Archive for May, 2010

Triple Bottom Line: Addressing food needs of the future requires a balance between people, profits & the planet

Dairy needs a financial ‘bounce back’ year, as well as in the court of public opinion.

By Dave Natzke

The 2009 dairy economy took a significant financial toll on the industry. A full-court press by climate change and anti-livestock ag extremists put all of agriculture on the defensive. To rebound, food producers must implement a balanced, proactive offense, according to Alltech president Pearse Lyons, addressing Alltech’s 26th International Animal Health and Nutrition Symposium, May 16-19, in Lexington, Ky.

Alltech’s 26th International Animal Health and Nutrition Symposium

“In today’s world, profits are more critical than ever,” Lyons told 1,542 symposium participants from 63 countries. “Companies cannot forget, however, that their people and customers, and the sustainability of the environment in which they operate, have become critical to long-term survival.”

Specific to dairy, Lyons said the industry must “brand” its products, avoiding the negative branding (rbST-free) frequently used. “Messages must be positive,” he said. “Negativity will get you nowhere.”

Jim Pettigrew, University of Illinois nutritionist and Alltech’s 2010 Medal of Excellence, said food sufficiency and food security will play a role in feeding the world. He said food production has been a success story over the past 30 years. However, as land, water, fossil fuel and fertilizer resource availability declines, Pettigrew outlined four key elements to match future food production with a growing population:

• recognition of the challenge.

• innovation in production technologies and a marketing system that rewards risks.

• investments in research and education.

• converting developing nation’s subsistence farmers into commercial farmers.

Food producers must also take back the “green agenda” hijacked by environmental and anti-animal agriculture extremists, panelists in the symposium’s annual “Great Debate” said.

Trent Loos, popular agribusiness commentator, called global warming “the largest man-made hoax the world has ever seen.” Patrick Wall, former chair of the European Food & Safety Association, Ireland, said obesity is a “BSE” (blame somebody else) issue, and that the food industry should not shoulder all the blame. Additionally, world hunger cannot be eliminated by aid, but rather by addressing poverty through education, according to Gordon Butland, director, G&S Agri Consultants, Thailand. Osler Desouzart, managing director for OD Consulting, Brazil, said food safety standards were necessary, and “buying local” should be promoted to support local producers, but both are being used as means to restrict trade.

FYI

■ For more information on Alltech’s 26th International Animal Health and Nutrition Industry Symposium, visit www.alltech.com/symposium.

Alltech’s annual Global Dairy 500, will be held Nov. 1-4, in Lexington, Ky. For information, visit www.alltech.com/globaldairy500.

Alltech Symposium Research Updates

Summaries of dairy-related presentations at Alltech’s 26th Animal Health and Nutrition Symposium

Communicating value-added to farmers in tough economic times, by Theo Lam, DD-Animal Health Service, Netherlands. Most dairy farm advisors have the technical skills; it’s the personal and communications skills that need work.

• The rumen: The challenge of producing microbial protein, by Juan Tricarico, Alltech, USA. Don’t chase the last pound of milk, maximize metabolizable protein efficiency. Feed the microbes that feed the cows.

• Manipulating escape microbial protein – The latest technology in the nutritionist’s toolbox, by Jay Johnston, Ritchie Feed and Seed, Inc., Canada.

Conversion efficiency of dietary protein to milk protein is about 30%. A method to lower dietary crude protein is needed to maximize efficiency and lower nitrogen excretions.

• Getting the most from distillers dried grains, by Mary Beth de Ondarza, Paradox Nutrition, USA. Distillers grains’ nutrient profiles vary widely, and many contain higher mycotoxin concentrations. Cows require specific amounts of each amino acid. Demand more information from suppliers.

• Scaling the mycotoxicosis learning curve, by Simon Timmermans, Horizon Beef, Iowa, USA. Molds and mycotoxins affect rumen microbes differently. Purine derivatives can be use to measure rumen output and determine mycotoxin effects.

• Detection breakthrough: Penicillium mold ‘signature’ in dairy cows, by Johanna Fink-Gremmels, Netherlands. Rumen microflora are a primary target for penicillium toxins most common in silage or big bales.

• More milk from more fertile cows: Solutions to the dairy paradox, by Finbar Mulligan, Ireland. The nutrition component of fertility is a balancing act. Maximize milk production efficiency without overfeeding protein, and fill the energy gap needed for cow health and reproduction.

• A calf never gets over a good or a bad start – Practical applications of nucleotides, by Sylvia Kehoe, University of Wisconsin-River Falls, USA. About 50% of all calf mortalities are due to scours, and those that survive are negatively impacted the rest of their productive lives. Signs of dehydration mean the damage is already done.

• Using organic minerals to differentiate a business – Pioneering opportunities for the feed compounder, by David Wilde, Massey Bros. Feeds, United Kingdom. Three main reasons to supplement with organic minerals are fertility, mastitis and hoof quality.


Prepare for milk marketing ‘what ifs’

Marketing

By Matt Mattke

Producers don’t want to dwell on it, but a marketing strategy must have contingency targets built in to provide a safety net.

Matt Mattke, Market360® adviser at Stewart-Peterson

Many dairy producers tend to shape their marketing strategy around the notion milk prices will go higher and provide better marketing opportunities in the future.

The marketing strategy might be to place offers through the milk plant to forward contract if the price hits $15.00/cwt. Maybe the strategy is to buy $14.50/cwt. put options if their cost falls to 25¢. Or, perhaps, the strategy is to get $15.00/$17.00 bear fences in place if the market reaches $15.50/cwt.

Whatever the strategy specifics, the important question needing an answer is: “What if the milk market fails to reach any of these higher targets and starts to fall apart?” Is the producer’s marketing strategy equipped to deal with that situation?

Unfortunately, being fully prepared for any adverse price situation means having to contemplate milk prices trending in a direction no dairy producer really wants to dwell on – downward. But for milk marketing to be successful, that’s exactly what is required. A successful marketing strategy needs to have contingency targets built in to provide a safety net – a “Plan B” of action – in case milk prices don’t trend higher or don’t reach the targeted price levels.

Ultimately, a successful milk marketing strategy is prepared for whichever direction the market trends, higher or lower. Preparing for the downward trend is more difficult. It requires analyzing milk prices and trying to identify the crucial levels of support that, if broken, could signal the overall milk price trend has shifted from “up” to “down.”

Even if the dairy producer has successfully established Plan A for an upward-trending milk market, and Plan B in case a lower-trending milk market develops, the next big hurdle is following through and having the discipline to act on Plan B.

If downside triggers have been hit, signaling Plan B needs to be put into action, that likely means milk prices are down and have fallen below support. After milk prices have started to fall, it’s always the most difficult for most dairy producers to pull the trigger and take action – but often when taking action is the most crucial.

The milk market in late 2008 and into 2009 is a perfect example. Once milk prices topped out in May 2008 and started to fall, it provided no opportunities to sell on a bounce. Prices steadily eroded week after week, until the market had shed 50% of its value.

Finding the confidence and discipline to execute on Plan B of the strategy – after milk prices have already started to fall – is garnered from Market Scenario Planningsm.

Market Scenario Planningsm is all about contemplating the “what ifs.” It is about thinking of every possible way milk prices can move, not only to the downside, but to the topside, as well. It is thinking about the possibility for extreme milk price moves, as well as more benign moves. It also looks at the impact any marketing decision has on the bottom-line average price, and analyzes the decision under a number of different price scenarios.

In next month’s article, I’ll detail how Market Scenario Planningsm can provide the confidence to take action, even in a falling market.

Market Scenario Planningsm is a service mark of Stewart-Peterson, Inc.

FYI

Matt Mattke, Market360® adviser at Stewart-Peterson, can be reached via e-mail: mmattke@stewart-peterson.com, phone: 800-334-9779 or visit www.stewart-peterson.com.


Management can’t go back to the good old days

People Power

By ROBERT MILLIGAN

Most dairy managers have been waiting – yearning – for the TURBULENCE X TURBULENCE to end, so they can  again face a business environment similar to 2-3 years ago. As I work with clients to understand the agriculture and business environments, I become more convinced than ever two years ago is “the good old days.”

To return to profitability and continue to prosper in the years to come will require “going to a new (higher) level.” To explain, let me address two questions: 1) Why is it not the world it was two years ago? and 2) What will business owners have to do to thrive in the future?

1) Why is it not the world it was two years ago?

• The hole is deep. The financial analysis completed by Farm Credit found the 2009 average per cow loss on the 544 Northeastern US dairy farms was $386. Depending on production per cow, that’s $1.30-$2.00/cwt. It will take most dairies two or more years to recover that loss and get back to where they were. Most farms will have made only minimal capital purchases during this period and will have a capital stock that is 2-3 years older and in need of a major capital infusion. Many agribusinesses have amassed large accounts receivable and not all will be recovered.

• There’s a new economic reality. Hopefully, we will never again see the swing in economic conditions we’ve seen in the dairy industry and in the general economy over the last two years. That said, nearly all of the conditions creating the swing – agriculture in the energy business, global market adjustments, inelastic price, the increasing rate of change – remain. The oil spill in the Gulf and the economic crises in Europe add even more uncertainty. High unemployment will likely contribute to weaken consumer demand, resulting in a sluggish economy for the foreseeable future. In addition, continued potential price variability and the lessons of the last two years are resulting in reduced availability of credit.

• External threats have intensified. For reasons we do not well understand (but need to), the dairy industry and modern agriculture has become a punching bag of the media. Will Rogers may be best known for his quote: “All I know is what I read in the newspaper.” Today the media is much more than the newspaper; however, the quote reminds us of the power of the media.

2) What will business owners have to do to thrive in the future?

• Be much more keenly aware of the external environment. Hockey great Wayne Gretzky always attributed his success to passing the puck to where the player will be, not to where the player is. Similarly, dairy business owners must make decisions based on their best judgment as to where their industry and the business environment will be, not based on where it is today. To know where “the player will be” requires an in-depth understanding of the business environment in which your business operates.

• Management to a new level. One of Albert Einstein’s most famous quotes is, “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” This applies to the current situation, in the sense that we must take our management to the next level. This new level must include even more efficient and quality focused (no defects) operational management; however, the greatest strides in management are likely needed at the leadership level.

• You cannot do this alone. A greater reliance is needed on your workforce. One of the greatest business needs we have noticed during the last two years is more attention must be devoted to management.

This higher level of management will require owners to focus more on the chief financial officer (CFO) and chief executive officer (CEO) roles. Since there are still only 24 hours in a day, this will leave less time for operations and labor management roles. The result will be more reliance on other members of your workforce and your trusted advisors. Greater attention to attracting, retaining and developing an exceptional workforce will be key to success.

Are you frustrated yet?

Frustration over the slow and shallow economic recovery is the prevailing emotion currently expressed by many farm and dairy business owners. While understandable, you must trade your frustration for two other emotions – determination and focus.

I am confident that you and other managers can move to the required higher level. The first requirement is recognition that change is needed. You must then summon the determination to compete under the new economic realities, and then maintain the focus necessary to succeed.

Next month, I’ll focus on what is needed to manage at the next level.

FYI

Robert
Milligan
, senior consultant with Dairy Strategies LLC, can be reached via phone: 888-249-3244, ext. 255, e-mail:
rmilligan@trsmith.com, or website: www.dairystrategies.com.


They’re watching: Notoriety can happen to you

Even though an independent review cleared Willet Dairy’s animal care practices, producers can’t be complacent.

By Susan Harlow

Lyn Odell wants dairy producers to know that what happened to his dairy could happen to any dairy, large or small.

Odell is operations officer for Willet Dairy, a large dairy that milks cows and raises youngstock at four locations in Cayuga County, N.Y. The dairy employs 90 people.

Odell said it took just one “isolated instance of abuse,” caught on an undercover video, to catapult the dairy onto ABC Nightline last January. The video, shot by a Mercy for Animals member, showed a Willet employee mistreating animals. Odell knew nothing about the video or a complaint filed by the organization until ABC Nightline called him just before it aired. The employee was suspended.

Here’s the background: the Cayuga County (N.Y.) District Attorney had received a complaint from Mercy for Animals the previous summer but, based on consultation with the New York State Department of Agriculture and Markets, did not pursue the complaint.

But once the video aired on national television, the district attorney asked the Finger Lakes Society for the Prevention of Cruelty to Animals (SPCA) of Central New York, to investigate. That report, scheduled to be finished in February, is still to be released.

Within a week of the television show, Odell asked the New York State Cattle Health Assurance Program (NSYCHAP), a program of the state’s Department of Agriculture and Markets, for an independent review of the dairy’s animal care practices. NYSCHAP’s team, which included staff from the Animal Health Diagnostic Center, PRO-DAIRY, Quality Milk Production Services and the agriculture department, visited the dairy and assessed its animals for locomotion, hygiene and body condition score. By the end of March, NYSCHAP had certified the dairy in cattle welfare.

Willet Dairy had already had some standard operating procedures (SOP) in place; NYSCHAP helped the dairy modify and add others.

“Once our review and modifications were completed, the SOPs were further reviewed by NYSCHAP staff and support vets,” Odell said.

When the SOPs were established, Odell set up a formal training process for the dairy’s employees.

SOPs are often unique to each farm – at Willet, for instance, calves are raised in hutches, so that determines the timing of weaning and dehorning.

One change that Willet made to its practices was to incorporate anesthesia into some procedures, such as dehorning and tail docking.

Odell said Willet’s NYSCHAP certification is a good opportunity to educate the farm community. All dairy producers, he said, should be aware that the same thing could happen to them.

Besides the public relations black eye for the dairy and the industry, Willet has suffered economically. Their milk buyer is not taking Willet Dairy milk until the legal issue is resolved.

“So the impact on the farm can be more than just getting on the national news,” Odell said. His advice:

• Examine your animal care practices closely. Look at them as an uninformed member of the public would.

• If you don’t have standard operating procedures  (SOPs) for animal care, you should. NYSCHAP can help with that.

• Even if your dairy’s animal care practices are impeccable, you may not be off the hook. “Our standard practices are beyond what is typical, but activists could still portray a farm that was inadequate in animal care,” Odell said.

• Don’t invite opponents to your dairy in hopes of convincing them otherwise. “They have preconceived notions of what they’ll see,” Odell said.

“There’s a real struggle – producers have to be aware we are at risk and need to make sure their shop is in order,” Odell said. And even when it is, they may not be perceived that way. p

Editor’s note: Another hidden camera video showing abuse of cows and calves surfaced at this month’s Eastern DairyBusiness press deadline. Billy Joe Gregg Jr., 25, an employee at Conklin Dairy Farms, in Plain City, Ohio was charged with 12 counts of cruelty to animals.

FYI

See more on NYSCHAP’s cattle welfare certification in “Herds step up to the plate” in PRO-DAIRY’s The Manager, page 24, in the May 2010 issue of Eastern DairyBusiness. Find the entire issue online at www.dairybusiness.com. Or, visit www.ansci.cornell.edu/prodairy.

See NYSCHAP’s cattle welfare certification module at http://nyschap.vet.cornell.edu/module/welfare/welfare.asp.

Changing winds: Dairy’s GHG emissions don’t match the rhetoric

By Dave Natzke

All the anti-livestock rhetoric since 2006 has produced 25% of all global greenhouse (GHG) emissions.

OK, so I’m exaggerating. But there has been a lot of “hot air” related to the dairy industry’s role in GHG emissions as a result of the 2006 United Nation’s Food and Agriculture Organization (FAO) report, “Livestock’s Long Shadow – Environmental Issues and Options.” That report – which one author now admits was exaggerated –  claimed livestock agriculture contributed 18% of the world’s GHG emissions, even more than emissions from all transportation. Anti-meat and anti-dairy groups use those estimates to call for “Meatless Mondays” and a reduction in dairy product consumption as a means to “save the planet.” According to Trent Loos, (www.loostales.com), that estimate is already showing up in textbooks.

A chief challenger of the 2006 UN report is University of California-Davis associate professor and air quality specialist Frank Mitloehner. Most recently, Mitloehner shared information at Alltech’s International Animal Health and Nutrition Symposium.

Mitloehner’s presentation came shortly after the release of another UN/FAO report, “Greenhouse Gas Emissions from the Dairy Sector – A Life Cycle Analysis.” That report estimated global milk production, processing and transportation contributed just 2.7% of global GHG emissions. Add emissions related to meat produced from dairy animals, it’s 4%.

The report focuses on the entire dairy food chain, from feed production and on-farm emissions, to emissions associated with milk processing, packaging and transportation of dairy products to retailers.

The new report also indicates improved milk production efficiency is a major factor in limiting GHG emissions per unit of milk produced. Dairies located in North America, Europe and Australia/New Zealand had the lowest carbon footprint. In contrast, the biggest dairy GHG emitters were in Central and South America, Western Europe, West Asia and North Africa, Sub-Saharan Africa and South Asia.

The news is even better in the United States. Research underway through the Innovation Center for U.S. Dairy, working with the University of Arkansas Applied Sustainability Center and other experts, attributes about 2% of total U.S. GHG emissions to its dairy industry.

That U.S. analysis gathered data from more than 500 farms and 50 processing plants across the United States, analyzing 150,000 round trips transporting milk from farm to processor. Abstracts of the research have been accepted for presentation at the 7th International Conference on Life Cycle Assessment in the Agri-Food Sector (Sept. 22-24, 2010 in Italy). A series of articles based on the detailed findings will be submitted for publication in peer-reviewed journals in 2010, with publication expected in 2011

The Innovation Center for U.S. Dairy is taking additional measures to further reduce GHG emissions by another 25% by 2020.

Mitloehner remains skeptical of UN FAO’s estimate of 18% GHG contributions from livestock production, saying the organization is comparing apples and oranges when placing livestock agriculture next to transportation, for example. Total GHG from transportation is not accurately estimated, he said.

“If you know the life cycle (emissions’ contribution) of livestock, but you don’t know what the life cycle of all the other industries, and you don’t know what the total is, how can you tell what percentage the livestock contribution is?”

FYI

■ Find the 98-page report, Greenhouse gas emissions from the dairy sector, at www.fao.org/docrep/012/k7930e/k7930e00.pdf.

■ For information about International Dairy Federation global projects aimed at reducing dairy emissions, www.dairy-sustainability-initiative.org/Public/.

■ For more information on the Innovation Center for U.S. Dairy’s sustainability commitment, go to www.usdairy.com/sustainability or e-mail: innovationcenter@usdairy.com.


20 Years of ‘Super Milk’

The Empire State Milk Quality Council recognizes these 36 dairies for 20 years  of Super Milk

The Super Milk Award recognizes dairies whose owners produce high quality milk and operate exemplary farmsteads. These 36 New York dairy farms have distinguished themselves by meeting those standards not once but 20 years running.

Presented annually by the Empire State Milk Quality Council (ESMQC), the Super Milk Award requires dairies to produce milk with somatic cell counts less than 250,000 for 10 out of 12 months. All dairies hitting the 20-year mark have counts consistently far below that.

The 36 dairies presented here represent all size herds, from 40 cows to more than 1,000, and all types of production systems, including tiestall barns with pipelines and freestall barns with milking parlors.

Many factors contribute to the success of these dairies: Cleanliness, sound milking procedures, quality people, attention to detail, and clean, healthy cows all play a role in producing Super Milk.

Formed in the mid-1970s, the ESMQC works to reduce the incidence of mastitis and improve the quality of milk produced through education on New York dairies. As well, the Super Milk program focuses the attention of producers and handlers on the importance of udder health.

The 20-year Super Milk recipients will be recognized at a Dairy Profit Seminar, held on Thursday, Aug. 12, at Empire Farm Days. For more information on this program, as well as the Super Milk recognition and the ESMQC, see its website: www.supermilkny.org

Name:  John, Lee and Justin Bach

Farm name: Bach Farm

Location: Carthage

Milk handler: Lowville Producers Dairy Co-op

Number of cows: 146

Housing: Stanchion

Bedding: Chopped hay and lime

Milking system: Pipeline

Milk production: 23,000 lbs.

SCC: 120,000

SPC: 1,000

Key factor: Pay attention to detail and cleanliness

Name: John and Jackie Bennett

Farm name: Bennett Farms Inc.

Location: Bloomfield

Milk handler: Upstate-Niagara Co-op

Number of cows: 85

Housing: Tiestall

Bedding: Chopped straw on rubber mats

Milking system: Pipeline

Milk production: 22,500 lbs.

SCC: 100,000

SPC: 2,000

Key factor: It’s our responsibility to provide a high quality product for consumers.

Name: Noel & Terese Bibbins, Larry

Bertram, Dick & Linda Brown

Farm name: Hi Hope Farm LLC

Location: Mannsville

Milk handler: Dairylea Co-op

Number of cows: 940

Housing: Freestall

Bedding type: Paper sludge

Milking system: Parlor

Milk production: 23,800 lbs.

SCC: 116,000

Key factor: Cleanliness, training & attention to detail

Name: John G. and John M. Borer

Farm name: Edelweiss Farms Inc.

Location: Freedom

Milk handler: Upstate-Niagara

Number of cows: 1,250

Housing: Freestall

Bedding type: Sawdust

Milking system: Double-12 herringbone parlor

Milk production: 26,800 lbs.

SCC: 90,000

SPC: 1,000

Key factor: Quality people

Name: David Bruning

Farm name: Ledge Hill Farm

Location: Akron

Milk handler: Upstate-Niagara

Number of cows: 44

Housing: Tiestall

Bedding type: Straw

Milking system: Pipeline

Milk production: 73 – 75 lbs/cow

SCC: 80,000 – 100,000

SPC: 2,000 – 2,500

Key factor: Milking my cows myself

Name: The Butler Family

Farm name: Sunny Knoll Farms

Location: Perry

Milk handler: Upstate-Niagara

Number of cows: 1,520

Housing: Freestall

Bedding type: Sawdust

Milking system: Double-24 herringbone

Milk production: 25,100 lbs.

SCC: 100,000 – 180,000

SPC: 2,000 – 10,000

Key factor: Quality people milking. Keeping bedding areas clean & dry

Name: Charles B. Campbell

Farm name: Crest Valley Farm

Location: Nichols

Milk handler: Dairy Marketing Services (DMS)/Crowleys

Number of cows: 60

Housing: Tiestall/tunnel ventilation

Bedding type: Mattress/sawdust

Milking system: Automatic takeoffs

Milk production: 27,000 lbs.

SCC: 146,000

SPC: 2,000

Key factor: Cow comfort, clean environment & good milking practices

Name: Thurlow Cowles Family

Farm name: Cowles Farms

Location: Marietta

Milk handler: Byrne Dairy

Number of cows: 280

Housing: Freestall

Bedding type: Sand

Milking system: Double-12 parallel parlor

Milk production: 22,875 lbs.

SCC: 120,000

SPC: 1,000 – 1,500

Key factor: Consistency + cleanliness = quality

Name: Donald Dimock

Farm name: Dimock Farms LLC

Location: Peru

Milk handler: Agri-Mark Co-op

Number of cows: 270

Housing: Freestall

Bedding type: Sand

Milking system: Double-10 herringbone parlor

Milk production: 25,800 lbs.

SCC: 78,000

SPC: 1,000

Key factor: Clean cows, good equipment & procedures. Caring staff

Name: John & Terry Eichas

Farm name: Eichas Farms

Location: Hilton

Milk handler: Upstate Niagara

Number of cows: 45

Housing: Freestall

Bedding type: Straw

Milking system: Double-8 herringbone parlor

Milk production:17,000 lbs.

SCC: <100,000

SPC: <1,000

Key factor: Good mammary health

Name: Steve & Edward Eiholzer

Farm name: Eiholzer Farms

Location: W. Edmeston

Milk handler: Worchester Creameries

Number of cows: 65

Housing: Tiestall

Bedding type: Shavings & hydrated lime

Milking system: Pipeline

Milk production: 67 lbs./cow

SCC: 38,000

Bacteria count: 3,000

Key factor: Clean, dry beds with hydrated lime & shavings

Name: Norman & Colleen Farney

Location: Lowville

Milk handler: Lowville Dairy Producers

Number of cows: 100

Housing: Freestall

Bedding type: Sand

Milking system: Double-4 parallel parlor

Milk production: 21,400 lbs.

SCC: 150,000

SPC: <5,000

Key factor: A lot of care for the cows, including good bedding

Name:  Edward L. Geier

Farm name: KELGEM Farms

Location: Sherburne

Milk handler: Dairylea

Number of cows: 35

Housing type: Stanchion/tiestall

Bedding: Shavings/hay

Milking system: Milk-in-place pipeline

Milk production: 16,000 lbs.

SCC: 120,000

SPC: 2,000

Key factor: Paying attention when milking & consistency

Name: Randy and Betty Getty

Farm name: Main Drag Holsteins

Location: Hudson Falls

Milk Handler: Stewart’s Processing Corp.

Number of Cows: 100

Housing: Freestall, then tiestall in winter

Bedding: Sand in freestall; shavings/straw in tiestall

Milking system: Swing parlor and pipeline

Milk production: 24,473 lbs.

SCC: 140,000

SPC: 1,000

Key factor: Proper management protocols & attention to details

Name: Terry, Kevin & Brian Getty & Diane Getty Smith

Farm name: Gettyvue Farm LLC

Location: Granville

Milk handler: Stewart’s

Number of cows: 198

Housing: Freestall

Bedding type: Kiln-dried shavings

Milking system: Double-9 herringbone parlor

Milk production: 24,800 lbs.

SCC: 89,000

SPC: 2,000

Key factor: Clean cows, proper milking procedures, high quality teat dip, routine equipment maintenance & rapid cooling. Stewart’s 80-cent quality premium is a nice reward.

Name: Cecelia & Michael Gracey

Farm name: Gracey Stoney Acres

Location: Calcium

Milk handler: Crowley Foods

Number of cows: 100

Housing: Tiestall

Bedding type: Chopped straw

Milking system: Pipeline

Milk production: 21,000

SCC: <150,000

SPC: 2,000 – 4,000

Key factor: Clean, healthy cows & clean equipment. Good mastitis control.

Name: Mark Higby

Farm name: Mark Higby Farms

Location: Constableville

Milk handler: Lowville Producers Dairy Co-op

Number of cows: 105

Housing: Freestall

Bedding type: Wood shavings

Milking system: Parlor

Milk production: 20,810 lbs.

SCC: 115,000

Key factor: Healthy cows = quality milk

Name: Mike Hourigan

Farm name: Michael Hourigan Family Dairy LLC

Location: Syracuse

Milk handler: Byrne Dairy

Number of cows: 1,200

Housing: Freestall

Bedding type: Sand

Milking system: Double-18 parallel parlor

Milk production: 28,000 lbs.

SCC: 60,000

SPC: 1,000

Key factor: Pay close attention to details

Name: Valentin Kuster

Farm name: Kuster Farm

Location: Hudson Falls

Milk handler: Agri-Mark

Number of cows: 120

Housing: Freestall

Bedding type: Sawdust

Milking system: Double-5 parallel parlor

Milk production: 22,500 lbs.

SCC: 100,000 to 120,000

SPC: 1,000

Key factor: Keeping cows clean is one of many factors.

Name: Edward & Leon Lubaczewski

Location: Fort Johnson

Milk handler: DMS

Number of cows: 45

Housing: Stanchion

Bedding type: Hay

Milking system: Bucket

SCC: 114,000 – 120,000

SPC: 2,000

Key factor: Using CMT every milking

Name: Gene & Dian Mealus, retired 2009

Location: Harrisville

Milk handler: Allied Co-op

Number of cows: 20

Housing: Stanchion

Milking system: Pipeline

Key factor: Running a clean, organized operation

Name: Bill & Lew Mowry

Farm name: Mow Acres Farm

Location: LeRoy

Milk handler: Upstate-Niagara

Number of cows: 1,400

Housing: Freestall

Bedding type: Sand

Milking system: Parlor

Milk production: 25,500 lbs.

SCC: 150,000 – 170,000

SPC: <5,000

Key factor: Conscientious employees, healthy cows & consistent milking routine

Name: Gordon, Scott and Travis Offhaus

Farm name: Offhaus Farms Inc.

Location: Batavia

Milk handler: Dairylea

Number of cows: 900

Housing: Freestall

Bedding type: Sawdust

Milking system: Double-20 herringbone parlor

Milk production: 24,300 lbs.

SCC: 150,000 – 180,000

SPC: 2,000 – 3,000

Key factor: Paying attention to details

Name: Carl, Fran and Stephen Putnam

Farm name: Putnam Farms

Location: Cobleskill

Milk handler: Schoharie County Dairy Co-op/ DMS

Number of cows: 61

Housing: Tiestall

Bedding type: Chopped straw and mulch hay

Milking system: 6-unit pipeline

Milk production: 20,335 lbs.

SCC: <100,000

SPC: 1,000

Key factor: Same milkers, since we do the milking ourselves

Name: John & Chuck Richmond

Farm name: Richmond Farms Dairy LLC

Location: North Collins

Milk handler: Upstate-Niagara

Number of cows: 215

Housing: Freestall

Bedding type: Sand

Milking system: Double-10 parlor

Milk production: 27,500 lbs.

SCC: 150,000

SPC: 2,000

Name: Ronald Space II

Farm name: Millbrook Farms LLC

Location: Freeville

Milk handler: Dairylea

Number of cows: 700

Housing: Freestall

Bedding type: Sawdust & recycled shredded paper

Milking system: Double-10 herringbone parlor

SCC: 125,000

SPC: 4,000

Key factor: Consistent cleanliness throughout the dairy

Name: Richard & Jason Tooley

Farm name: Toolite Farm LLC

Location: Granville

Milk handler: Dairylea

Number of cows: 140

Housing: Freestall

Bedding type: Sand

Milking system: Parlor

Milk production: 23,000 lbs.

SCC: 130,000

SPC: 2,000

Key factor: Cleanliness of barns, stalls, cows & milking system

Name: Charles & Shelley Walker

Farm name: Walking R Farm

Location: Geneva

Milk handler: Dairy Farmers of America (DFA)

Number of cows: 40

Housing: Tiestall

Bedding type: Straw, sawdust & mats

Milking system: Pipeline

SCC: 56,000

SPC: 1,000

Key factor: Keep things clean & pay attention to little things

Name: Kerry & Alan Wing

Farm name: Springdale Farm

Location: Pike

Milk handler: DFA

Number of cows: 75

Housing: Tiestall

Bedding type: Straw

Milk production: 19,000 lbs.

SCC: 180,000

SPC: 2,000

Key factor: Clean before prepping

Name: Jared & Randy Yousey

Farm name: You-Dale Farms LLC

Location: Basom

Milk handler: Upstate-Niagara

Number of cows: 240

Housing: Compost pack barn

Bedding type: Sawdust

Milk production: 26,600 lbs.

SCC: 75,000 – 130,000

SPC: 1,000 – 3,000

Key factor: Stripping cows. Using CMT kit & quarter milkers


Conversations: Ask your veterinarian about udder health

Mastitis is the most common and costly disease on dairy farms. Financial losses include lost milk production, treatment costs, discarded milk, reduced quality premiums, labor costs, culled cows and death. Trying to control mastitis is like trying to control the common cold, but a strong management program can keep the number one dairy health issue in check.

Dr. Andy Skidmore is a dairy technical services veterinarian for Intervet/Schering-Plough Animal Health.

By Dr. Andy Skidmore, D.V.M., Ph.D.

The basics of mastitis management can seem like common sense, but often we need a reminder to not be complacent and to look for areas of improvement. As consumers increasingly question how food is produced, mastitis management, udder health and, ultimately, the quality and safety of milk, become larger issues. Challenge yourself to review your mastitis management practices and find ways to improve the quality of the milk you produce.

1) How can I prevent mastitis in my herd?

It is always better to prevent a disease than to treat one, and this is certainly true for mastitis. The milking parlor and the barn are the two primary areas of mastitis prevention. Strict milking procedures and stall and bedding management should be in place and communicated to all employees.

Ask your veterinarian to review your milking procedures and management practices.

2) Is it necessary to treat dry cows?

The dry period and near calving are the times of greatest risk for mastitis, so dry cow treatment is critical to your mastitis prevention program. Use an approved dry cow treatment with broad-spectrum coverage. Following treatment, ensure dry cows have a clean, dry environment, and monitor cows periodically for swollen quarters.

Ask your veterinarian about ways to improve your dry cow mastitis prevention program.

3) How do I diagnose mastitis, particularly subclinical cases?

Early detection increases treatment success, so it’s important to have a comprehensive monitoring program in place. Milkers should be vigilant in watching for clinical signs in the parlor. Subclinical cases are particularly hard to diagnose because there are no visible signs, so it’s important to regularly test individual cows for somatic cell counts.

If your somatic cell counts and/or cases of mastitis increase or are higher than usual, ask your veterinarian to identify areas you may be overlooking to diagnose both clinical and subclinical cases.

4) Should I treat a clinical case if the culture doesn’t grow any bacteria?

Up to one-third of all clinical cases will not grow any bacteria on culture. If bacteria are not present in the udder, then antibiotics won’t help the cow and therefore she should not be treated. The reasons this could happen include: bacteria have either already been eliminated and the gland is still healing, bacteria were never present, something else caused the inflammation or the sample/culture did not represent the true status.

Ask your veterinarian how to manage clinical cases that do not grow bacteria.

5) How does identifying the bacteria help make better treatment decisions?

In the animal health industry we often say, “Know the bug, know the drug.” In treating mastitis, this advice holds true. If possible, culture milk samples to determine if the bacteria is gram positive or negative. Gram negatives, which represent 40% of cases, do not respond well to antibiotic therapy and should not be treated in the mammary gland. Responsible antibiotic use is critical to the image of the dairy industry and the efficiency of animal health programs, so targeted therapy such as this, should be part of your mastitis management protocols. New technologies are being developed to aid producers in mastitis diagnostics.

Work closely with your veterinarian to identify and treat mastitis efficiently and effectively.

6) How do I know that my mastitis treatment is working?

Evaluating your mastitis management program is an important step in the process. Most importantly, watch for visible signs of improvement at milking time, follow label directions of your treatment and be careful not to over-treat your cows. Evaluate changes in somatic cell counts, milk production, discarded milk, recurrence rates, days of withheld milk, days in the sick pen, etc. Keep in mind cows respond differently depending on age of the cow, stage of lactation, season and genetics.

Ask your veterinarian to review and evaluate the effectiveness of your treatment protocols.

FYI

Dr. Andy Skidmore is a dairy technical services veterinarian for Intervet/Schering-Plough Animal Health. He lives in upstate New York, and can be contacted by phone: 716-474-2715 or e-mail: andrew.skidmore@sp.intervet.com


June Dairy Month: Milk continues to be a good buy

URBANA – Consumers have reason to celebrate the approach of June Dairy Month, said Mike Hutjens, University of Illinois Extension dairy specialist.

Not only have dairy products remained a “good buy” for consumers, but the nutritional importance of dairy products in the diet continues to play a foundational role in human health and development.

June Dairy Month originally celebrated the time of the year when surplus milk needed to be sold due to cows producing more milk after receiving pasture in the spring, Hutjens said. During the month of June, consumers will notice more focus on dairy products and dairy product recipes in displays near the dairy case.

“Milk prices have remained constant in most areas with specials on milk as low as $2 to $2.50 a gallon,” Hutjens said. “Milk prices remain below break-even at the dairy farm gate with dairy managers receiving $1.20 to $1.30 a gallon.”

In addition to cost, consumers have many choices when they go to the grocery store today. From method of production to nutritional content, there are many factors to consider when buying dairy products.

“Organic milk is available at $6 to $7 a gallon,” Hutjens said. “Or consumers can purchase ‘green’ milk from dairy farmers using approved FDA technologies to produce milk resulting in a lower carbon footprint.”

Perhaps the most controversial milk in the news is raw milk, or milk that is not pasteurized.

“Consumers should never purchase raw milk due to potential bacteria risks,” Hutjens warned.

The nutritional value of dairy products helps them remain popular today.

“Dairy products contain high-quality protein with all essential amino acids in addition to whey proteins that are important in weight control,” he said. “Milk contains high levels of calcium, potassium, magnesium, phosphorous and added vitamin D, which are critical for human health and bone formation. Dairy products can be particularly important for older consumers.”

Daily U.S. dietary guidelines include two servings of dairy products for children from 1 to 8 years of age, and three dairy servings for children over 9 years and adults. These dietary guidelines served as the foundation for the popular “Three a Day” dairy theme used in radio, television, and other media advertising.

So, what kinds of milk and milk products are most favored by U.S. consumers?

In 2008, the average U.S. consumer consumed 85.3 pounds of reduced or low-fat milk, 50.4 pounds of whole milk, 27.1 pounds of fat-free milk, and 14.2 pounds of flavored milk. In addition, each person consumed 32.5 pounds of cheese, 20.7 pounds of ice cream, and 11.8 pounds of yogurt.

Hutjens added that vanilla ice cream remains the No. 1 flavor at 28.7%, chocolate followed behind at 10.4 percent, and cookies and cream ranked third at 4.4%.

Dairy products that sold well in 2008 include skim milk (up 0.5 percent), low-fat milk (up 5%), and yogurt (up 3.6%). Meanwhile, whole milk dropped 2.7% and cottage cheese dropped 7.7%.

“These trends reflect consumers’ desire for lower caloric products such as yogurt,” Hutjens said. “The advantage of producing a wide variety of dairy products is that it allows consumers to pick their favorite product based on fat content, caloric intake, flavor, taste, cost, and food recipe alternatives.”

Last year, the U.S. dairy industry included 54,942 dairy farm operations with 9.2 million dairy cows, down 1.2 percent from 2008. These cows produced 189.3 billion pounds of milk, down 0.3% as compared to 2008. U.S. dairy cows averaged 20,576 pounds of milk per cow. In comparison, the European Union of 27 countries has 24.2 million dairy cows producing 12,165 pounds of milk per cow.

“The continued improvements in efficiency in the U.S. dairy industry reflect higher milk yield per cow which results in lower-priced milk and dairy products for U.S. consumers,” Hutjens said.

In addition, he said exports of dairy products continue to improve as the world recession eases and demand increases.

Business Management: It‘s never too early to plan for a successful transition

By Susan Harlow

A turbulent dairy economy makes many things difficult for producers, including one of the most important decisions they’ll ever make: transferring the farm land and business to the next generation. And as dairy operations grow larger with greater assets, “it’s harder to transfer them, and you need more money to take over the business,” said George Twohig, a Chilton, Wis., agricultural attorney with Twohig, Rietbrock & Schneider.

Gordon Richardson and his two sons, Scott and Reid, are just part of a large family running a 105-year-old Vermont farm. Figuring out how to pass it along is complicated, Gordon said.

Bringing the next generation into the business often depends on the commitment of parents to transfer the farm at a price the children can afford, while making sure there’s enough money so the farm can retool and modernize for the future, Twohig said.

That’s different today than during the 1970s and 1980s. “With lower-value assets, little inflation and no influence from off-farm investors, you could sell the farm to your children outright at a reasonable price,” Twohig said. But now, land that was $1,000/acre is now many times higher in value.

Land is essential to a farm’s continued success, so producers are finding ways of effecting a transfer besides outright sale. “Today, more parents are bringing their kids in as partners and having them earn equity rather than buying equity,” Twohig said.

Crucial to any successful transfer between generations is good communication. “What makes a farm transfer not work is not the financial aspect,” Twohig said. “It’s the delicate nature of human relationships. Honest communication is important, and that they share values.”

Don’t procrastinate

Farm transfer is often a complicated affair and can take a long time. Bob Parsons, Extension economist with the University of Vermont Extension Service, and Mike Sciabarrasi, Extension professor with University of New Hampshire Extension Service, give workshops on farm estate planning. They emphasize the need for family discussion and communication – before it’s too late. Parsons tells the tale of a farmer who asked for assurance his wife would not sell the farm – as he was being wheeled in for open-heart surgery.

“(Estate planning) is one of the easiest things to put aside that there is – but it’s a very difficult thing to figure out,” said Gordon Richardson, a Hartland, Vt., dairy producer who has attended seminars with his wife, Pat. “One of the most important things is legal advice from people who know, because there are so many legal angles that it makes all the difference in the world.”

Gordon and his brother, James, are partners in the farm with Gordon’s sons, Scott and Reid. A number of family members, including grandchildren, help out.

The older generation is gradually turning the farm over to Scott and Reid by gifting the maximum annual allowance, based on the appraised value of the buildings, equipment and a herd of registered Jerseys.

They have yet to decide what to do with the real estate, which Gordon said is “the biggest problem.” That’s because there are off-farm heirs to consider: James has three daughters; Gordon has a son not involved with the farm.

One possibility is a trust. But Gordon believes the land should be controlled by those who farm, not tied up in a trust.

The number of family members and the farm’s landscape and location complicate the matter. The high, 450-acre hill farm would be almost impossible to dairy on a large scale. Yet, located just a few miles outside the affluent town of Woodstock, the Richardson Family Farm – Vermont’s Green Pastures Award winner last year – would bring a large chunk of money if sold for development. A “high-value, low-productivity farm,” Gordon calls it. “There just isn’t enough to go around that the pie can be doled out in too many pieces.”

The farm has been in the Richardson family for 105 years ago. Like his grandfather and father before him, Gordon is not relying on the farm for his retirement.

“Frugality has always been an important part of farm life,” he said. “I‘m not saying we’re not looking out for ourselves – but we don’t want a home in Florida.”

Communication is a critical component of estate planning.

In family meetings, both older and younger generations should identify and talk over their goals and objectives, Parsons said. They need to be realistic about the income the farm can generate. “If the farm could just barely support one family, how could it now support two?”

For effective family meetings:

• Use a facilitator – someone familiar with the family, such as Extension or agricultural agency staff, or someone from a lending institution.

• Set an agenda and stay on topic.

• Don’t get wrapped up in personal issues.

• Determine the major challenges – don’t try to solve all problems at once.

• Leave all grudges at the door.

Then, as producers consider estate planning, they’ll need to address major issues, including how to fairly accommodate off-farm heirs; potential business structures; and the elder generation’s retirement.

Give some thought to retirement:

• Decide on your vision and goals for retirement. Are they workable?

• Set a timetable for retiring to give the younger generation a roadmap.

• Answer questions: Where will you live? What will you need for health and long-term care? How much money will you need? Where will you get that money? Will you continue as owner and/or work on the farm? Or will you rent or sell farmland?

In today’s economy, securing retirement income can be difficult, Parsons said. The volatile market can mean investments lose value, and low interest rates may limit income. “You should be diversified in investments and expect volatility.”

• What about family relationships and support? Will you live with your children, maybe as part of a farm transfer?

If you are planning to transfer the farm to farming heirs, there are three basic options: sell it, give it or will it.

• Sale. Because of the size of today’s dairy operations, an outright sale is seldom feasible. Selling the farm piecemeal, as the buyer can afford it, is difficult to do with land. Selling in installments can spread income and taxes over several years, but the IRS requires at least a minimal interest rate.

If you want to sell the farm to heirs at a price below market value, consult an advisor first, Sciabarrasi said. If the value is too unrealistic, the IRS will likely consider at least a portion of the “sale” a gift.

• Gift. A person can give farm assets to family members, or anyone else, of up to $13,000 per individual each year. In addition, each person has the lifetime ability to give $1 million away without incurring gift tax.

• Inheritance. The estate pays any estate tax due. There is no estate tax for 2010. But in 2011, the federal estate tax reverts to any estate valued over $1 million, with a maximum rate 55%. The state estate tax rate depends on the state you live in.

Meanwhile, you may want to farm with your children or farm separately as you make the transition. “It’s not just a real estate change, but a change in labor and management responsibility and income,” Sciabarrasi said. “But both are moving the business from a parent to a child. When you do this, you have to remember it’s not just about property. You’re giving the younger generation some experience in management so they can someday run a business themselves.”

Options to consider:

Farming together.

1. Younger generation starts as an employee, gains management experience and some ownership of farm assets.

2. A business structure is formed with the older generation as they share management responsibilities and profits.

3. The older generation retires, leasing the real estate to the younger generation.

Farming separately

1. Younger generation starts as employee, gains some ownership of assets.

2. Younger generation spins off a separate business but shares equipment, land and/or labor with older generation.

3. Younger generation buys or leases original farm assets.

If assets are transferred gradually, it’s important that the first assets to be transferred are those that are more “portable,” such as breeding livestock and machinery, and could go to another business if the original arrangement doesn’t work out.

What’s fair? If farm owners have heirs who aren’t involved in the business, they face the fair vs. equal dilemma: What is equitable may not be fair and equal distribution is seldom ever fair. “The challenge is – you want to treat off-farm heirs equally,” Twohig said. “But if 90% of assets need to go to on-farm heirs, there’s often very little to transfer to off-farm heirs.”

Splitting up a farm, while it might be “fair” to off-farm heirs – will often mean the end of the farm. “If you are going to have multiple farmland owners, It’s essential that the operator of the farm be in control of the land,” Parsons said. This can be solved through a business structure that defines the role of various owners.

Business structures exist today, such as limited liability company (LLC), limited partnerships and, in some state, limited liability partnerships, that can help solve that dilemma, ease farm transfers and address tax issues. The main options are:

• Sole proprietorship

• Partnership

• Corporation. However, it’s never advisable to put real estate in a corporation. If the corporation is dissolved, you could take a big hit in taxes, Sciabarrasi said.

• LLC. An LLC is an entity legally separate from the owners which gives them the tax advantages and flexibility of a partnership. It requires the parties to have an operating agreement, governing what LLC members can do.

In transferring the farm to farming heirs while accommodating off-farm heirs, you can use a combination of business entities to make it work, Sciabarrasi said:

• Set up an LLC with farming parents and children. The LLC owns the inventory, breeding stock and machinery, and leases real estate from parents. The LLC can acquire more assets as needed. The real estate is addressed separately later.

• Or, combine business structures. An LLC or limited partnership that includes all the children and whose members own the real estate. Then, in a separate, farm-operating entity such as an LLC or corporation, the members include only farming children.

“So the farming heirs control the land (members) and off-farm heirs have some ownership (non-managing members of LLC),” said Sciabarrasi. “That way you distinguish between membership and control.” This type of ownership arrangement will allow non-farming members to share some of the farmland appreciation if it is sold, but limits them from having any say in the farm operation.

Another option is a trust, a legal entity that also exists apart from people who control the property. A revocable living trust enables more sophisticated planning and has advantages for farm transfers, Sciabarrasi said. For instance, the trust can control property during the trustmaker’s life and after death. Property in a trust doesn’t go through probate.

Finally, Sciabarrasi has these suggestions for a successful transition:

• Identify your business mission and goals.

• Identify a willing, capable successor.

• Encourage successors to gain experience off the farm.

• Give them an opportunity to learn management responsibilities.

• Identify realistic income from the farm.

• Don’t underestimate capital needs.

• Create a survival kit for your successor – an up-to-date will, property deeds and operating agreements.

• Communicate with family members not in the business.

FYI

• For more information see:

www.agtransitions.umn.edu

www.uvm.edu/farmtransfer/

www.farmtransfernewengland.net/

• Contact Bob Parsons at bob.parsons@uvm.edu or call 802-656-2109

• Contact Mike Sciabarrasi at Mike.Sciabarrasi@unh.edu or call 603-862-3234.


Accounting for profits: Where do we go from here?

By Bob Matlick

As we deal with the effects of the deep recession the world has experienced over the past 20 months, the term deleveraging, being bantered about throughout the financial and business world, comes to mind.  In researching the term deleverage, Investopedia says, “[c]ompanies will often take on excessive amounts of debt to initiate growth. However, using leverage substantially increases the riskiness of the company. If leverage does not further growth as planned, the risk can become too much for the company to bear…”

We are all aware that 2009 was one of the worst years in the dairy industry as far as profitability. The average dairy operation lost $600-$900 per cow for the period ending Dec. 31, 2009, but it appears the losses slowed somewhat in the first quarter of 2010. However, the return to profitability in the industry has not occurred, and it may not be until the 3rd quarter of 2010 before any sustained profitability will occur in the overall dairy industry.

A majority of the dairy producers throughout the United States have utilized debt to fund the aforementioned losses and will attempt to do so until the industry returns to profitability. The debt incurred over the past year and a half was not for growth; rather it was utilized to stay in business and fund losses. While it is impossible to ascertain the amount of debt growth within the industry in the last 24 months, I believe it is safe to assume that is has grown dramatically. Most financial institutions and vendors continued to extend credit/debt to the industry with a clouded crystal ball that indicated “it just had to get better.” The bottom line is that it didn’t get better and we now find an industry that is highly leveraged (excessive debt per cow or income generating unit) and there is a call for quick deleveraging from its financial institutions and creditors. The call for deleveraging most likely stems from the above-referenced definition that stated “the risk (of high leverage) can become too much for the company to bear.” This means that liquidation of some or all assets becomes the only way to manage the high debt levels and reduce debt, or bottom line, exiting the business. It also means that as the debt has grown (to fund losses as opposed to growth), so has the risk of staying in business.

I believe the industry has now reached a point where credit institutions and vendors are demanding clients deleverage to reduce risk. I think they may be asking too much of the industry in an abbreviated time frame. Most conversations I have with lenders center on the question of how quickly can the operation return to “normal” or conforming loan to value ratios.  For example, lenders are pushing for dairies to conform to a 75% loan to cattle value. This leverage has also been exacerbated by the falling cattle values that have created higher loan to value ratios. If a lender requires a deleveraging process at too quick of a pace, the business will fail to meet its deleveraging obligations and make the situation worse.

So, what can a producer do to begin to deleverage and reduce risk?  My first answer would be to communicate. Speak openly and truthfully with your creditors including your bank(s). Secondly, it is important to have detailed cash flows for the upcoming 6 to 12 months.  I am encouraging producers to build semi-monthly cash flow scenarios where cash shortfalls and windfalls can be determined.  This is a time consuming and tedious task. However, once the process is developed and implemented, it gives the producer a clear picture of what time frame the cash will be generated and utilized. The cash flow scenarios are somewhat different from a projection in that they account for the payment of scheduled debt, payment on past due trade debt, and account for cattle, heifer, and weather related variations. With cash flow information, an owner can then interact and discuss with creditors their deleveraging plan of action and begin to reduce risk. I also encourage producers to track their actual performance to the projected performance and change course when needed. This exercise enables the producer to understand what the variances are and make the appropriate adjustments going forward.

Utilizing projected cash flows and keeping them updated on a consistent basis also allows for margin management and the use of forward contracting or floor price protection. With the use of margin management tools, cash flow projections become more predictable and begins to give certainty to the deleveraging process.

FYI

Bob Matlick, CPA, is a partner at Frazer Frost, LLP, in Visalia, Calif. Contact him by e-mail at: bmatlick@frazrfrost.com or call, 559-732-7140.


background_banner