of the producer division at Ever.Ag, and Will Babler, principal at Atten Babler Risk Management LLC, made two points clear during the Professional Dairy Producers conference:

Beef-on-dairy is now a significant part of a dairy’s financial picture.
Tools like Livestock Risk Protection, or LRP, are critical to protecting those profits, especially at today’s historic highs.

Beef-on-Dairy Income Becomes a Major Revenue Stream

In just a few years, beef-on-dairy revenue has expanded dramatically. Strong demand from feedyards and packers, combined with tight U.S. cattle supplies, has pushed prices for beef-on-dairy calves to levels few producers expected even five years ago. For many farms, those calf checks now add several dollars per hundredweight to the milk check equivalent.

“At the end of 2022, the average dairy was getting paid about a $1 to a $1.50 a hundred in beef revenue,” North says. “Today, that number is north of $5. We’ve tripled that part of the financials. It’s a massive, massive opportunity, and with it a massive growing potential risk.”

Babler described beef as a new pillar supporting dairy profitability.

“We now have this other leg to the stool, whether it be black calves or cull cows,” Babler says. “That also has become a major contributor to our revenue stream.”

But as beef revenue grows, so does exposure to market swings. North and Babler say this makes it a smart time for producers to think about expanding their risk management toolbox . Alongside programs like DMC and DRP for milk, tools such as LRP can help protect beef-on-dairy income, letting producers capture strong markets while buffering against sudden drops.

Are Beef-on-Dairy Calves the New $24 Milk?

For many dairy producers, beef-on-dairy calves have become one of the most valuable animals leaving the farm. Day-old calves have averaged $1,500 in some regions and pushed over $2,000 in others — a price that would have been hard to imagine just a few years ago. North says the current market feels similar to $24 milk.

“What should one do with $24 milk?” he asks. “Walk quietly into the sunset and say, ‘We’ll wait to see if it gets better?’”

With prices sitting at all‑time highs, he says this isn’t the moment to step back.

“We’re talking about all-time records, and you just don’t walk away from those and say, ‘Ah, I’ll check back in next month.’ That’s not how we approach markets like this. You’ve got to go after it,” he says.

Lock in Gains

As attractive as today’s beef-on-dairy calf prices are, North cautions markets at record highs rarely stay there forever. When you’re standing at the top of the mountain, the fall can be just as steep on the way down. That’s why he encourages producers to think carefully about risk management tools like LRP to help guard against sudden market swings.

The federally subsidized insurance program administered by USDA allows producers to establish a price floor while still participating in market rallies, functioning similarly to a put option. Unlike futures contracts, which require fixed contract sizes, LRP policies can be written to cover the actual number of animals in a group rather than standardized futures contract weights.

Babler notes how attractive the program has become in the current market.

“When we look at the tools available, LRP really stands out for cross calves right now,” he says. “There’s a lot of reach in the market, and premiums have collapsed. We’re talking about $30 a head floors.”

Babler explains if prices fall below the level you insured, LRP pays an indemnity equal to that gap. Because the program uses national price indexes rather than individual sale prices, it protects against broad market declines, not differences from one sale barn to another.

Recent changes to the program have also helped increase interest among dairy producers. New coverage options now exist for cull cows and unborn calves, including beef-on-dairy crosses that may be sold shortly after birth.

Subsidy levels have also increased significantly, rising from about 13% in earlier versions of the program to roughly 35% to 55%, depending on the level of coverage selected. Premium payments are now due at the end of the coverage period rather than upfront, which improves cash-flow timing for producers.

These changes have also helped to improve the program’s flexibility. Babler says cattle can now be sold up to 60 days prior to the coverage end date without affecting the policy, compared to the previous 30-day window. Producers may also purchase coverage for animals they have under a valid purchase agreement, as long as possession occurs at least 90 days before coverage ends.

Taken together, those updates have reduced out-of-pocket costs and made LRP more accessible as a risk management tool.

Playing Offense with LRP

North and Babler emphasize LRP isn’t just a defensive strategy. It’s also a way for producers to play offense, capturing opportunities when markets are strong.

“Risk management really has two sides,” Babler says. “You play offense when markets give you opportunities, like we’re seeing in cattle right now, and you lock in the gains. At the same time, you play defense to protect yourself from the downside when things turn. In the past, dairy producers mostly dealt with corn and milk, which often moved in opposite directions. But now there are more markets to work with — milk products, protein, and beef — so there’s a better chance that at least one of them is working in your favor. The goal is to capture those strong markets while still protecting yourself when prices drop.”

While prices are expected to remain strong for now, Babler and North emphasize risk management tools provide a safety net, letting producers play offense when opportunities arise, while still playing defense to protect the gains they’ve worked hard to earn.

From Handshakes to High-Speed Data: The New Reality of Dairy Lending

Mon, 09 Mar 2026 12:26:51 GMT

For decades, the relationship between a dairy farmer and a lender was often built on a firm handshake and a look at last year’s tax returns. But in the modern dairy landscape, the handshake has been replaced by a high-speed data transfer.

To the uninitiated, the mountain of spreadsheets, herd monitoring reports and feed inventories required for a loan might feel like a bureaucratic hurdle. To Ashley Vande Zande, senior credit officer for Compeer Financial, and Gary Sipiorski, an independent dairy financial consultant, that data is something much more powerful: It is a story.

Painting the Picture

“Detailed data helps paint a picture of your farming operation,” Vande Zande says.

When a loan moves from a farmer’s kitchen table to a lender’s desk, it travels through a gauntlet of departments from origination to underwriting to final funding. In those back offices, the people making decisions haven’t walked your pens or seen your new parlor.

The data acts as their eyes. Accurate, complete and detailed records allow a lender to develop financial trends. These trends aren’t just numbers; they are an analysis of the borrower’s balance sheet and earnings that identify hidden strengths and calculate true borrowing power.

Without the data, the picture is a blur; with it, the lender can see exactly where the operation stands today and, more importantly, where it can go.

The Cow-Side Connection

One might wonder why a credit officer cares about herd monitoring records or cow flow. For Vande Zande, these metrics are the leading indicators of financial success.

“Submitting herd monitoring or feed information allows us to drill down into the operation’s herd health and production,” she explains.

Consider a farmer who invests in improved cow comfort or a more precise ration. The immediate result is a spike in milk production. In the eyes of a data-savvy lender, that spike isn’t just a win for the cows; it’s a forecasting tool. Improved production trends suggest higher future revenue, which leads to better efficiency ratios. This historical data cements past performance and allows the lender to structure a loan that suits the operation’s specific repayment ability.

Furthermore, these records turn “invisible” assets into collateral. Detailed machinery listings and inventory spreadsheets provide a clear understanding of the assets available to secure a loan, giving the farmer more leverage and the lender more confidence.

The Consultant’s Checklist

Sipiorski, who has spent decades navigating the bridge between the barn and the bank, views data as the ultimate tool for financial soundness.

“Financial data are the only way a lender can determine a farm’s profitability,” Sipiorski says. “As long as a farm wants to borrow money, lenders will demand data.”

Sipiorski notes that while technology like RFID tags and computer outputs are great for management, the lender is looking for four financial pillars:

Solvency — Can the farm survive a market hit?
Liquidity — Can the farm pay its bills on Tuesday?
Profitability — Is there actual net income after the dust settles?
Repayment ability — Can the operation cover principal and interest without breaking?

Lenders may evaluate as many as 25 different items, ranging from debt per cow to the increasingly vital metric of debt per hundredweight (cwt) of milk. These numbers ensure that a loan is a ladder, not a weight. As Sipiorski bluntly puts it: “No lender wants to set up a farm to fail.”

The Partnership Model

At the heart of this data obsession is a shift in the philosophy of ag lending. For lenders like Compeer Financial, the goal isn’t just to be a source of capital but rather a partner in the operation’s future.

“We really want to partner with our clients, so they understand every aspect of their finances,” Vande Zande says. “We’re here to help crunch the data so they know where they stand today and where they can go in the future.”

By sharing data, the adversarial nature of the bank-client relationship disappears. Instead of a farmer asking for money and a banker looking for reasons to say no, the two parties work together to establish specific steps to work toward long-term goals. The data allows the lender to understand the industry factors, both positive and negative, that have affected the operation, allowing them to build a loan structure that survives the volatility of the dairy market.

The Bottom Line

Combing through data and financial planning can be an overwhelming part of running a dairy, but it is the only way to move from surviving to thriving. In today’s modern era, the most successful dairy farmers aren’t just experts at cow comfort or crop yields; they are masters of their own farm information.

When you hand over your data, you aren’t just fulfilling a requirement; you are giving your lender the tools they need to help you win.

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Dairy's 2026 Safety Net: Producers are Moving from DMC to DRP

Tue, 24 Feb 2026 14:56:55 GMT

In the high-stakes world of dairy production, the margin between a profitable versus a catastrophic year is often measured in pennies. For decades, the industry relied on a relatively simple equation: the price of milk minus the price of feed. In 2026, that equation is more complex. The tools that once served as a reliable safety net are now facing a paradox – a reality where the data says producers are thriving, but the checkbook says otherwise.

To understand the future of dairy survival, the two pillars of the federal safety net must be dissected: Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP). While one is a legacy program struggling to adapt to a world of hidden costs, the other is a flexible, high-tech shield that is rapidly becoming the industry standard.

The Dairy Margin Coverage Era: A Foundation in Flux

The Dairy Margin Coverage program, created by the 2018 farm bill, was designed to be the ultimate insulator against market shocks. Through various iterations from the 2014 farm bill’s Margin Protection Program for Dairy (MPP-Dairy) to the current DMC program, the program has been a statistical success. For most producers, the math is compelling: An average premium of 15 cents per cwt yields an average payment of $1 per cwt.

The structure for DMC, which is administered by the Farm Service Agency (FSA), is simple. Tier 1 offers a “safe harbor” for the first 5 million pounds of production, allowing for coverage up to $9.50 per cwt. Tier 2 allows larger operations to cover their excess production at a lower $8 cap and higher premiums.

However, the “success” of the DMC has hit a wall and is increasingly becoming a thing of the past. The formula relies on four main ingredients: the National All-Milk Price, corn, soybean meal and premium alfalfa. When these crop prices are low, the “calculated” margin looks healthy.

This is where the paradox lies.

“When crop prices are this low, it makes the milk margin under the DMC program look really high on paper, which is why the program didn’t trigger payments at any coverage level between May 2024 and November 2025,” says Danny Munch with the American Farm Bureau Federation.

The December 2025 pricing data finally points to the first payments in more than a year, but only for producers covered at the highest available $9.50 margin (at a $9.42 per cwt margin), he adds.

According to Katie Burgess with Ever.Ag, the DMC program uses national numbers for both the milk price and feed costs, so it has never really reflected the reality of any individual dairy operation.

“For the sake of keeping it simple and straight forward, I believe [the DMC program] does a fine job of representing a margin over feed. Of course, it’s not capturing the non-milk or feed data, so it’s not accounting for the higher non-feed costs the past few years. It’s also not making any adjustments for higher cull cow and calf revenue either,” she says. “For a producer really looking to dial in their margins, it’s not perfect. But, for a producer looking for some basic coverage against falling milk prices or rising feed costs, it does the trick – especially when you consider it comes at an affordable premium cost of 15 cents per hundredweight for the $9.50-margin Tier 1 coverage.”

The “Hidden Cost” Crisis

The primary criticism of the current DMC is its simplicity. Grant Grinstead with Vir-Clar Farms in Wis., says the DMC formula doesn’t account for modern cost factors.

“There are so many other cost factors that come into play now versus just feed,” he says. “I think we’re still missing some of that for true risk protection ... it makes us look like we’re doing better than we are.”

“The additives, minerals and fuel costs — those costs play a role,” Munch adds.

Beyond inputs, there is the massive, uncounted elephant in the room: labor. In fact, since 2016, the cost of keeping a reliable team on the ground has surged by 30% to 50%, driven by a tightening rural workforce and rising cost of living. This especially holds true for farms in states that have mandated overtime laws for dairy employees.

As dairy operations scale, labor has moved from a minor line item to one of the largest expenses on the balance sheet. Because DMC only looks at feed, a producer can be losing money on every gallon of milk due to labor and fuel, yet USDA data will show they are operating in a “healthy” margin.

Industry leaders are now “ringing the bell” for a formula enhancement. Suggestions include a “floor” for feed costs to protect those who grow their own crops or the inclusion of a “total cost of production” index that accounts for the reality of additives, minerals and human capital.

The Rise of Dairy Revenue Protection

As the DMC program struggles with its rigid formula, producers are shifting to a more surgical tool: DRP. Launched by the USDA Risk Management Agency in 2018, the program covered nearly 30% of all U.S. milk production in 2025.

Unlike the DMC, which focuses on the margin, DRP is designed to insure against unexpected declines in quarterly revenue. It is a “fluid” policy — markets change daily, and the coverage can be adjusted to match. For the lifetime of the program through 2025, net indemnities to producers have totaled more than $850 million, proving its effectiveness in a volatile market. Through the first three quarters in 2025, the program paid out a net of $31 million, but according to Phil Plourd, president of Ever.Ag, that number will go up considerably once Q4 figures land, estimated at an additional $150 million.

Ken McCarty, co-owner of McCarty Family Farms in Rexford, Kan., says that in their experience DMC is less applicable to a farm of their size compared to DRP.

“We believe that it is important that all safety net programs are kept nimble enough to adjust to changing market dynamics and the evolution of the dairy industry,” he says.

Grinstead views risk management as a way to provide control points for the business, ensuring the farm survives the future. Since 2019, Grinstead has utilized DRP as a net-positive tool for Vir-Clar Farms, managing his strategy at least a year in advance to secure incremental margins. After experiencing a significant premium loss during the COVID-19 pandemic, he shifted to combining DRP with options to protect his financial downside while still participating in potential market rallies.

“We’re not looking for home runs,” he shares. “We’re looking for base hits and just kind of driving our business through some control points and being here for the next generation tomorrow.”

5 Pillars of the Dairy Revenue Protection Strategy

For producers, DRP offers five advantages DMC cannot match:

1. Class vs. Component Pricing. DRP allows producers to choose how their milk is valued. Class pricing (Class III and IV) is ideal for those focused on fluid volume. However, for the rising number of Jersey and high-component herds, component pricing is a game-changer. It allows producers to establish an insured price based on butterfat, protein and other solids.

2. Flexible Coverage Levels. Producers aren’t locked into a “one-size-fits-all” tier. They can cover up to 100% of their expected production at levels between 80% and 95%. This allows a producer to “buy what they need” based on their specific break-even points.

3. State-Level Indexing. DRP is not a national average; it is indexed to the state or region where the producer is located. This accounts for regional basis and production fluctuations, making the indemnity much more accurate to the producer’s actual loss.

4. Natural Market Protection. DRP is a pure market tool. It covers revenue loss caused by natural occurrences in market prices and yields. While it doesn’t cover the death of cattle or management errors, it provides a “floor” that allows a producer to keep doing business even when the global market turns sour.

5. The 2026 Evolution. The program is not stagnant. For the 2026 crop year, several key revisions are being implemented to protect the integrity of the program and the producer. This includes a new “Insured’s Certification Against Subsidy Capture,” ensuring the program remains a legitimate insurance tool rather than a speculative one. Most importantly for herd health, the 2026 revisions include language that considers animal disease a “natural disaster” event that can trigger coverage if it prevents a producer from marketing milk.

“We continue to see strong interest in DRP insurance, as it helps protect against falling milk prices regardless of what feed prices do,” Burgess shares. “It’s especially useful for producers with output of more than 6 million pounds annually who can’t fully cover their production with the DMC program.”

Even if a producer can cover all their milk with DMC, it is also a good idea to have a DRP policy because many times DRP allows them to lock in a higher milk price than what would be protected by DMC, she adds.

“For instance, in 2025, many DRP policies saw sizable claim payouts whereas DMC only had an 8 cent payout in December,” Burgess notes. “Both DMC and DRP are useful programs, but knowing the strengths and weaknesses of each is important to make sure you are using the right tool for the job.”

The sign-up period for the 2026 DMC is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

Elevating Farm Financial Transparency: Empowering Employees for Success

Fri, 19 Dec 2025 15:27:37 GMT

With the fast pace of running a dairy, the significance of financial transparency cannot be overstated. Gabriella Houdek of AgriGrowth Solutions underscored its importance during her presentation at the 2025 Alltech Dairy Summit in Green Bay. At the heart of her message was the idea that farm operations thrive when those involved, especially mid-level managers and the next generation of farm operators, understand their financials.

Understanding Financial Transparency
Financial transparency on farms involves more than opening the books. Houdek clarified the focus should be on sharing relevant parts of the income statement, particularly those elements that employees can influence, such as revenue and expenses. This understanding is critical for involving team members in driving farm success.

“It does not have to be sharing every financial number,” she says. “You do not have to share everything ... what we do typically share is the line-by-line income statement that usually does end up being pretty important for understanding what expenses they have an impact over, what revenues they have an impact over.”

Why Transparency Matters
Houdek points out three central benefits of financial transparency: clarity, awareness and consistency. Shared clarity around farm goals ensures everyone understands their roles in achieving them. Increasing awareness helps managers grasp the impact of their decisions on daily operations. Consistency revolves around regular reviews of financials to ensure everyone is aligned and informed.

Fostering transparency builds trust between farm owners and employees, creating a collaborative environment aimed at common goals. Empowered employees, especially herdsmen making daily animal health decisions, can make wiser choices when they comprehend the financial implications.

Overcoming Assumptions and Improving Data Use
Keeping employees out of the financial loop can lead to assumptions and missed improvement opportunities. By sharing select financial data, employees can become aware of their role in profit generation and cost management. Houdek emphasizes the need to distinguish between financial transparency and privacy, suggesting sensitive documents remain in-house after meetings.

“Assumptions can always lead to some disconnect between goals and daily work and then lost opportunities in general,” she states.

Incentivizing Engagement and Future Goals
Success begins by identifying which employees should be included in financial discussions and what metrics to share. Define what success looks like. Is it maintaining current performance, reducing costs or achieving a new competitive edge? Regular tracking and acknowledging accomplishments forge a path to sustained improvement.

Houdek mentions incentive programs often accompany transparency efforts, rewarding employees aligned with higher-level metrics. This ensures everyone is motivated to contribute positively to the farm’s financial health. Ultimately, the goal is clear: providing employees with the insights they need to make informed decisions, fostering an environment where communication and transparency breed success.

Financial transparency is a vital component of modern farming operations. By carefully choosing what financial details to share and with whom, farm leaders can create a culture of trust, engagement and informed decision-making. Transparency not only boosts the profitability and sustainability of farms but also empowers employees to take ownership of their roles within the agriculture industry.

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How to Get a Loan Approval: A Banker's Point of View

Tue, 18 Nov 2025 20:28:25 GMT

For most farmers, the next big project on the operation starts with a conversation with your banke, and being fully prepared before you walk into that meeting can significantly increase your chances of getting a loan approval.

Curtis Gerrits, senior lending specialist at Compeer Financial, has spent years helping producers get the financing they need. During a recent Professional Dairy Producers webinar, he shares what truly makes a loan application stand out and how farmers can set themselves up for a smoother approval process.

Get Your Financial House in Order
When preparing for a loan, Gerrits emphasizes lenders look first at clear and complete financial documentation. The process begins with the fundamentals.

“Some of the documents that are top of mind are your profit and loss statement,” he says. “Don’t just stick with the current year. Try to have access to the last three years.”

A profit and loss statement not only establishes whether a business is profitable but also helps lenders understand how the farm manages revenue and expenses over time. Gerrits encourages farmers to follow this with a current balance sheet that breaks down assets and liabilities in detail.

This balance sheet should include livestock numbers, acres owned and leased and a complete equipment list with updated values. Together, these documents paint a picture of financial health and management discipline.

For long-term planning, Gerrits stresses the importance of forward-looking projections.

“Probably one of the last things is to have a detailed projection,” he adds. “What is the business plan, and how is this going to impact your business?”

These projections help both the producer and the lender understand how an expansion, land purchase or capital improvement will affect cash flow and operational stability in the years ahead.

Details Matter
Gerrits says one of the most common pitfalls he sees is overlooking the finer points of financial reporting. Accurate and transparent records build trust and demonstrate professionalism, giving lenders greater confidence in the producer’s decision-making capacity.

“The attention to detail is probably a key thing that maybe gets overlooked from time to time,” he explains.

A lender needs to see exactly what makes up the operation’s income. This could include crop sales, livestock sales, custom work, direct-to-consumer revenue or any other streams that support the business. Clear categorization helps verify performance and gives lenders a better understanding of how the farm is managed.

Build a Strong Relationship
Beyond the numbers, Gerrits stresses the importance of working with a lender who understands the realities of farming. A loan officer familiar with agriculture can better interpret financial statements, spot trends and anticipate challenges.

“Working with a loan officer that understands your day-to-day is really important,” he says. “Having that good relationship where you can bounce ideas off of one another is a really great thing.

Gerrits also encourages producers to bring their lender onto the farm. Sometimes a walk-through can communicate more than a financial packet ever could.

“Put your boots on and take a walk through the barns and show them what you are doing and why the loan application that you are requesting is important,” he says.

Seeing the animals, the facilities and the workflow helps lenders fully understand the operation’s strengths and opportunities, and it gives them greater clarity when evaluating a loan request.

Be Honest About Tough Years
Producers should not shy away from acknowledging difficult financial periods or reporting losses on taxes. Gerrits reassures farmers that losses do not automatically disqualify them from financing.

“Do not get too hung up on the losses out there,” he explains.

A balance sheet can often show how those losses are supported or offset by strong assets, such as land, livestock or equipment equity. What matters most is transparency and context. And demonstrating that you have a plan to manage challenges and leverage your assets can build confidence with your lender.

Plan for the Future
Constant communication with your loan officer can make a big difference in the approval process. Gerrits says checking in periodically, even with a quick touch base, helps avoid surprises.

“Maybe you’ve already talked about: ‘Hey, in a couple of months we might have something come in, and I’m going to have a request for an operating line of credit,’” he says. “That way it’s already in the back of the loan officer’s mind, and they can start preparing or gathering the right information.”

A little preparation can also greatly speed up the loan process. Gerrits recommends giving your loan officer about one month of lead time before funds are needed, along with complete financial documents.

“At the end of the year, we’ll see some borrowers who need to borrow money to do some prepaids to help their tax situation,” he says. “It’s hard to turn things around because a lot of folks are coming in at the last hour. If you give them a month’s lead time with all of the information pertinent, all the financials and balance sheets, that will just help expedite it.”

Looking further ahead, Gerrits encourages producers to think generationally and begin planning for succession well before retirement becomes imminent.

“It is never too early to start a succession plan,” he says.

Early planning gives the next generation clarity about future roles and expectations, helping them prepare financially and personally for the responsibilities that lie ahead.

Own Your Numbers
Ultimately, Gerrits believes successful borrowers take responsibility for knowing and understanding every aspect of their financial position.

“Know your numbers first,” he says. “Don’t just rely on your loan officer to tell you how you are doing.”

Throughout the loan process, preparation and transparency go a long way. Clear financials, attention to detail and regular communication help your lender understand your goals, while on-farm conversations and honest discussions build trust. Being organized, consistent and informed does more than streamline an application, it helps you make better decisions, catch issues early and keep the operation moving in the right direction.

Three East Coast Dairy Producers Share Strategic Planning and Risk Management Lessons

Mon, 22 Sep 2025 11:43:20 GMT

Navigating through the volatile milk market, rising production costs and numerous other challenges require innovation, strategic planning and sometimes a little outside help. In recent years, the transformations of three east coast dairy farms: Shafdon Farms, JoBo Holsteins and Misty Mountain Dairy exemplify how strategic interventions can lead to a sustainable future.

Shafdon Farms: Rising from Rock Bottom
Shafdon Farms, nestled in Jefferson, Md., stands as a testament to resilience and strategic transformation. Ten years ago, Shafdon Farms was struggling under a high debt load and poor forage quality. Dee Shafer and her family faced significant challenges with no clear path forward.

“We hit rock bottom,” Shafer says. “We finally realized we needed some outside help.”

In 2015, the Shafers made a pivotal decision —hiring an accountant with extensive experience in agriculture. Two years later, and with assistance from the Center for Dairy Excellence, they assembled a profit team.

The significance of a business plan and a collaborative approach cannot be overstated for any farm looking to climb out of economic hardship. Shafdon’s profit team — comprised of nutritionists, accountants, lenders and various consultants — was the catalyst for crafting a meticulous business plan. This blueprint aimed at setting production targets, managing expenses and providing a roadmap for future growth.

“I can’t stress enough the importance of a profit team and a business plan,” Shafer says, reflecting on the pivotal role teamwork played.

By channeling their combined knowledge and efforts, the Shafers went to work on several fronts — expanding their herd, optimizing facility usage, hiring a new custom forage operator and refining crop and ration strategies.

Fueling Growth with Strategic Changes
A new partnership with a lender streamlined the farm’s payments, granting the Shafers enhanced flexibility in their financial decisions. In an ambitious bid to boost milk production efficiency, they transitioned their barley and alfalfa acreage to double-cropped corn and triticale, necessitating changes in herd rations.

Noteworthy farm improvements were made, including the construction of a new manure storage pit, a heifer barn and an addition of 72 freestalls to enhance cow comfort. They also introduced separate rations for high and low producers, tailoring their approach to maximizing output.

Since 2017, the advancements at Shafdon Farms have been profound. Their herd has expanded from 240 cows to more than 400 cows. Financial health, once characterized by a deficit of approximately $155,000, has reversed impressively, now reflecting a positive balance exceeding $140,000.

JoBo Holsteins: Strategic Expansion and Profit Margin Focus
JoBo Holsteins, nestled in the charming landscapes of Gettysburg, Pa., is a testament to the power of strategic decision-making in agriculture. In a sector where operational difficulties are commonplace, the farm has managed to transform its challenges into opportunities, shifting from a struggling enterprise to one flourishing with positive cash flow and a promising future.

Dale Brown, one of the visionary partners behind JoBo Holsteins Farm LLC, sheds light on the pivotal strategies that fueled this turnaround. The farm’s unique five-way partnership has been instrumental in navigating financial distress. Through collaborative efforts, they have emphasized operational efficiencies and profit margins, focusing on the profit margin per cow and overall capacity as the backbone of their success. This strategic focus has been crucial in expanding the dairy to its current scale of approximately 1,050 milking cows.

Leverage Expertise for Growth
Like other successful farming entrepreneurs, Brown credits peer groups and financial consultants for their indispensable role in the dairy’s revival. These external experts provided invaluable insights and frameworks for sustainable growth, paving the way for the farm to embrace financial stability. As the profits flow more consistently, the decisions related to expansion and development can now be made with increased flexibility and confidence.

With solid financial footing, JoBo Holsteins is ready to tackle its next growth challenge. While operational stability has been achieved, the focus shifts to future objectives.

“Our next challenge is where to go next,” reflects Brown, highlighting the farm’s commitment to continuous innovation and development.

Misty Mountain Dairy: Building a Foundation on Profit Margins
Mark Mosemann of Misty Mountain Dairy LLC recounts how his family farm rose from challenging times through a combination of good communication, team planning, dedicated work and a touch of faith. It’s a story of resilience and strategic growth for the Mosemanns, who are driven by the pursuit of financial sustainability and family legacy.

For Mosemann and his family, the cornerstone of decision-making lies in profit margins. Operating a 500-cow dairy alongside his wife Lauren, his parents, brother, and two members of the next generation, Mosemann emphasizes the importance of financial health.

“If you’re not making the margin, you’re not making the income to survive,” Mosemann candidly shares. The family’s ethos revolves around the idea that every decision must enhance their financial footing.

Strategic Growth Through a Master Plan
Adapting to a complex agricultural landscape requires a thoughtful master plan for growth. Mosemann urges fellow farmers to devise a strategy that aligns with family goals while remaining economically viable. At Misty Mountain Dairy, this translates into a comprehensive approach where risk management plays a crucial role. The family keenly balances the cost of homegrown feed against purchasing options and fosters advantageous purchase agreements.

The Art of Incremental Growth
Instead of aiming for spectacular immediate success, Mosemann and his family embrace the power of incremental achievements.

“Hit singles instead of going for a grand slam,” Mosemann advises.

By focusing on internal herd growth and enhancing forage quality, they aim for steady, sustainable improvements. For them, measured progress is the pathway to durability.

Networking stands as a pivotal component of Misty Mountain Dairy’s transformation. By connecting with industry experts and fellow farmers, the Mosemann family expanded their horizons beyond initial limitations.

“The more people you know, the more options and information you will have,” Mosemann explains. This exchange of diverse perspectives has empowered them to be innovative thinkers— sometimes even discarding conventional structures in favor of new approaches.

Each of these farms exemplifies how strategic risk management, financial oversight and a focus on profit margins over gross sales can transform a dairy operation into a successful business. Whether it’s hiring knowledgeable consultants, forming a profit team or developing a master plan, these steps can pave the way for a brighter and more profitable future in the dairy industry.

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Unlock Financial Success: Working with Your Ag Lender

Wed, 10 Sep 2025 14:50:25 GMT

The latest USDA farm cash receipts forecast has corn, soybean and wheat prices driving a 2.5% decrease for 2025 crop receipts compared to 2024, and the agency’s forecast shows an 11.2% increase for total animal/animal product receipts. Pair that with production expense increases calculated at 2.6% for crops and 21.5% for livestock. Farmers are financially pinched.

“Good decision-making, good risk management are always differentiators in any market, but they’re especially true today,” says Jase Wagner, president and CEO of Compeer Financial.

This fall into the winter, farmers will meet with their lenders to discuss operating loans, cash flow and capital expenditures. And the risks feel higher than ever. While greater transparency may reveal vulnerabilities in the business, it is the No. 1 thing lenders say will help them get farmers through what could be a very tough series of years.
“Really be open and honest with your lender,” Wagner says. “Being honest with yourself about where you are and what your abilities to execute over the next couple years will be really important as things get tighter.”

To prepare yourself for working with your ag lender, Kelly Hardy and Jim Halvorsen, with CLA, share these tips from the accountancy perspective:

1. Build a team of outsiders that work together. That should include:

Banker
Accountant
Attorney
Grain Buyer
Marketing Advisor
Crop Insurance Agent
Mentors
Successors

2. Be proactive in who you work with.

“Work with lenders who understand farming,” Halvorsen says. “You should expect to give them information about [the] farm, answer their questions and have them understand your goals.”

As for how often to meet with your lender, Halvorsen says it’s a best practice to meet with your financial partners once a quarter.

3. Know the type of information needed to make the best decisions for your business.

“If your banker only wants your tax return, it’s a red light,” Hardy says. “You need to provide a financial statement.”

She says tax returns are not a measure of the business’s profitability or assets.
“Tax returns don’t say how much grain you have in the bin,” she says.

Also, she advocates for the financial discussions to be centered on investments in the business — not taxes.

4. Transparency is the quickest way to establish a long-term, successful strategy despite any short-term challenges.

“No lender wants to take your farm. They are there to help you,” Hardy says.

She says having honest discussions with the full set of information is what reveals opportunities, even if the discussions may show weakness in the current business.
With lower commodity prices, Hardy says the drop in income will be evident on balance sheets this year. Having a true state of the business discussion will also unveil a strategy for how to manage the current farm economy.

The Best Time to Start Your Retirement Plan

Mon, 09 Jun 2025 19:35:34 GMT

Farmers historically have struggled to invest money in anything other than their farm operation. However, by investing in retirement plans including an IRA, a farmer can more easily save up for retirement and make the transfer to the next generation much easier.

The power of compounding is the financial seventh wonder of the world. Based on your annual investment return, you can determine how quickly your investment will double by dividing it into 72. For example, if you average 3% on your money, it will take 24 years to double. However, if you can earn 8%, then it only takes nine years.

The younger you start to invest, even small sums, the more money you will have at retirement. Let’s compare the results of placing $10,000 into a retirement account at either age 20 or 40.

The farmer who does this at age 40 and then pulls the money out at age 70 will have $100,627. However, the farmer who starts at age 20 will have $469,016, and if they can earn 10%, will have $1,173,909.

The cost of maintaining a solo 401k plan is very inexpensive and married couples can set aside at least $14,000 into an IRA each year. The fees on those accounts are minimal and you can make sure to invest in low-cost ETFs or mutual funds. High-cost funds could quickly reduce your returns substantially.

Most of the earnings will result in the last 10 years, so the sooner you get started, the more funds you will accumulate.

Risk Protection Benefits
There’s another big reason to make this investment. Funds in a retirement plan are fully exempt from bankruptcy, and we all know farming can be a very risky business. The full exemption does not apply to IRAs, but the amount that is exempt is fairly large.

This amount gets updated every three years. On April 1, 2025, the exemption amount was raised from $1,512,350 to $1,711.975 through March 31, 2028.

Most farmers have IRAs less than this amount, so it’s likely they will have a full exclusion if bankruptcy was to occur. Amounts rolled over from a 401k plan or other retirement account, including earnings associated on that account, are fully exempt.

In some states, IRAs are fully exempt or at least partially exempt.

The bottom line is to invest in an IRA or retirement plan. I hope you never need the protection, but it is a good insurance policy.

Advice From a Rural Banker: How to Navigate Today’s Uncertainty

Thu, 15 May 2025 14:07:12 GMT

What is top of farmers’ minds as they manage their business today? John Steeves, head of rural banking for Rabobank, says in his recent on-farm visits, he sums it up as three things:

Cost structure: continued high inputs, particularly equipment
Availability of quality labor
Uncertainty in the market: access to foreign markets, tariffs and cross border supply chains

“Uncertainty is the only certainty,” he says. “In times of volatility, I always say cash is king. I would encourage farmers and ranchers to kind of focus on the cash position or access to cash and liquidity, whether that be liquidity on operating lines, or cash on the side. Whatever your case might be, it’s about how to help absorb potential unforeseen shocks and potential short term losses if they occur.”

Steeves points to Rabo analysis showing for the foreseeable future a 75% chance corn will remain under $5 and a 75% chance soybeans will remain under $11.

“This is creating challenges for our farming clients, for sure,” Steeves says. “This year more than ever, farmers should put a particular focus on cash flow and liquidity, set up for long term success and set up for any unforeseen shocks.”

When looking at the general farm lending landscape, Steeves says farm businesses are ready to face those challenges.

“Farmers and ranchers are good at this—have a plan, plan to manage your business, and hedge your risk,” he says. “I classify it as still good liquidity in the market, which is great for farmers, whether it be on the G&O side, cattle and other animal proteins. I think there’s still good access to capital, which is great. At the same time, we have heard rumblings in the market that some of our some lenders are pulling back.”

Steeves says now is a good time for farmers to engage with their banker and financial relationships.

“Review your plan with your financial partner, and actively engage in discussions about what the opportunities are,” he says.

Steeves shares more on the Top Producer Podcast with Paul Neiffer:

Steering Farm Succession Planning: A Roadmap for the Next Generation

Tue, 10 Jun 2025 15:05:00 GMT

Succession planning is an essential, yet often daunting, task for farm owners. The idea of transitioning a family farm to the next generation involves careful planning, strategic financial practices and, most importantly, open communication. Independent dairy financial consultant, Gary Sipiorski, offers invaluable insights into effective succession planning for farms. Here’s a comprehensive guide based on his advice.

Recognizing the Signs of Interest
One of the key indicators that it’s time to start thinking about succession is when children on the farm begin to show genuine interest in its operations. Participation in 4-H projects, eagerness to help at young ages and an overall enthusiasm for farm life can signal a potential future for the next generation on the family farm.

Educating the Future Generation
As children begin to engage with the farm, it is crucial to use teachable moments to explain the intricacies of farming. Demonstrating the importance of detail-oriented work is essential. Moreover, when they are old enough to grasp financial concepts, share the farm’s financial records with them. Introduce them to the checkbook, monthly cash inflows and outflows and annual balance sheets. Encouraging them to manage their own personal accounts fosters financial literacy and responsibility.

The Importance of Positive Communication
Continuous, positive communication among all family members involved is fundamental to the success of succession planning. Open dialogues help manage expectations and ensure everyone is on the same page.

Engaging with Professionals
Around the age of 55, it’s time for the parents to engage professionals like lenders, accountants, consultants and attorneys to discuss farm transfer strategies. These discussions pave the way for viable transfer plans starting by age 60, leading to a potential 10-year transition period.

“There are a lot of assets on the farm today,” he says. “Gifting will be part of the picture in the future.”

Ensuring Financial Viability
It is critical to assess the farm’s financial capacity to support both generations before proceeding. This involves running detailed cash flow analyses to ensure sustainability.

Documenting and Structuring the Transition
Accountants and attorneys play crucial roles in documenting the various aspects of the transition. Clarity in the process helps avoid misunderstandings and disputes. Initial steps may involve forming separate LLCs for livestock and transitioning income and expenses to the new generation. The first generation can also rent machinery and land to the newcomers as part of this initial transition phase.

Implementing a Probation Period
Once signed documents are completed, a one-year probation period is advised. This allows all parties to assess whether the chemistry between generations translates into successful collaboration.

Long-term Transfer Strategies
Assets can eventually be transferred through gifting or loans, forming the backbone of a successful, structured succession that benefits all parties involved.

Farm succession planning might be complex, but by following these steps and maintaining open, positive communication throughout, families can ensure a smooth and successful transition to the next generation.

5 Key Areas that Dairy Producers Need to Mindfully Protect in 2025

Tue, 25 Mar 2025 13:16:33 GMT

2025 has been anything but smooth sailing for dairy producers. With immigration reforms and pending tariffs creating uncertainty, it adds to the difficulty for producers to strategically plan their dairy’s next steps. Independent dairy financial consultant, Gary Sipiorski, suggests five key areas that producers should focus on to successfully navigate the year ahead.

1. Prepare for Uncertainty
Producers should set themselves up to expect anything in 2025. Currently, the milk prices for Class III and Class IV are hovering around $20 and $22, respectively. Despite lower U.S. milk production, the dairy herd remains stable at around 9.3 million cows. The shortage of heifers would typically suggest that prices should be at least 20% higher. However, the future market continues to fluctuate, with tariffs (or the absence thereof) potentially impacting dairy exports.

2. Projections Are Key
Despite the unpredictable market, it remains crucial to making projections. Using last year’s expenses as a base along with a conservative milk price can help in completing these projections. It’s important to make an informed estimate to understand your path forward.

3. Monitor Interest Rates
Producers need to be acutely aware of interest rates. Many five-year interest rate locks are due for renewal after being established in 2020. Lender relationships remain of paramount importance, especially considering that some lenders are becoming hesitant about extending agricultural loans.

4. Engage in Best Guessing
When engaging with lenders, it’s vital to bring along the year-end balance sheet, year-end income statement, and your best projections. A written business plan detailing 3 to 5 major items and any necessary purchases is key. Ensuring lines of credit are approved can provide financial stability amidst uncertainty.

5. Leverage Artificial Intelligence
Artificial Intelligence has permeated various aspects of our lives, and dairy production is no exception. When considering any equipment purchases, producers should explore how this technology can provide better information and support more informed decision-making.

By remaining adaptable and mindful of these key areas, dairy producers can better position themselves to handle the uncertainties and challenges that 2025 presents.

Key Metrics for Dairy Profitability
According to Steve Schwoerer, vice president of animal ag lending for dairy with Compeer, three important metrics separate the top 25% in profitability from the bottom 25%.

• Feed benchmarks. These might include feed cost per cow or feed cost per hundredweight (cwt). Benchmarking feed conversion—how much milk is produced for every pound of dry matter a cow eats—and the cost of the dairy ration per cow per day in dry matter, are critical. Some dairies achieve high milk production but at a cost that undermines profitability.

• Labor cost. Either labor cost per cow or labor cost per cwt.

• Net herd replacement cost. Are producers getting enough money for cull cows and beef calves in comparison to what it costs them to raise a dairy replacement.

By focusing on these metrics and strategic areas, dairy producers can not only survive but potentially thrive in a challenging economic climate.

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Boost Your Dairy Business: Financial Success Tips for 2025

Fri, 17 Jan 2025 14:04:59 GMT

Many of us start thinking about ways to improve our fitness and health now that the New Year has begun. The usual advice from experts is to get moving. But when it comes to getting financially fit, sitting down might just be your best bet. At least, that’s the advice from independent financial consultant, Gary Sipiorski.

According to Sipiorski, producers need to begin the year by reviewing the year-end balance sheet and accrual-adjusted income statement to set the stage for 2025 planning. Steve Schwoerer, vice president of ag lending for dairy with Compeer Financial, concurs, adding that producers should also be looking at any capital needs for 2025 and prioritizing those needs versus wants.

“They should also have a handle on their 2025 crop input costs and see if they have enough money in the line of credit to pay for the costs,” Schwoerer says. “It is always a good time to look at their risk management plans for the year.”

Schwoerer says a common mistake that producers make is not accounting for all of their 2024 pre-paid expenses and showing them on their 12-31-24 balance sheet correctly.

“This is crucial for have an accurate accrual balance sheet,” he says. “Another common mistake is looking at first quarter cash earnings to determine their profitability for the quarter.”

Key Steps to Focus On
To put a solid financial business plan into action, Sipiorski suggests focusing on three to four major initiatives for 2024. These initiatives will serve as the bedrock of your financial plan. Here are some key components to consider when crafting your strategy:

1. Document the Plan
It’s essential for the plan to be documented. This involves thoughtful consideration and input from key players on the farm as well as advisors. Having a written plan ensures clarity and can help track progress effectively.

2. Prepare for Uncertainty
Uncertainty and volatility in the market can impact any business strategy. It’s important to build flexibility into your plan to accommodate these challenges and adjust as necessary.

3. Create a Comprehensive Business Plan
A business plan that ranges between 3 to 30 pages is essential. This document should thoroughly detail your strategies and expected outcomes, making it an indispensable tool for guiding your business forward.

4. Assign Responsibilities and Follow up
Clearly lay out who will be responsible for implementing parts of the plan and establish a timeline for progress follow-ups. This accountability helps ensure that the plan is executed effectively.

Sipiorski also emphasizes the importance of projecting cash flow based on the impact of your plans. This foresight allows producers to anticipate financial needs and adjust strategies, accordingly, ensuring that they are well-positioned for success in the coming year.

By taking these steps, producers can enhance their financial health the same way many of us strive to improve our physical health. Start by sitting down and reviewing your financials, then proceed with a robust plan to ensure a prosperous 2025.

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Farm Business Resolutions for 2025

Thu, 26 Dec 2024 19:38:00 GMT

We asked past Top Producer award winners to share what’s new for them in the coming year. Here are some of the responses they shared with us:

(Top Producer)

"2025 is the year of artificial intelligence (AI) for Carroll Farms. It’s a top-down push for training and implementation. The ability of AI to automate processes, write contracts, prepare reports, perform HR functions, and analyze data is stunning. I think the world could look dramatically different in five years as AI moves into all areas of our lives and businesses. “
~John Carroll

“This year is about going back to the basics like when I first started farming in 2015 in the last margin squeeze. I’m giving my personal family living budget a solid look, diving headfirst into the farm cash flow, developing a marketing strategy, and sticking to it. We’re replacing the tropical vacation with a staycation to do projects around the homeplace to eliminate some repair and maintenance bills. And for the fitness center I own and operate after all the updates and changes made this summer, I am going to let it operate for a year before any other drastic things are done. The only thing new thing I am trying is adding my significant other to my health insurance policy.”

~Maggie Holub

(Top Producer)

“I have sat down with my last two years of profit/loss (P/L) statement and “scrubbed” every line item. I asked where/what are the reductions or cuts that could be made. Then, I made a list of any/all line items that need to be looked at more in depth. I then am looking into these expenses one by one to understand if it is a merited expense or an “extra” that can be reduced. If it doesn’t provide a defined ROI, it is definitely out!
Cash rents that do not have a flex bonus have been negotiated and (thankfully) reduced appropriately. This is a reflection of a continual dialog year around about their farm and all-encompassing topics like profitability.

We have a continuous dialogue throughout the year with our lender(s) as to how we are doing business. Sharing these things listed above really helps the relationship and their confidence in our operation.”

~Dave Nelson

“I’m trying four new and/or different things for 2025.

Beef: We are moving to a fall calving schedule for our beef cattle. We have typically had spring and early summer calves. We are shifting to this schedule so that we can AI more efficiently and have better management of the schedule.

Labor: We are shifting our mindset on labor. We are re-evaluating how to structure part-time and seasonal workers to be most beneficial to both parties. We want the employee to receive maximum benefit for their time and talents as well as running our operation as efficiently as possible.

Advocacy: I am putting more focus on our media and promotion of agriculture and our farm operation. It has been somewhat of a passive project. I am working on making it deliberate and intentional this year. Promoting agriculture and educating the public is a great passion of mine.

Marketing Diversity: We are exploring new ways to connect with customers locally with the ear corn and freezer beef businesses. We continue to load containers for export and are looking at future marketing diversity in that entity as well.”

~Marcia Ruff

(Top Producer)

“At Splitter Farms, we are looking at 2025 as a reset year and getting back to firm foundations. We’re planning to focus on employee retention and development as well as improved landlord relationships, including consistent communication with them throughout the entire year. We are also scheduling in time for data analysis; we do a great job of data collection and we’d like to make analysis a priority again.”
~Matt and Janna Splitter

Read even more farmer New Years’ resolutions here.

Essential Tips to Financially Plan Ahead

Tue, 10 Sep 2024 14:04:49 GMT

This time of year, farmers start spending a good chunk of their day in the seat of a tractor or combine. As the harvest season continues, ‘windshield time’ provides a great opportunity to start thinking ahead for the next year. Producers who begin planning for 2025 early will have a competitive advantage over those who don’t. Now is the time to learn the financial pulse of how your operation is performing.

Independent financial consultant, Gary Sipiorski understands it is tough to ask a farmer to stop working and turn their attention to numbers, especially this time of year. He recommends farmers to:

Set aside time. Two hours a week to strictly focus on financial planning. “When you are fresh, in the early mornings is best and before the to-do list is delegated out,” he says.

Focus without interruptions. “These four hours a week may be the most profitable hours for understanding where the money is coming from and going,” he notes. “You don’t have to do it all in one sitting. Nights are difficult when the mind is tired. “

Making time to carve out conversations. “Even if they are just being planned from a tractor seat. It will put you ahead of the curve when it comes to initiating your business plans for the upcoming year,” he shares.

Two Things to Do Right Now for Solid Plans in 2025

Start implementing quarterly reviews.
According to Sipiorski now is a good time to touch base with the person responsible for the financial records of your operation. “Quarterly reviews are best for Cost of Production (COP), along with Profit and Loss (P&L) projections,” he says, noting that it would be nice to have had an end of the second quarter tea meeting with your lender, accountant, veterinarian, nutritionist, etc. “If not then, by the end of the third quarter. There should be some serious evaluation. I understand how busy cropping gets in October, but a November meeting should be set to talk with your accountant to help you with year-end taxes.”

Projections need to be finalized in December.
“Balance sheets should be started in December with an accurate completion in January,” Sipiorski suggests.

Four things to help maximize a margin in 2025.

Put extra attention to expenses. Pay attention to each expense item. Sipiorski suggests paying extra attention to the larger expenses and discussing them with family, managers, and employees to all consider if any savings can be found.
Analyze custom work. Custom tillage, manure handling and harvesting should be visited with a pencil to see if owning, renting or custom work makes sense.
Maximize components and milk quality. Maximizing milk components and quality should be worked on, especially with limited bases for shipping milk pounds.
Marketing Discussions. Milk marketing using government-supported programs and discussions with brokers should be researched to find a margin. Remember owners always make the final decisions.

90 Days to Find a New Lender?

Mon, 09 Sep 2024 15:45:52 GMT

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.

Click here to listen to the entire conversation:

Profitability on U.S. Dairy Farms Looking Up

Wed, 03 Jul 2024 20:44:13 GMT

Dairy producer margins have risen to the highest level in a year and a half, according to the Milk Margin Above Feed Costs as calculated in the Dairy Margin Coverage (DMC) program.

“Increasing margins are good news for dairy producers and should send signals to them to increase output,” Monica Ganely, analyst with the Daily Dairy Report and founder and principal of Quarterra, an agricultural consulting firm in Buenos Aires. “However, well-publicized barriers, including animal health challenges, expensive financing, and a lack of replacement animals, are impeding the ability of U.S. producers to expand and capitalize on higher margins.”

May’s Milk Margin Above Feed Costs jumped to $10.52/cwt., an increase of 92 cents from April and the strongest margin since November 2022. “Depending on the level of coverage selected by a producer, the DMC program can result in payments when the margin falls below $9.50/cwt.,” Ganely said. “And May marked the third month in a row that no payments would be made.”

Stronger milk prices were responsible for much of the gain in dairy producer margins, but weakening feed costs also played a role. May’s All-Milk price rose to $22/cwt., up $1.50 from the previous month and the highest All-Milk price since January 2023, Ganley noted. The All-Milk price moved higher in response to increases in the Class IV price but especially in the Class III price, which climbed more than $3/cwt. compared to April. While spot dairy product prices have remained resilient, Ganely noted that futures markets suggest lower prices, especially Class III prices, could be on the horizon, she added.

May feed costs rose slightly compared to April levels but remain well below the lofty levels of the past few years, Ganley said. Feed costs as calculated by the DMC program rose 58 cents from April levels to $11.48/cwt. in May. All three feeds used in the calculation, corn, soybean meal, and premium alfalfa, rose. Despite the increases, though, May’s feed costs were nearly $3/cwt. lower than at the same time last year and were the lowest since 2021, she added.

“Despite higher margins, U.S. producers continue to face many barriers to expanding, but the longer margins stay at current levels, the greater the likelihood that resourceful producers will find ways to mitigate these challenges and increase production,” Ganley said.

One bearish factor for milk prices is lackluster U.S. dairy exports. In May, total U.S. exports fell below prior-year levels after growing in April, according to data from according to data from USDA’s Foreign Agricultural Service. U.S. exporters sent a total of 504.8 million pounds of dairy products offshore, 1.7% less than in May 2023. “Ongoing weak demand from Asia weighed on total exports, even as exports to Mexico continued to soar, Ganley said.

Cheese exports climbed 46.6% in May to 504.8 million pounds, the most ever recorded for the month. More than 40 million pounds of that cheese was sent to Mexico. Whey exports rose 15.2% as China’s demand for permeate and dry whey picked up, she added, but other dairy categories fared less well. Exports of nonfat dry milk, for example, slipped 24.2%, and butter exports fell 19.4% under the weight of high prices.