By Stanley Moore
There is no question that Michigan dairy farms have been experiencing tough economic conditions over the past two years. Some drivers of these conditions are new, or at least greater in scale than have been experienced previously. The response by individual farms is critical to their ability to survive and thrive.
When we travel to dairy farms to talk with producers that are going through these tough times, we cover three areas that we believe are important to turning the operation around. These areas include: maximizing the resources that you have, reducing waste, and re-evaluating the business structure.
Maximizing resources means getting more out of investments you have already made, particularly resources that are currently underutilized. Examples could include milking cow barns that are not full, work schedules that don’t fully utilize workers time, and parlor underutilization. Milking cow housing that is only partially full is an automatic red flag. Farms can ill afford to have assets that are not being fully utilized to generate revenue. Underutilized cow housing is often associated with other problem areas, including higher cull and death rates, poor reproductive performance and compromised calf raising.
Another underutilized resource that farms may not immediately recognize is the external resources that they have available to them. One such resource is your Michigan State University Extension Dairy Team. The MSU Extension Dairy Team consists of six field educators and several campus-based specialists who can bring varied expertise to help producers identify opportunities and pathways to improvement. Like other outside people resources, MSU Extension educators offer an external perspective, and we also are a link to unbiased research-based information.
Reducing waste on farms means identifying any area where there are losses of value. This includes animals that should be pregnant and are still open, dead animals, disease that robs production or decreases reproduction or milk quality, wasted feed, wasted seeds, and wasted time. This area requires the farm manager to take a step back, observe, do inventory and look for opportunities to cut waste without hurting performance. This is a great area to utilize employees as they are your eyes on the front lines. Seek their input, thank them for their input and use their ideas. Even when an idea is off the mark, recognize that employees are trying to help your business succeed. Use these ideas that are “off the mark” to help train employees on why it is important not to cut a certain area.
Reevaluating the business structure means that you critically evaluate each operation and whether you consistently, efficiently and profitably perform it. Oftentimes, that will take bringing in some outside thinking and ideas. The newest economic realities may necessitate that your business structure change from what you have always done. That could be using a custom heifer grower to free up facility space, feed and human resources. It could be contracting with a custom harvester to free up financial resources that have been dedicated to machinery that is underutilized and improving the harvested product by getting it put up in a narrower window. Finally, it may mean changing debt structure to enable you to weather these tough economic times.
In all of these cases, you will need to have a firm grasp on your farm’s cost of production, balance sheet information, net income and cash flow. You’ll need to be able to determine what areas of your farm are profitable and which areas are not. If this is where you could use assistance, there is a MSU Extension resource available to help you.
Michigan State University Extension is offering a program entitled Newest Economic Realities in Agriculture: Building Your Farm’s Plan. This program is designed to help everyone, from a novice to an advanced farmer, understand your business’ numbers and how that translates into prioritizing options and making timely management decisions. There will be breakout sessions for dairy/livestock, field crops, and fruits/vegetable production.
The program is being held on March 8 at the Kellogg Hotel and Conference Center in East Lansing. It runs from 8:30 to 5:00 p.m. with an optional dinner with Question and Answer session from 5:30 - 7 p.m. To view the full program agenda and register for the program, please go to the event page online.
Tough times demand re-evaluation. Don’t miss the opportunity to re-evaluate your business and put it on a path to greater profitability.
Source: msu.edu