Hunker down in the face of troubles? Not if you want to succeed
How are you responding to what may be negative margins for milk production? Are you hunkering down, or being deliberately active?
“Hunker down” was the advice given at a recent dairy conference in another state. The advice was presented to dairy producers in light of the forecast for milk prices to remain relatively low with little significant upward movement for a period of possibly 12-18 months.
As an educator with Michigan State University Extension, I will not argue the milk price forecast, why argue a forecast when the reality is that it is based on what is known today, and tomorrow something could change. I take exception to the advice based on it.
“Hunker down” implies digging in and waiting for the storm to pass, or taking shelter and hiding. It indicates closing one’s eyes, stopping activity and simply hoping for the best. That sounds a lot like burying your head in the sand, and frankly, I believe it is exactly the wrong approach to the financial stress caused by lower milk prices.
Financial stress, whether one is a dairy producer or not, should lead one to open their eyes wider, increase deliberate activity and plan changes rather than just hoping for the best.
A time of financial stress is the time to examine the ways we have been doing things, examine the things we do and to consider alternatives. Decisions need to be made considering both the short and long-term impacts on finances.
It often helps to have someone else to help evaluate your operation. Their outside eyes will see things from a different perspective and may challenge what we often consider as the “only way” to do things. Getting additional views of your farm’s situation can sometimes identify opportunities or see things that were not considered as options.
Dairy producers need to take a look at each input and examine it as an investment. The “hunker down” mentality is to pull back all investments rather than examining them and distinguishing between investments that provide a good payback and those which do not. If saving money results in the loss of milk production, it is generally not a good move. A management team can help you better understand impact a change may make on the farm economics.
Examine not only the inputs you purchase, but also what you spend your time, and therefore, money, doing. Maybe it is time to rethink some of the operations we perform and search for alternatives. It is very important to avoid being drawn into the misconception that working more hours will always improve the farm’s bottom line. Stress and fatigue are often huge risks to your health and often lead to poor or altered management decisions.
Ask yourself questions, such as, how important is it to breed all cows? Wouldn’t it be better to determine the cows for which it is not worth having their offspring and label them as “do not breed”?
How many times should a cow be serviced? Not only does it add cost, but it means that her lactation will be lengthened, thereby increasing the risk that she will have fresh cow problems. Set a limit and stick to it.
Should all heifers be raised when the cost of raising one is around $2000? Make some selective decisions early. Should someone else raise your heifers so that you can expand the cow herd without having to invest in heifer facilities? Put your investment where it is most likely to pay back the best.
Do you need to own your own set of field equipment? Others have successfully relied more on custom operations or some have formed partnerships with a few other producers for equipment ownership and field operations.
Can you work with others to put together group orders for supplies to get a better price? Do you request bids from three suppliers before purchasing?
It is also time to ask the bigger questions. Do you plan to stay in business another five years? If not, it maybe time to exit the business before losses eat away your equity. Conversely, does the business need to expand in order to capture greater efficiencies and be better prepared for downturns?
While the time may not be right to embark on an expansion now, it is probably the best time to make the decision about future expansion and start preparations for it.
Those who survive tough times will be more likely to use this time to re-examine the way they do business and consider alternatives to what they currently do. Doing the same thing will not bring different results. So open your eyes and explore alternatives; examine your investments and your future needs; be active in establishing new working relationships; and though the tough times are still tough, you will have a new perspective and a new future.