What to Do and Not to Do to Endure Financial Tough Times

Producers are challenged paying the bills with the lack-lusting prices that have shown up on milk checks this summer. Independent financial consultant, Gary Sipiorski, shares six tips to focus on during financial tough times.

  1. Conduct family and staff meetings so everyone understands what’s going on. Be realistic, not pessimistic about your dairy financial situation.
  2. Reconsider all expenses.
  3. Cows don’t understand that milk prices are considerably less than a year ago. Keep taking care of your cows. Now is not the time to make shortcuts.
  4. With the high price of beef, take a hard look at culling that will take a minimum hit to the bulk tank.
  5. Gather with your lender to talk about finances. Have the funds approved for an operating loan, even if you don’t need them right now. Make sure you bring a financial projection for the remainder of 2023 to the meeting.
  6. Keep on leading. The owner sets the atmosphere for all.

“It is hard to say how long milk prices will be low, where the bottom is and how long before markets turn up,” Sipiorski says.

Curtis Gerrits with Compeer Financial concurs with Sipiorski, adding the importance of staying connected with your professional team.

“Have continued discussions with your veterinarian, nutritionist, commodity broker, and banker on how to continue to improve your operation,” he says. “With these discussions keep margin management at the front of mind on any operational adjustments you may be considering.”

Gerrits adds to keep looking towards the future.

“Look out 12-18 months for areas of opportunity with managing your margins,” he says. “DRP, LGM, DMC and other hedging strategies may present opportunities to capture some positive margins even when prices are low today as you look out into the future. Review your dairy’s budget for this year and think through your budget for 2024. Explore areas of opportunity to lower your cost of production whether that be on the income or expense side of your operation.”

What Not to Do

Wayne Knoblauch, professor in the Dyson School of Applied economics and Management in the SC Johnson College of Business and the College of Agriculture and Life Sciences at Cornell University adds the following 11 things to avoid when dairy farmers are facing financial difficulty.

  1. Making decisions that will cause the problem to be worse a week, month, or year down the road.
  2. Continuing the same practices simply because you’ve always done it that way.
  3. Neglecting needed accounting tasks because there isn’t time right now.
  4. Utilizing farm-produced feeds so rapidly that they are used up without a replacement plan.
  5. Reducing purchased feed just to save money.
  6. Purchasing products that promise to be a cure-all unless you have hard data and the experiences of others to confirm.
  7. Making capital investments to reduce tax liability or because “it is a good buy.”
  8. Borrowing money unless the profitability of the farm is reasonably expected to increase in order to provide for repayment.
  9. Neglecting the details; cleaning and maintaining equipment, detecting heats, etc.
  10. Using alcohol to excess. Alcohol and other drugs can make a tough situation even worse.
  11. Assuming a management strategy that worked for one farm will be effective on yours.