Fighting an Uphill Battle

John Ellsworthof Success Strategies

John Ellsworth

I was recently reading a review of the comments offered by U.S. Agriculture Secretary Sonny Perdue while he was visiting World Dairy Expo in Madison, Wisconsin. I wasn’t there, so I am not defending his commentary, nor am I saying he is totally right or wrong. However, I believe that his speaking points hit on some relevant thoughts.

As I understand the commentary, it was reported that he said he didn’t know if the family farm can survive as the industry moves toward a factory farm model. On that point, I would like to add that I have clients who milk 400 cows, and I have others who have milked as many as 10,000 cows. However, they all have one thing in common. They are still family owned farms. They may be incorporated as an S-Corporation, a C-Corporation or an LLC, but they are still owned by one family. Perhaps he should have stated (and I suspect he meant) that the old days of a set of parents and one or two of their sons plus their sons’ families being able to survive with 50-75 cows is no longer realistic. Isn’t it difficult enough for one family to make a living from 75 cows? Some places, such as the western states, I would say it’s nearly impossible. In fact, I don’t know anyone in California who is doing this successfully.

As far as his comments on the smaller operations selling out and larger ones continuing to grow larger, that’s clearly a trend that has been going on since the early 1950’s. When I started consulting in 1999, I believe there were about 60,000 dairy herds in the United States. Today, that number is closer to 40,000 herds. If our cow numbers are about the same, simple arithmetic would tell us that the average herd size has gone up substantially. In fact, I believe this is validated by the current trends we see nationwide. Even in states with larger herds, such as California, as some producers sell out, others are continuing to grow in cow numbers.

I believe that we would all be better served by, rather than focusing on disagreeing with Secretary Perdue’s comments, considering that he may be correct about several points:

  • Our future industry will likely consist of fewer operations, which, on average, are likely to be milking considerably more cows.
  • There will continue to be more environmental and other issues that we face as an industry, some of which will be financially formidable for a small business to handle.
  • As more industry automation occurs, we may see additional consolidation of operations, particularly if it requires large capital expenditures.
  • If labor becomes either more expensive or even harder to locate, there could be added pressure for smaller farms to compete.

Once again, I’m not defending his comments, but we will be wise to consider the solid possibility that he is correct. I am very much in favor of family farms succeeding in the U.S. Most of us are, but we should never deceive ourselves into thinking that we can totally overcome the trends of the last 50 plus years.

As you think about this challenge, what action do you need to undertake this week? What will you do differently, going forward? Think about it.

 





 

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You won’t regret it. I wish you the very best for a success-filled year!

John Ellsworth through his Success Strategies firm advises dairy and farming clients on a variety of financial and production issues. He may be contacted at 209.988.8960 or <john@success-strategies.com>

 





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