Recently, I’ve had numerous conversations with producers who, to varying degrees, have expressed their disappointment with the smaller than expected payout from the Federal dairy price relief program. I can completely empathize with them. However, my suggestion to all of them is that, although it would have been a genuine “shot in the arm” for all producers, it’s time to move forward. We can all spend time complaining about it, but will we gain anything? I doubt it. In fact, our time will be better spent developing future courses of action for your business.
I understand that it’s been difficult. I know first-hand, given the number of Clients with whom I work in the dairy industry. Nearly everyone’s cash flow has been challenging since 2014. Yet, what can we do about it? Here are a couple of suggestions:
Is your loan structure being optimized for the long term? While we all would like to be “debt free,” most producers today are carrying more debt than they did four years ago. Given that knowledge, doesn’t it make sense to structure your debt load to boost your Cash Flow as much as possible. For example, are your long- term real estate loan(s) set up at 65% Loan-to-Value? Once that is completed, you should be able to reduce the amount of debt & related payments being made on short term feed lines & intermediate term herd loans. Just accomplishing this task of establishing the correct debt structure can often lower your monthly principal & interest payments enough that your cash flows are improved.
As I outlined in a blog last month (8/31/2018), here are a few suggestions. Have you completed the following items? 1.) Filled the barn to ensure that your dairy is running at its maximum efficiency. Replacements are fairly inexpensive right now, so why not take advantage of it and fill your facility? 2.) Have you looked at establishing sound feed contracts? With the recent trade wars going on, there may be some “windows of opportunity” where you can lock up some great deals on feed items. Watch closely for them. 3.) Have you reviewed your efficiencies on Feed (Energy Corrected Milk/Feed Intakes), on Labor (e.g. Number of Cows milked/employee) and on farming operations? These can all be crucial to your success! 4.) How about opportunities for automation in your operation? Can you use various Robotics to push up feed more regularly, which can boost feed efficiency? How about for feeding calves? What about in the milking barn? It is clearly the wave of the future with rising labor, benefit and workers compensation costs.
Remember, as George Bernard Shaw stated: “The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can’t find them, make them.” It sounds like good advice to follow.
Hopefully, these suggestions will expand your thinking to some extent. I hope you find them helpful in your business. Be watching for some upcoming “Mastermind Group” opportunities we are planning to offer. This entire thinking process is absolutely critical today, and if you need assistance, please e-mail me at [email protected] or check out our website for many useful tools for your ongoing business evaluation at www.success-strategies.com. I’m always available for a follow-up call and wish you the best of success!