Future of dairying is a big unknown
My past two columns have centered on the changes in dairy agriculture that have led to bigger and fewer dairy farms every year for decades, something that is very bothersome to many people who are or were farmers or who respect and love small family farms.
But, time marches on as does technology and how people look at operating a dairy farm or any other business. The advent of ever-bigger dairy herds is not a plot to eliminate small farms (as some small farmers and some non-farmers think). There are many reasons for farms and other businesses to expand, the following letter in response to last week’s column well summarizes why a small ag business made the decision to grow.
“Hi John, I just finished reading your article in the (Aug. 21, 2020) Wisconsin State Farmer newspaper. This is one of the best articles that I have read in regard to the structural changes made in the Wisconsin dairy industry over the past 40 years. I especially liked, and have now thought about, the comments made by the California dairy producer when you talked with him back in the early 1970s. He was right, as were you. You replied that this is just the way we all do things back in the Midwest, while he was introducing you to a different way of looking at the business of milk protein production, but at a larger scale. I think this applies to many types of business.
I think a lot of people in the general public would be more understanding of the larger-sized dairies if they realized the scope and scale of the activities and inputs dairy producers of all size are responsible for. Investing in and utilizing technology that is designed to support increased production capacity and efficiency, is done in all industries, not just on dairy farms or other agribusiness entities. There is no guarantee given to those that choose to make these investments and to expand their operations, but it does allow the business owners to step back a bit, and perhaps obtain a better view and perspective of their business enterprise, which then can provide opportunities for continued operations improvement, and hopefully a stronger bottom line.
In my case here at Tier 1 Nutritionals, I could have kept this business running with its worn-down blending equipment and undersized warehouse for a few more years until I retired, but this business is more than just me and my livelihood. I have 18 employees that make their living working here, tens of ingredient and service providers to which Tier 1 is a significant customer, and many customers, large and small, that rely on us to supply the feed ingredients that we produce here to support their feed manufacturing and/or production animal agriculture activities throughout the U.S.. In the case of some of our larger customers, they rely on little Tier 1 Nutritionals to supply their global feed ingredient customers. These are responsibilities that I take seriously.
With the many regulatory changes and challenges pushing animal feed ingredient and complete feed production closer and closer to human food standards, along with the continued consolidation of the animal agriculture industry, I could either have treaded water and let the current take me/us as it may for the next few years until I retired, or I could, and did, invest in a life jacket and a set of high performance swim fins, and start swimming and doing what I can to control my/our future. We now have a contract/technical feed ingredient blending enterprise that will be able to serve the production animal agriculture industry for many years into the future – surely beyond my career and lifetime.
It is at times very overwhelming for me to think about the debt I took on, but my commitment to our people, those that we serve and that serve us, and to supporting the future of animal-based meat and milk protein production is the “drug” I take to allow me to sleep at night. The big advantage that I have over dairy producers is that I still control the price I am paid for the services (product) that I provide. I sure wish we could figure-out a better system to manage the farm gate milk pricing received."
Best regards – Tim Jacobson, President & CEO, Tier 1 Nutritionals, Inc., Madison, WI
Big not always best
Jacobson’s note pretty much applies to every business – although not all expand into long-term success. Some grow beyond their capabilities and fail: Associated Milk Producers (AMPI) at one time was the dominant milk marketing cooperative in the country with over 40,000 members. In the late 90’s, its three divisions went their own ways with the north central unit still prospering in New Ulm, Minn., the southern division merged with DFA and the mid-states region becoming a part of Morning Glory that was later absorbed by Foremost Farms USA. Then just recently the bankruptcies of Dean’s and Bordens, both big and supposedly the best, was a shocker.
Just over 7,000
The question on the minds of many of today’s small dairy farm families centers on their future. As of August 1 there were 7,049 dairy farms in Wisconsin – of these there are 290 CAFO (larger than about 750 cows) dairies according to the Wisconsin DNR. The constant loss of dairy farm numbers is coming from the small farm segment and will no doubt continue.
Who will own?
My concern is not about family ownership – most all mega dairies remain family-owned, but who will be the next owner 30, 40, 50 years from now? What if there are no sons or daughters in the family? If there are other family members, will they want to dairy? Can they afford to buy a $5 million operation? Are they skilled enough to run a large dairy enterprise?
There will surely be some no’s to the questions, then what? Will an investment fund, seed company, an A.I. firm, a lender, a farm equipment company see dairying as a good investment and buy 49% and keep the family as majority owners? Or maybe 51% or more and assume ownership? That would indeed be the decades-long much feared corporate ownership.
Good questions but no answers. Think about it!
John F. Oncken is owner of Oncken Communications, He can be reached at 608-837-7406 or e-mail him at jfodairy2@gmailcom