I recently received an e-mail from a reader of one of my previous blogs, expressing his concern that he wasn’t quite sure that he could get his business where he wanted to take it in the future. After describing the situation with his current lender and the various cash flow challenges he was having, he asked me if I thought there was any possibility for him to move forward.
In one of my previous blogs, I had referred to comments from Viktor Frankl in his book Man’s Search for Meaning, where he stated that his survival at Auschwitz, the vilest of Nazi concentration camps, depended upon the realization that his old life was over. His new life and future would be vastly different.
In my last blog, I talked about knowing your costs of milk production on a per cwt basis. While some may be thinking that knowing this number is great fodder for your local coffee shop conversations, there is truly a lot more benefit to knowing this number. If you know your cost per cwt, you will be positioned to complete a number of tasks. . .
Recently, I was reading a book entitled Your 5 Day Weekend and discovered the following quote, which was part of an analysis that the authors Nik Halik and Garrett B. Gunderson were relating to their readers about the dangers of the historical mantra of putting in our 40-hour work week and then retiring, after which we would get to live on about 40% of the income that we had previously received each week when we were working. I’m not here to judge the merits or challenges of doing this, but it got me thinking about another “drug” that we sometimes get trapped by when we are in business.
Wow! This has been a difficult start to our new year. Cash flowing has been difficult with milk in the neighborhood of $14-15/cwt. Given the rising cost of so many inputs and the recent difficulty of acquiring the financing you need, what can you do? Most banks still seem to understand this, but there is, at best, the possibility of delays on loan renewals because even their patience with the dairy industry has been wearing thin. One of the items I am most concerned about, in the entire scenario of finance and the world economy, revolves around the seeming presence of paralysis – that is, the inability to make a decision.
Wow! If you watch the headlines in the dairy industry, you’ll note that there are a tremendous number of changes going on. Exports are up in some markets. Others are down. Block cheese prices are up, but barrels are down. The trade balance is changing, and our recent government shutdown is impacting some reports we receive. However, while all of this is true and likely of interest to you, there is another factor that you might just want to look at – interest rates. They represent an area that has not received a lot of attention lately, simply because they have been so low since 2008’s financial crisis.
As I promised in my last blog, I said I’d offer some key examples of producers who had positively turned the corner, following 2009’s disastrous results. In all of these examples, they were ready for an upturn in milk prices, in terms of what those higher prices could add to their business. However, they were also producers whose herds had Pregnancy Rates above 20%, Heat Detection Rates over 60%, and Milk Flows well above their breakeven levels at normal milk prices.
Back in 2010, I recall writing an article that asked the very same question I listed in the title of this blog: Will You Be Ready? Ready for what, you might be asking, and my answer would be ready for the higher levels of profitability that await us in the next several years.
2018 is now over. You either made money, or you didn’t… So what’s next for you and your business?
As you probably already know, the new Dairy Revenue Protection Program was introduced in early November. Is this the answer we’ve all been looking for? I don’t see it as the whole answer to our industry challenges. However, it does represent another tool to use in setting minimum milk prices. Like any other existing tool, it can only benefit you if you learn how to use it and then, most importantly, take appropriate action to move forward.
