Dairy’s New Reality?

Barry Putnam, Farm Credit East

Barry Putnam of Farm Credit East

During the recent Empire Farm Days in the seminar tent a speaker discussed milk marketing and what the future had in store for prices. As I looked at the charts I couldn’t help but wonder if we are at a turning point in our industry and the prices we will receive moving forward will be more of the same?

What my 40 years in the industry has taught me is dealing with change and facing reality as it is, are two things that we must count on. During the last several years we have all heard about the need to do more on managing our cost of production and debt. The reality we all face is that managing the cost side is only part of the equation.

So we work on what is controllable, producing high quantities of quality component-rich milk, right sizing to our infrastructure for both cows and heifers, harvesting high quality amounts of feed, improving how we engage our staff and doing everything to become as efficient as possible maximizing our cows’ potential through our cow comfort and handling. This is today’s new reality.

If the dairy industry is to survive we are left to figure out how to change/adapt to this New Reality. At the same seminar Cornell’s Jason Karszes mentioned that back in the mid-1900’s that 50% of our producers choose to stop producing milk because the of the new regulations that required bulk tanks instead of milk cans. Here is a link to a related story; https://vtdigger.org/2019/01/13/bulk-milk-tanks-altered-family-farm-way-life/ . I wonder what these producers saw as their New Reality? For many the answer was expanding their dairies to justify the cost of this new technology; for others the New Reality meant finding other work or changing occupations.

Are we facing a New Reality? Do we need to rethink what we value and what our goals are? Is there a strategy to meet the challenges currently and ahead for the ever changing dairy industry?

There are multiple solutions that will be used to face the New Realities and position a dairy for a profitable future. Could there be some form of collaboration in your future? Working together with neighbors is not new, but it does require individuals to surrender some traditions of the past and just doing it your way. It might help you achieve what is most valued and potentially align your business to deal with New Realities.

In the past, producers came together to market milk, form bull studs etc. because of a common need. Today as some dairies struggle to cope with the financial strains of milk prices, shrinking milk markets, and their inability to gain the necessary opportunities of scale to market their products with a margin. The question that everyone needs to ask, “What can I be best in the world at?”

No one person can do this, it requires a team of talented people. New regulations/realities require a different mindset. Does some form of a Holding Company or Cooperative or some other structure/partnership enable you to come together to meet the New Realities and position your business for the future?

 

 

Many producers have gained efficiencies through innovation or adoption of technology, (just look at how the number of cows per worker in our industry has increased). Many producers across the US have realized raising their own replacements is not the best use of their time, talents or investments, while other producers made the decision to use a custom harvester to better utilize their capital, time and talents.

Some form of collaborative effort in the form of an  agreements or partnerships, maybe a holding company  or a new form of cooperative just might allow you to come together to address a common need and meet your long-term goals. Any decision made that requires a change, must come after a thorough review of your current business with trusted advisors. To move forward with others it will require individuals of like goals and passion who will work together.

I will go back to the beginning.  To survive and prosper in any business, finding new ways to meet the New Realities (added cost, regulations, inflation to name a few) a business must continue to evolve. Doing things because we always have done it that way will not continue to be successful. If you do not believe me, go to the next farm show and count the number of dealers there or better yet I challenge you while you are there to find any piece of equipment for sale that is just like the one we used on our dairies 10 years ago.

 

 

Change is inevitable and is occurring at a faster pace. Don’t fight it; figure out a way to see it for what it is and keep moving forward. Moving forward will be different for us all, but moving forward is a must. Some may choose to do more themselves and move towards the Added Value side of the equation. It still will require new skills and change.

Embrace reality as it is, not as we wish it to be. Ask yourself the hard questions to understand what you value most and determine a way forward. Do not let the past dictate what your future holds. Plan for it, work for it and make it your New Reality.

The author is a business consultant for Farm Credit East based in Batavia, N.Y.  He has previously held regional management positions with GENEX A. I. Cooperative and Cargill nutrition.  He’s a former chair of the National Dairy Challenge and served on the advisory committee of Cornell’s PRO-DAIRY and the Dyson School of ag economics.

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