FARME Institute November 2018 Management Report

For November, our example herd was Down.

Protein dropped $0.38/lb. and fat decreased $0.02/lb. On a hundred-weight basis, Statistical Uniform Price (3.5% fat) decreased $0.57/cwt and Class III price decreased $1.09/cwt which resulted in PPD increasing $0.52cwt. We had previously predicted PPD to increase $0.54/cwt. Regionally, fat and protein levels continued their seasonal increase. Taking emotion out of decision making: When times are good, being a good farmer is usually enough to make a nice income. But when times get tough, it becomes necessary to challenge old mindsets.

Producing 6 pounds of components per cow daily was an accepted benchmark. Hitting this target feels good. But is it profitable? For example, we took all the “extra stuff” out of a diet in the Cornell Model. In this diet, we removed $1.90/cow/day and the model estimated a loss of 10 pounds of milk. For most of our farms last month, the mail box price was in the $16/cwt range. This means we would lose $1.60/cow/day according to the model. Would you consider dropping milk 10 pounds per cow per day if there was a net increase of $0.30/cow/day? Money Management: (Guest contributor: Marcelo Oberto, DVM [email protected]) We don’t know if we are at the bottom of this downturn, but we believe there are still things to do if you want to survive. In recent visits with clients, we started looking at managing the business instead of just managing the dairy.

Most farmers think that cutting costs is the only thing they can do and most have already done it. However, they keep tapping on the Operating Line of Credit if there is still something left. Remember that if somebody is going to call your number, it isn’t going to be your vendors but your banker. Therefore, keeping the lending institutions happy by staying current on principal and interest payments, as well as not maxing out your borrowing base is the most important thing to do right now. Leave the farm work for a little while and sit down with somebody that can work with you on bill pay strategy. Get solid advice to either avoid using your operating line of credit or minimize how much you borrow.

There are multiple different ways to approach this but how and when you pay your bills without falling behind with your vendors may help you relieve some of your stress with your banker. There are farms that have not used their operating lines of credit under the thought that if you can’t pay it every month, DON’T USE IT. It may seem impossible but think twice before you give up.

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