Low Milk Prices
Challenge: Wisconsin dairy worried about losing too much equity from forecasted low milk prices.
How We Helped: We had in-depth discussions with this client to learn their goals and establish objectives. This client already believed that price risk management was not an option, but a necessity to protect and improve the equity position of their farm. We worked with them to establish a marketing program for both milk and feed during 2017. Following this conservative marketing program utilizing a combination of futures, options, and forward contracting established an average Class III price of $17.50.
Value to Producer: Following this plan resulted in a gain of $1.25 per cwt (net after fees) over the average Class III price for the year. Protecting one million pounds per month resulted in a milk income gain of around $12,500 per month and a total of $150,000 for the year.
Challenge: Large California dairy seeking input on growth and profitability strategies.
How We Helped: Genomic technology was introduced as a potential high return investment. Our team brought in resources including technology review, education, financial return, best practices, and personnel training for proper implementation.
Value to Producer: The owner made the informed decision to begin full-scale genomic testing on all cows and heifers. Results from the first batch of 100 animals led to identification of extremely high genetic merit individuals with breeding right contracts signed. The income from those first contracts returned 10:1 profits. The dairy continues to benefit by retaining the highest value animals while breeding the lower value animals to beef breeds.
Too much turnover
Challenge: A 2,500 cow Midwest dairy with the problem of high turnover in their first-time managers (mostly promoted from within). Within 6 months or a year these people either weren’t working out, or the new manager asked to return to their old position because they didn’t like managing their past coworkers.
How We Helped: We started by working with the owner of the dairy to define the management roles in their company and clarify the expectations of each role. This information was used to create simple job descriptions for each management role. Those allowed us to define the skills the new manager would need to be successful, and to develop tools to help them learn the new skills. We also helped the dairy implement a program where each new manager was paired with a mentor to help them transition into the role. Also, the old “annual review” process was eliminated and replaced with an “immediate feedback” process. Each manager was asked to look for opportunities every day to give feedback on what they saw as their team members did their job.
Value to Producer: The owner soon noticed that people being promoted truly understood what managing people was about, and were more likely to be successful in their new role. They also saw that all employees were more engaged because of the ongoing effort to "catch people doing things right" and reinforcing those behaviors with quick feedback sessions.
These changes led to: less frustration for the owner and managers; a great amount of time saved moving people in and out of manager roles; an overall increase in "happiness" on the dairy.
Do we expand?
Challenge: A small Minnesota dairy considering their future. Do they expand or stay the same size? If they expand, how big should they/can they go?
How We Helped: We began by discussing objectives: What did they hope to accomplish? Why are they considering expansion? What are their attitudes towards risk? What did they hope to improve? We then moved to calculating their current profitability, cash flow, and equity positions. Using our best projections of future milk prices and production levels, feed costs, and costs of capital improvements we projected multiple growth and timeline scenarios. We also looked critically at potential impacts on owner equity.
Value to Producer: The owners decided to remain at the same size as all potential scenarios put their equity at unacceptable risk. It was clear that the way forward was to re-evaluate existing practices, products, and vendors with the focus on per cow profitability. They protected a life time's worth of equity.
Challenge: A large dairy faced community opposition throughout their expansion project.
How We Helped: It’s important for every business to tell their story and for every business to have a brand that reinforces their beliefs, their values and their pride. We began by taking professional photography and video of the dairy showcasing their animal care and sustainable farming practices. Using these, we created community outreach materials including a quarterly newsletter, website, YouTube channel and Facebook page. We worked with them to set up speaking engagements, farm tours with influencers, media stories and a high school scholarship program. Their story reached community members and the agricultural community. Two years later, we organized a press conference at the farm regarding their permit renewal which gathered 100 allied industry, neighbors and area farmers to show their support.
Value to Producer: When searched online, positive stories are ranked first on Google. Community support grew. Their permit was renewed. Sharing their story allowed the dairy to focus on growing milk production, managing regulations and planning for the future.