A Difficult Year for Dairy

A Difficult Year for Dairy. I’m Greg Martin with today’s Line On Agriculture.

It’s been a difficult year for dairy producers. In fact, Vita Plus Dairy Development Manager Gary Sipiorski says it’s been the most difficult year for producers. That’s why he says it’s vital to keep the lines of communication open with your lender. He says it’s also extremely important to get balance sheets, cash flows, and projections for next year together. And when doing so - Sipiorski says it’s just as important to be realistic and accurate.

SIPIORSKI: I think you’ll find the lenders certainly don’t want land, they don’t want your cattle, they don’t want your machinery. They want to work with you; they want you to be successful. They understand what’s going on and they’ve seen the kind of prices we have and all of their customers are facing the exact same thing. But they want to make sure that you know what’s going on and that you’re being realistic about it. So when you do that balance sheet at the end of this month make sure you are using realistic numbers and the same with the cash flows. Make sure those are accurate numbers and projections for this next year. Right now we’re talking that $15, $15 and a half cents as far as the price of milk so base your projections on that and then make an appointment, don’t wait, get to see them now.

With all of the volatility in the market - Sipiorski says producers need to take a look at some type of a margin.

SIPIORSKI: In other words, get as many of your costs locked in as possible. Look at forward contracting of milk whether it be puts or calls or whatever. And I know a lot of people got burnt on this in the last 10 years and some people walked away – actually left money on the table and said I’ll never do that again. But maybe it’s time to take another look and the producers the last one who needs to pull the trigger, but maybe not all the milk. Maybe 20%, maybe 40%. If you can get 2 or 3 bucks you can never go broke by making a profit.

Sipiorski says forward contracting has actually helped some weather the storm.

SIPIORSKI: I’ve seen a number of producers that did make some decisions 18 months ago and they got through this last period without having as much struggle as others but it’s only been a small percentage. Probably less than 5% of producers did much but I know a lot of producers will be taking a hard look at that now.

According to Sipiorski - brokers are a good way to go - but he says producers must work with one that understands their business. He also advises talking with them often to look at margins available. 

That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information.