Management

There has been much talk about the lack of profitability among dairy producers lately, with milk prices below most operators’ cost of production. The negative profit margins have certainly put quite a bit of strain on the industry for the past year and led to a new round of the CWT’s herd retirement program in an effort to further reduce production and boost prices.

The transfer of monetary wealth is the primary consideration for families considering transitioning the dairy farm from the older generation to the younger generation. However the transfer of intellectual wealth and family values are critical components of the transfer process, which determine the success of the transfer and the long-term viability of the farm.

Dairy producers are usually not professional economists, yet every dairy operation has to understand and work within today’s economic realities. To some, current conditions are a “perfect storm.” Others, however, see an era of opportunity.

On a global basis, success in dairying has always meant different things in different regions, depending on markets, climate, land values, availability of labor and a variety of other factors. For the last 50 years, successful dairy development in North America has primarily revolved around saving labor and capital through economies of scale.

Small businesses are confronted by many different types of risk: production, marketing, financial, legal and human. Managers generally spend most of their time dealing with production, marketing, financial and legal risks and give little consideration to human resource risk and how the absence of key personnel can affect their business. This is a serious oversight because people are the key component in many risk management strategies.

Producers can’t change the price of milk, but they can examine ways to make their operations more efficient in good times or bad. When dairies are making money, it is easy to forget the details, but in tough times, reexamining current feed and vaccination protocols can ensure maximum production.