Management

Like milk prices, no one can accurately predict the direction of interest rates in the future. That being said, I firmly believe farm loan interest rates will rise (and possibly sooner rather than later), and producers should have a strategy to hedge interest rate risk.

Dairy producers tend to focus on the production side of the business more than financial metrics. And when they do take a look at the financial picture, they tend to consider it in the aggregate. But there’s a better way of getting the full measure of your dairy’s finances: enterprise accounting.

In any industry, we often hear of the three tiers. The top tier is successful, thriving businesses positioned for sustainable futures, while the bottom tier is the struggling businesses that will likely not exist five years from now. In between lies businesses that could go either way.

As I write this article, January 2020 Class III futures are $18.15 per hundredweight (cwt), a $1.65 increase since my semester of teaching started in September and well above the annual averages for the last five years (Figure 1).

Imagine this: Your employees, advisors and partners all in the same room, productively discussing issues and finding ways to improve farm profitability.

Progressive Dairy contributor Andy Junkin recently released a new book to help farm families called Bulletproof Your Farm.