The author is the dairy development manager for Vita Plus of Madison, Wis. He is a member of the board of directors with Citizens State Bank of Loyal, Wis.

Many people may have heard about the four or five D’s when it comes to lending and farming. Each can tear a business apart. Some of the D’s are unavoidable. Others are a matter of choice. Just being aware of these business possibilities can help in the planning and decision-making of a dairy farm’s future. Based on my experience, I have added a sixth D that can have a huge affect on a dairy.

1. Death: It is a sad day when a farm member and/or family member passes away. This is a stressful time, especially when a key person dies unexpectedly. The shear emotion of the event is hard enough. A vacancy caused by death will reshuffle both the physical and management responsibilities.

If wills were complete and hard questions asked in the past regarding an empty position, the sting may be a little less. In many cases, death will upset the milk cart for a period of time.

2. Disease: This D refers to devastating illnesses. The words of cancer with statements that limit the life expectancy will bring about a forced change. There may be time to realign job descriptions. Emotions will run high. As hard as it is, realignments may have time to be completed. Make sure “Power of Attorney” documents are double-checked as part of the plan with this D.

3. Disability: Caring for the milking herd, other livestock, and cropping requires a lot of physical activity. When a key person is unable to fulfill their daily tasks, physically or mentally, someone has to step in. This may lead to bringing on additional help or others picking up the slack. There is only so much time in a day. Stress levels must be monitored or burnout can occur on those doing the work.

Disability insurance can supplement the income for an individual, family, or farm. Replacing the abilities of a person may be more of a challenge.

4. Divorce: This D leads to a parting of ways and, many times, assets. If the farm is in a good equity position, reasonable settlements can be made. Premarital agreements, trusts, and gifting can limit the financial disturbance. If assets are limited, however, the only way to split the assets is to turn them into cash. After debts and taxes are satisfied, the cash leftovers will be the results of another dairy farm changing ownership.

5. Disenchantment: Sometimes discouragement of expectations can lead to the abandonment of interest. This can occur early in a career or after the volatility of market swings become too difficult to manage.

6. Disregard of financial documents: Day-to-day caring for livestock and crops requires a lot of hard work. A person has to be strong physically and mentally. In modern dairy production, the mental strength must be exercised regularly. All financial information must be accurate and updated regularly.

A thorough understanding of documents and key ratios can no longer be left to the accountant and lender. Balance sheets must be done annually or more often as needed. Historic income statements need to be examined for future improvements of current operations. Complete annual budgets before the current year ends and then make quarterly analyses against those projections. A list of key ratios can be discussed with lenders and accountants. Goals have to be written down and monitored.

In the past, four or five D’s have always been considered by lenders when making loans. Some are avoidable, and some are just a fact of life, but adding the sixth D should get the attention of every dairy producer.

The sixth D is a choice. It will lead to a path of success or lack of success.

This article appears on page 111 of the February 25, 2017 issue of Hoard's Dairyman.
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