By Steve Bodart, principal business consultant, Compeer Financial 

Just a few short months ago, 2020 started with bountiful opportunities for the dairy industry, a time for farmers to think about rebuilding working capital and to focus on writing the next chapter in each dairy business.  

Those glimmers were darkened quickly as markets disappeared virtually overnight and the dairy industry, along with the rest of the world, entered unchartered waters.  

While the industry continues to navigate the unknowns of today, it is important to point our focus to tomorrow, next quarter and beyond. How are you rethinking the future of your farm business? 

For some, preparing early, through the consistent use of milk marketing and/or Dairy Revenue Protection (DRP), helped to soften the financial impact of the past 60 days. For others, having a solid understanding of their financial position and an abundance of cash reserves aided in the initial navigation of the market downturn.  

As you begin to chart your course into the future, how do you plan to control your destiny? There is no question that the effective utilization of risk management tools will be more important than ever as we move forward. Establishing a holistic plan for your farm that protects against volatility is critical. Understanding the combination of robust tools available and knowing how they fit into your operational plan both today and into the future is key. 

When milk prices rebound, risk management cannot be an afterthought or something that gets put on the shelf and forgotten. Working with your trusted advisers, you can evaluate correct mix of ongoing use of forward contracts, futures contracts, options and DRP for your business. The market has provided opportunities for contracts to be put into place in the past couple of weeks that would provide the leveling of volatility in the fourth quarter of 2020. Your marketing and risk management plan cannot simply be a onetime event. Just like your business, it needs to be constantly monitored, updated, talked about and managed.   

The consistent use of risk management is just one of the major opportunities for many dairies as they look toward the future. Understanding your business’ financial limitations is another area of focus.  There are many models within the dairy industry that are and can be successful. One model that is rarely successful is one that is not updated and one that doesn’t adapt and evolve.  

We have all heard and read Albert Einstein’s definition of insanity — doing the same thing over and over again and expecting a different result. If your dairy business has been operating with multiple years of losses and there is no meaningful correction taking place, there needs to be a realization that drastic change must occur. It is never easy, but the earlier the realization is made, the more options you have. Don’t ever be afraid or hesitate to reach out to your trusted advisers or key people in your network to talk through options and ideas for your business. In those situations, you still can control your destiny versus letting the world decide for you.   

Through all that 2019 and now 2020 has thrown at you as a dairy farmer, if you remember nothing else, just remember to be kind to yourself. Know that no one is perfect and it is not about comparing yourself or your business to anyone else. Regardless of the position you were in going into the COVID-19 pandemic, you have the opportunity to position yourself and your business differently for the future, whatever your vision of the future may be.