Lending a helping hand to young farmers looking to start dairying
This is the first in a two-part series "Farming into the Future" that explores the opportunities for farmers to be successful in this industry despite the economic challenges.
Navigating the ups and downs of the dairy industry is challenging enough for seasoned farmers. But what about the next generation eager to begin the journey?
Gary Sipiorski, Dairy Development Manager at VitaPlus, and retired lender and farm management consultant, Bob Panzer, offer a road map filled with straight forward insights on how to get there.
Sipiorski who recently led a seminar on the very topic at World Dairy Expo, said many people may be scratching their heads, wondering why anyone would want to get into the business of dairy farming, especially with the dairy economy being in the doldrums for the past three years.
"Despite that, I get questions from young people all the time. They want to know how to get started and where to begin," Sipiorski said.
The starting point is whether or not they like cows.
"If you're going to be in this business you have to enjoy doing this and working with them because guess how many days a year we have to take care of them?" he said.
Sipiorski says its important for perspective dairy farmers to get a firm knowledge base beyond high school under their belts, whether its through a technical college, short course or four-year university.
"And remember there's a lot of successful dairy producers out there with a ton of information. Don't be afraid to ask questions and find out what's going on and pick up some new ideas," Sipiorski said.
A successful journey needs a good plan in order for its travelers to reach their destination. Sipiorski says having a written plan that charts out a person's goals and concrete strategies to accomplish them is critical. Where do you want to be in five years? he asked the young people in attendance.
"And be honest about what your strengths and weaknesses are. If you prefer machinery then deal with machinery, get involved in that. If you're going to be in the dairy business, you've got to like cows," he said.
Sipiorski says those looking to find success in the dairy business need to embrace four tenants that support that goal — likening it to a four-legged stool. Those include taking good care of the cattle, growing or buying high quality feed, understanding the financials and working well with others.
"Find a good dairy producer out there and I will guarantee you they know all about these legs because if you take one away you will find someone who isn't quite as successful as they could be," he said.
Years ago many farms could support one family by milking 50 cows. Today that number is around 75-100. Those farmers looking to expand their operations may soon find themselves managing employees to help with the workload.
"As a lender, I've sat down and the first question I've asked is 'do you enjoy working with other people?'" he said. "Successful farms are those who take care of their employees."
Siprioski recommends young farmers start out slow and modestly, spending their money where it really matters.
"Dairy farming is a capital intense business with farmers investing $10,000-$25,000 per cow...that's the kind of investment that's out there," he said.
Sipiorski advises beginners to start with the most important asset first, and that's the cows.
"A cow generates $4,000 in gross income, that's where you start. Then you rent a facility and slowly begin phasing things in according to your business plan," he said. "And be patient. It could take up to 10 years before you own all the cattle and start buying hard assets like machinery and buildings. The last thing you ought to purchase as a young farmer starting out is land."
Have a plan
Panzer says USDA's Farm Service Agency has at least seven loan programs that can be of assistance to beginning farmers with rates as low as 1.5 percent interest.
"I've personally worked with young/beginning farmers to get down payment loans. But they need to show proof that they have a business plan and that it will work," he said.
Sipiorski says farmers need to do their homework by putting together a realistic business plan each year that includes a balance sheet and cash flow plan that includes accurate, realistic numbers.
"Don't put some numbers down that are out in left field, like expecting $25/cwt for milk next year...or only going to have a 5 percent cull rate for the herd. That ain't going to happen. How about, can you cash flow at $16/cwt?" he said. "Don't do it for the lender, do it for you. And make sure it's realistic because surprises happen."
Panzer says that parents can help their children succeed in farming by training them to work and think. Some families may require their children to gain off-farm experience before returning to the farm.
"This off-farm experience encourages learning new ideas, building 401K accounts, and allows young folks to learn there are many times when you need to take orders and learn to how to work with others," Panzer said. "Off-farm employment offers the opportunity to learn there are many ways to get the job done and get good results."
Finding a mentor
Both Panzer and Sipiorski encourage young, beginning farmers to seek out a mentor. That mentor may be a parent, neighbor, member of a peer group, UW Extension or a dairy organization like PDPW or Dairy Business Association.
"A good mentor is someone who understands the dairy business and can sit down on a regular basis and invites you to follow them and ask questions about the operation," Sipiorski said. "Find like-minded farmers and share information and compare operations and management practices to find out how they're doing and what works for them."
Sipiorski says the Department of Agriculture, Trade and Consumer Protection may also be able to help connect young, beginning farmers with those looking to exit farming.
A good mentor may be as close as your lender, veterinarian, nutritionist or accountant.
"Follow them around and see what they're doing — ask questions," he said. "And be sure to talk to a milk processor before you start buying that herd of cattle."
Panzer said that poor economic times may offer great opportunities for young farmers to enter into a business.
"Cattle prices are one example. Some good to great cows sold for $600/head in the past year. That's about one-third of what they sold for a few years back," Panzer said. "Buying right can allow for success as start up costs are reduced greatly. Timing is everything, and being prepared for this is a challenge for existing and new operations."
While some may think the sun is setting on the dairy industry, Sipriorski feels differently.
"There are people out there who want to do a good job in this industry, taking care of cattle and being successful," he said. "I prefer to think of it as the sun rising."