Routes of succession routes differ for every dairy operation
Within the family or outside of it, two dairy farm enterprises have found ways in recent years to bring in new partners with careful planning and professional guidance.
How that was done and how it is faring was the topic for a concluding panel presentation at the 'What's Your Farm's Future?' farm transition and estate planning workshop sponsored by the Extension Service. It attracted 83 attendees from counties in east central Wisconsin.
The presenters were Sandie Fitzgerald and her daughter Julie Maurer of Soaring Eagle Dairy at rural Newton in Manitowoc County and Deborah Reinhart of Gold Star Dairy Farms between Chilton and New Holstein in Calumet County.
Soaring Eagle history
Starting in 1980, Fitzgerald and her husband Jim established a dairy farm with 60 cows after previously farming with two brothers and their father for 24 years. The big changes, begun in the 1990s, eventually led to inclusion of the couple's three daughters and son into the limited liability partnership, which today has a dairy cow herd of 1,100 head and a cropping enterprise on more than 1,800 acres.
The Fitzgeralds and daughter Kelly Goehring (husband Brian) created the LLP in 1997 as new facilities were constructed and cow numbers were increased. After 11 years, Maurer left what described as a secure and probable lifetime position at the Kohler Company to join the dairy operation in 2003. She specializes in employee management and permitting.
Stacy Klotz (husband Jeremy) joined her sister Kelly later to become the herd manager team. More recently, the partners made some allowances, necessary arrangements, and sacrifices in order to bring their son and brother Nicholas into the LLP.
With the land having been removed from the LLP, there was little remaining equity in the new entity which started with the senior Fitzgeralds and Kelly as partners, Maurer said. The original partners were buying cows and new machinery before the other siblings became partners.
At the moment, Jim Fitzgerald is officially the chief executive officer but he gives the younger generation a major role in decisions. Maurer pointed out that everyone in the family was offered an opportunity, that birth order does not matter, and that 'there is no 'I' or 'mine' in the business because it's ours.'
'We count on the siblings getting along and respecting one another,' Sandie Fitzgerald said. Maurer agreed that the partners 'cannot plan for everything' and reported that they're doing well in covering for one another as necessary.
Sandie Fitzgerald continues as the chief bookkeeper and a tractor driver, frequently for cutting alfalfa hay. When the senior Fitzgeralds were away for three weeks in 2015, the farm continued to operate smoothly with one exception, she pointed out.
'Too many strips were left in the hayfields when we were gone,' Fitzgerald said. This shows neighbors and passersby who cut or didn't cut the hay, Maurer chuckled.
Gold Star Dairy history
At Gold Star Dairy, where Reinhart and her husband David Geiser represent the third generation of his family, keeping the dairy in business has required bringing in outside partners because the couple's three sons were not interested in remaining on the farm. The new limited liability company has 300 dairy cows. As a business, it pays rent on the land and buildings.
After learning of their sons' intentions during a meeting in 2006, Reinhart and Geiser had the farm for sale for about six years without finding any seriously interested buyer(s). Their succession arrangement, which officially began on January 1, 2015, brought in 16-year employee Manuel Valenzuela and Simon Regan, who had worked on the farm for two years while advancing to be the milking parlor manager, as the four are partners in the LLC that was created for ownership of the cows. Reinhart described the cows as 'the profit center' on the farm.
Geiser and Reinhart had already placed the farm's 300 owned acres and buildings into a trust. As the senior partners for the new LLC, 'we have most of the assets and most of the liability,' Reinhart said.
'We're financing internally, not having the new partners borrow,' Reinhart disclosed. To accomplish that, the new partners are making monthly payments and all members of the partnership are paid according to their job functions.
Paths to success
Both Maurer and Reinhart credited numerous other parties for getting their dairy farms to the point that they are today.
At the top of the list are attorney George Twohig and other members of his law office at Chilton. Twohig, who was the featured presenter at an earlier session during the workshop here, received particular credit, along with an accountant, from Maurer for arranging to get her brother Nicholas into the partnership.
According to Reinhart, Lakeshore Technical College agriculture instructor and private dairy consultant Greg Booher was a key player because he had Geiser, Valenzuela, and Regan in one or more of his classes.
The first contact with Regan occurred through the Lakeshore Area Network Dairyland, which is overseen by Extension Service offices in east central counties to create a linkage between farmers planning to exit and potential beginning farmers. There were three referrals through LAND, she said.
Reinhart also credited the input by Calumet County Extension Service agriculture agent Eric Ronk, who moderated the panel program, and Wisconsin Center for Dairy Profitability outreach specialist Joy Kirkpatrick. There needs to be someone in a neutral position who asks 'the hard questions — the dead fish questions,' she emphasized.
'Turn to such resources when you're ready to act,' Maurer advised. 'They'll help you find ways.
'The transition process need not be complex but it is always evolving. And you're never too young to have an estate plan.'
Views on the horizon
'We're in the honeymoon phase yet' on the new arrangement and 'expansion is not on the table,' Reinhart said. Valenzuela is pushing to add to cow numbers, but that idea needs to balanced with economic realities such as the costs for engineering and new buildings.
To the question about expansion, Maurer noted that the major construction project in 1997 was designed to allow for expansion, but at the moment 'there is no talk of more expansion' at Soaring Eagle. The senior Fitzgeralds have nine grandchildren.
As much as possible, the new Gold Star Dairy partners are being treated as family members within the context of some existing challenges, Reinhart said. 'We still don't have an organizational chart yet. We have people in charge of things.'
Even without a formalized structure, Reinhart was glad to report that 'the cows are doing better than ever,' that equipment bills are down, and that there is no problem with calf mortality. 'But we're all working long days and not talking enough among ourselves,' she observed.
At the moment, quarterly meetings of the team are held compared to the monthly sessions with consultants as the transition was being planned.
Reinhart is also pleased that the new partners are looking to her husband, whom she describes as 'the brain trust' of the operation, with confidence and for his leadership. But she also pointed out that he needs to step away in part from putting in too many 12 to 18 hours per day from late spring to autumn overseeing about 1,000 crop acres.
'We're not sure how it's going to turn out,' Reinhart acknowledged. She noted that she is no longer feeding calves after doing so for 40 years but is concerned about how her current role in handling payroll, insurance, and other business items will be filled in the years ahead. She suggested that it might have to contracted to an accounting firm.
Of greater concern and uncertainty is the fate of the land and buildings that the family trust owns, Reinhart said.
As she and her husband ease out of the enterprise toward retirement, there needs to be a plan for disposal or ownership of the land. That task needs to be approached 'by walking before running' and with an eye on avoiding risks, she said.
To a question about what effects the lowest milk prices in five years will have, Maurer said Soaring Eagle Dairy is not overly focused on numbers or balance sheets.
'Our motives and goals are to be a successful business,' she said. 'That includes managing in tough times.'
Reinhart had a similar response, noting that there have been 'good times and bad times' in the past 40 years. Rather than getting shook up by milk prices, what's most important is milk production per cow, feed costs and having well-trained employees.
'We focus on what we can control,' Reinhart concluded. 'We want to keep the dairy alive.'