Making informed decisions is a key business component for any farm. This is true more than ever in the tumultuous world of the COVID-19 pandemic.
“Now is not the time for a mistake,” said Roger Murray, executive vice president of Farm Credit East, on the May 20 episode of Hoard’s Dairyman DairyLivestream. “Make educated decisions by talking with your whole farm team.”
Dairy farm finance decisions were the focus of this week’s broadcast. Murray was joined by Sam Miller, managing director for agricultural banking at BMO Harris Bank, and Cornell University agricultural economist Chris Wolf to sort through the various federal aid and loan programs available to dairy farmers as well as strategies to maintain financial health during uncertain market times.
Talk with your people
In times of stress, we can feel pressured to act quickly for the idea of minimizing loss, but we should still remember to consider each option thoroughly. Every panelist emphasized that communication among your employees and with consultants cannot be compromised.
As lenders, Miller and Murray have had many meetings with their customers about grant and loan applications, risk management tools, and farm opportunities to improve cash flow. They encouraged DairyLivestream attendees to have similar conversations with their creditors.
Before making changes, be sure to get input from all stakeholders. This means your employees and customers, Murray pointed out. Miller added suppliers to that list, too.
Murray advised engaging the whole farm team to build the operation’s budget, especially the person responsible for paying the bills. Re-evaluate that budget every 30 days and change if the need arises.
“Have a dashboard of metrics you keep up with,” Miller suggested. When evaluating those measures, be sure to keep communication channels open to make sure everyone is on the same page.
Moving the plan forward
What might those conversations with your team consist of? Miller and Murray described a few ways their customers are being innovative and flexible to improve a tough financial environment.
- Cut back on excess feed production and reduce the number of extra heifers raised.
- Buy excess fuel while prices are low.
- Utilize direct contracting.
- Dive deeper into your cost of production.
- Explore additional markets — is there a niche or other product you can sell for additional income? Think hay, sweet corn, and so forth.
- Purchase put options.
- Keep an eye on risk management tools now while futures are high.
With the right preparation, a useful plan can be developed to mitigate some of the current fluctuations. “Meet with your advisers to make plans A, B, C, and D,” Murray said.
An ongoing series of events
The May 27 DairyLivestream will feature “Candid comments from the nation’s capital” with special guests Michael Dykes, CEO of the International Dairy Foods Association, and Jim Mulhern, CEO of the National Milk Producers Federation.
As always, the panel of experts will discuss over 30 minutes of audience questions. If you haven’t joined a DairyLivestream broadcast yet, register here. Registering once registers you for all future broadcasts.