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Fiscal Fitness

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Financial management experts, lenders and accountants share ways for dairy producers to improve money and credit management. Look for help on budgets, taxes, loans, financial performance and even bankruptcy.

Do You Really Want to Milk Cows?

Dec 28, 2012

To thrive in this new, evolving dairy industry, multiple skills must be mastered. Sometimes skills must be hired to successfully manage the overall business.

p7 Fiscally Fit Bob MatlickBy Bob Matlick, Frazer LLP

There are certain moments in one’s life that will never be forgotten. For me, one such moment  occurred during a client meeting some years ago that was attended by a father and son as partners in a dairy. During the meeting, which centered on the financial struggles of the dairy, I asked the adult son if he really wanted to be in the dairy business.

Tears began to stream from his face and he looked at his father and uttered those dreaded words: "I don’t want to do this anymore." At first, his father was taken aback (the dairy tradition had been in the family for several generations). Then he answered, "Well, then we need to sell this thing." A sale was completed to a neighbor during the next several months and the son entered a new career, while the father enjoyed retirement.

As the dairy industry continues to become more volatile and risky, many find the stress and uncertainty not to their liking. Terms like ‘put’, ‘risk reversal’, ‘EBITA’, and ‘feed-efficiency’ were not part of the dairy vocabulary 10 to 15 years ago. Couple all of this with Mother Nature and it can be a wild ride.

To thrive in this new, evolving dairy industry, a multiple of skills must be mastered. Sometimes the skills must be hired in an effort to successfully manage the overall business. So is it really defeat when a younger generation steps up and says they want to deploy their assets and skills in a different, more stable manner? 

Some would argue yes; others would argue the opposite. I don’t know if there is a right or wrong answer. But I would argue that the question needs to be asked and given heavy consideration. By asking the question early enough, one can evaluate and plan for tax issues, estate planning, and alternative asset structures. For a father to assume that he will pass the dairy operation onto the next generation is perhaps an over-reaching expectation in this new/evolving industry. Perhaps a son has a strong interest in being a farmer of permanent plantings, a calf raiser, or a fire fighter.

Over my 30-plus years of being involved in the dairy industry, I have had dairy clients that had sons/daughters go into fields that included farming, politics, law and assorted others. Bottom line, I would encourage the conversation to be had at all dairies where multiple generations exist. Some people love cows; some people do not. It is not defeat in my opinion – it is opportunity being evaluated.

Robert A. Matlick is a partner in the accounting firm of Frazer LLP. Based in Visalia, Calif., Matlick is a management advisory specialist and provides business consulting services to the agriculture industry, with an emphasis in the Western U.S. dairy industry. Contact him at bmatlick@frazerllp.com or 559-732-4135 Ext. 107.

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