Dollars & Sense Downside Planning

December 5, 2008 06:00 PM
NOTE: Extended comments highlighted in blue.

This year had me thinking about risk management, which for me ranges from contracting milk and feedstuffs to chopping haylage instead of trying to bale dry hay, to being diligent in my vaccination program and to keeping the debt load down.

I always tried to contract 20% to 30% of my milk. From time to time, I would contract cottonseed, corn and soybean meal. With the volatility of commodity and milk prices, I have started, more and more, to pay cash price for commodities and contract milk much less. My hope is that milk prices will keep ahead of feed prices. Besides, dairy producers are too smart to produce milk at a loss, right? Cooperatives Working Together also gives me a feeling that the milk supply can be controlled to some degree.

Our routine weekly herd checks have kept us up to date on most of our vaccinations. A biweekly routine of drying cows and moving cows to prefresh also helps keep vaccinations on schedule. Moving calves at one day old to the calf raisers (after receiving two feedings of colostrum and having been vaccinated for Clostridium C+D, and A) has really helped our calf health. We used to have calves picked up once a week, but the stress of moving the calves at two to six days old was too much for them. Daily delivery has really helped.

There aren't many things you can do to control the risk of weather. Putting up haylage instead of dry hay is one way I try to stay ahead of the weather. In Northwest Iowa, it is hard to put up good dry hay because of rain and humidity. This summer was a bad one for trying to get haylage dry enough to chop. Only during second cutting were we able to get the hay up without the risk of rain. I am afraid that the quality of this year's haylage may have been compromised due to rain.

I know you can't always carry a low debt load, especially through expansions. But retire debt as fast as you can so when times do get tough, you have a line of credit to fall back on. Before expanding or borrowing money on equipment, allow yourself room in your credit line for unexpected costs. If there is no room for unexpected expenses, rethink the expansion or equipment purchase.

Thanks for allowing me to write these articles this year. The articles have forced me to think and sort through things I may otherwise take for granted.

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