The author is a regional business manager with Vita Plus.

Long-term growth in dairy operations is the lifeblood of the industry. A farm’s growth can allow for more cash flow and profitability, help the business stay ahead of rising costs, give space for new generations to enter the business, and make it possible to adopt new technologies to capture efficiencies and become more sustainable. Of course, expansion is always predicated on having a market to continue to sell the milk produced.

Obviously, one way to expand is to grow on a present or home site. This has been common and successful over the years, usually through long-term business plans put into action.

In recent years, it’s become more common to see dairies expand to facilities on separate sites. This trend is driven by several factors, including constraint on the original dairy’s footprint, efficiency losses when a site becomes too big, or simply a good opportunity to partner with or purchase another dairy.

Benefits for both

Building a brand-new dairy — with all its modern qualities — is one way to establish a multisite operation. However, the difficulty in finding a site and getting permits, the high cost of turn-key construction, the lack of cow availability to populate a new site, and the challenge of marketing the new milk has made this option less feasible.

The other way to grow into multiple sites is to assume ownership or operation of an existing dairy. This trend is growing as numerous dairies are presently at a crossroads where they can’t or do not want to grow. Those owners are looking for an exit plan, and transitioning the intact operation to another farm is attractive. This approach can offer numerous advantages to all parties involved.

For the expanding farm, the benefits include fast expansion since the facilities, cows, manure system, feed system, and other infrastructure are already there. The income stream starts immediately upon takeover, and a milk market is generally in place. Additionally, concentrated animal feeding operation (CAFO) and other permits are already obtained.

With this option, the cost of any remodeling or retrofitting will likely be substantially less than new construction. Existing staff know the operation and may be part of the new team.

If the home herd is crowded, managers can improve cow comfort and performance by sending cows to the new location. The farm may also gain efficiencies by designating one of the sites as a milking cow-only site with no calving, reproduction work, or udder treatment taking place there, thus maximizing cows and production per worker. A new location may also help the farm gain land base for all operations and boost forage production.

Finally, the business may have more time to grow equity to ultimately expand to a completely new site and make existing facilities useful in the future (for example, using those facilities for heifer or nonlactating animal housing).

For the exiting farm, moving ownership to a new group offers a chance to pass a viable operation to someone else and keep a farm’s legacy as a dairy operation. The farm may be able to transfer assets in stages for tax purposes. Owners have the opportunity to adjust their lifestyles, and the team can become part of a new culture.

Asking the right questions

I recently had the opportunity to observe a farm business assume the operation of another existing dairy. Here are some of the key considerations that stood out as critical to a successful transition.

First, ask if the management team on the expanding farm is ready to take this on. The transition process has a lot of moving parts. Having someone who is passionate about the venture and dedicated to overseeing the details is vital. Time to explore the opportunity and gather pertinent information to determine viability is substantial.

Next, consider what the proximity of the new site is. When the operations are physically close, it’s a real advantage to be engaged in-person. Assessment of the current facilities, understanding the nuances of the culture, and observing cow comfort and parlor operation are not likely accomplished in one-and-done visits to construct a quality agreement between the parties. It will likely take many interactions to grasp this information to move forward accurately. The closer the operations are — and the easier it is for teams to meet in-person — the better this process works.

When not physically on-site, how are checklists, processes, or technologies used to delegate tasks, track progress, and follow up on assigned duties? This transition process requires competence and trust from everyone involved, but adequate follow-up systems and standard protocols serve well.

Also, know what the goals of each party are. Is everyone on the expanding dairy ready to take on this extra work? Is everyone on the exiting dairy ready to make this transition? If the two teams do not start on the same page, it is nearly impossible to get them on the same page once they begin down a path. Avoid an us-versus-them mentality by having clear goals at the beginning of this process. Using these goals as a guide in the exploration, negotiation, and agreement phases is paramount for success.

Here are some other questions farm owners may need to answer as they embark on this transition:

• Does the new site trigger the need for or changes to a CAFO permit or other permits? Work with authorities to ensure compliance.
• If cows or young stock remain at the exiting dairy, how will they be priced?
• If home cows are part of the population of the new site, which cows will go there and how will they be managed?
• How will young stock be managed with the extra animals from the new site? Will modifications need to be made to existing wet calf and grower facilities?
• If feed inventories on the exiting farm will be utilized, how will they be fairly priced for each party?
• How are repairs handled? How is remodeling and refurbishing paid for? This will likely differ if the facilities are purchased versus rented.
• How will manure be managed and valued if it’s applied to a land base that isn’t needed to make forage? Again, this will likely differ depending on whether the new site is purchased or rented.
• Are herd and feed management software systems compatible and seamless? If not, how will data be integrated into a system so it can be a reliable tool in making business and herd decisions as a whole?
• If the exiting dairy’s team is rehired and part of the new culture, how will the new roles be defined and how will everyone be held accountable?
• How will communication take place between employees and leaders at each facility? Having good information communicated on a timely basis is also vital for multisite success and having expectations set at the onset works well. This could include new technology or intentional, systematic meetings — whatever works for all.

These are just some of the initial considerations that are required for merging dairy businesses. Developing successful multisite dairies require dealing with many other details and decisions. The road map to get to a successful end can have many miles and some detours, and it isn’t necessarily an easy journey. However, when done properly, the outcome can meet the goals and objectives of all parties and be rewarding for everyone involved.

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