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Five Ways to Position Your Dairy for the Future

Date: 
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Compeer Financial
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Articles
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Dairy
Home > Education & Events > February 2016 > Five Ways to Position Your Dairy for the Future
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Over the past few years, many dairy operations have found their “war chests” or “rainy day” funds being depleted. Combine this with variability in weather, volatility in the corn market, and less than stellar projections for milk prices in the coming month; the stage is set for a new cycle of managing in turbulent times. Dairy producers need to consider and execute on management decisions with a focus of sustaining production and limiting losses to be better positioned for when markets improve.

Quality feed and inventory:

With feed cost being the number one driver, dairy producers must strive to put up high quality forages to limit purchased feed needs. Making sure equipment and your crew is ready to go for harvest, taking account of your crop yields, packing the feed tightly, use of inoculant, and storing feed with a goal of limiting spoilage and ultimately shrink will ensure adequate and high quality feed for your cows.

Work with your nutritionist:

Not find the cheapest ration, but one that maximizes the value of all feed supplements. If guidelines call for 1lb. of a particular supplement, but because of cost you look to reduce it to .5lb., make certain you are getting the same net effect from the .5lb as you were with 1lb. Sometimes lowered feeding rates will lower their positive value faster than their cost. Work with your nutritionist to evaluate alternative feeds and maximizing feed efficiency.

Maximizing labor:

Labor costs will not get any cheaper, but getting the most value from our employees is critical. Ensure employees have the necessary tools and are in functioning order to help them perform their jobs effectively. Time tasks and continue to evaluate employee performance for increased efficiency.

Anticipate cash needs:

Evaluate your average monthly cash needs and add an additional 10% to 15% for margin. Be sure to include and highlight key “big bill” type payments that might include fertilizer, manure hauling, land rents, leases, and others that could quickly comprise cash on hand.

As always, if you anticipate cash short-falls and an inability to keep pace with expenses or even debt payments, talk with your lender as soon as possible to evaluate your situation and devise a plan to improve your cash flow with interest only payments, restructuring debt, increasing operating line availability, or other tactics to meet your operational needs.
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