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Do you plan ahead for success?

Harley Wagenseller Published on 21 September 2010

Is your dairy gearing for success, or does it look like an episode of Jersey Shore – a TV show that has been poked fun at by everyone from Jay Leno to Fox News because its cast of characters collectively have an IQ of 100?

Hopefully your dairy has been planning well for the future. Do you know what steps to take to build a new reality? Let’s see how this might work in two different practical dairy applications.

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Dry-off
“Why has cow #2882 not been dried off yet?!?!” This exclamation came to me as I once talked with my herdsman.

My consternation? We have a regular “plan” as to when we dry our cows off weekly (every Tuesday). Our target date was 50 days dry and here this cow was already 40 days before calving. The herdsman’s explanation was, “She’s still making 65 pounds a day.”

Some cows as we know “wind themselves down” quite well on their own with little man-made intervention. Some of these cows at 380 DIM just naturally “shut off the spigot.” But others, like #2882, do not know when to stop producing.

So we added a special program that enables us to work with cows that just keep producing. At 57 days before calving, the computer signals those cows due to be dried up at Day 50 and also give their production figure. That way we can make an intelligent decision on how to handle exceptional cows.

For those cows that still make 60 to 80 pounds per day, we can divert them to a pen where they receive a reduction in feed, water or a reduced milking schedule in order to get their production down. It works well when we follow our protocol. We dried them up, feeling that all cows were more correctly being handled before going to the dry lot. We were able to plan for success in this small area.

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Finances
One of the greatest tests of planning ahead for a dairy farm relates to getting good financial advice when starting a new dairy. This can be tricky because we all naturally want our new dairy enterprise to succeed so badly, including the bank and finance adviser helping us. Remember, they have a vested interest too. This would also apply if we are planning to hand down our dairy to the next generation. Some of the same institutional guidelines apply to either situation.

It may be tempting to think that the $18 to $19 per hundredweight milk we saw in 2007 and 2008 should be what we base our budget projections on when reporting to our financial institutions, but this could not be farther from the truth. Unfortunately, situations like this have happened in the past.

What you realistically need to be able to do is to make cash flow projections when you have $12 to $16 per hundredweight milk. An overzealous adviser could make you think that high milk prices will continue on for years. You, as the educated dairy person, should be moved to anticipate any and all contingencies. Some alarming things can happen if you don’t get good advice.

• Most importantly, you could be seriously short of cash to pay your monthly obligations.

• Will you have a clear plan on how to maintain the budget, organize the cows, set production goals, etc. when the time comes to deviate from the original plan?

• Will you have the ability to make payroll on time and not wonder where the accountant is this week?

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• Does your accountant refuse to spend time at your dairy to really understand how things are going, or is the golf course more important to him or her?

• Are your advisers more interested in their own financial situation rather than helping you get a solid hold on your business?

• Is political posturing what your adviser seems to enjoy?

• Are these advisers more interested in leveraging 5 to 10 percent of any deal for themselves, whether it is feed contracts, cattle dealers or other services?

• Do your advisers advocate that all your new dairy’s vendors have to pay a “fee” to sponsor an “open house” or some kind of a “welcome to the neighborhood” event? Sounds like a mafia style “shakedown,” doesn’t it?

You get the point: Advisers can make you or break you depending on how you listen to their advice.

How should you make a decision regarding these matters? First, check your ego at the door. You cannot believe you have all the answers. You have to honestly take stock in what you know are your strengths and weaknesses.

Second, work with people who have a proven track record. Word spreads quickly on who can be counted on and those who are only interested in their own financial interest. A good rule of thumb is that if one person out of 10 has had a problem with a financial adviser, then perhaps they had a misunderstanding.

Obviously the majority have a favorable feeling towards this individual. If, however, three or more out of 10 people warn you that certain individuals will not help the long-term interest of your dairy, then you better listen.

So can you plan ahead for the success of your dairy? Remember, if you fail to plan your dairy enterprise as these two examples have shown, then perhaps your dairy will ultimately plan to fail. PD

Harley Wagenseller

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