Yet, despite all that it was a good year for dairy. And that brought healing to farm balance sheets that were negatively impacted from 2016 to 2018.
After a couple of profitable years for many dairy operations, 2021 affords the opportunity for continued success. Many dairy producers have made changes in recent years to how they manage their business. Those changes include:
Focusing on producing high components
Continuous improvement in milk quality
Managing heifer inventories
Breeding a portion of the herd to beef
Managing expenses intensively
Making strategic investments
Many became more astute at creating budgets and projections, and setting operational and financial targets. While several benefitted from a high level of government support in 2020, it is difficult to imagine a repeat of that in the normal course of industry cycles. It is important to continue to manage all aspects of business to ensure success in 2021.
With an improved financial position and liquidity many operations will likely also look for opportunities to reinvest into their operation. If that is the case, develop a plan for capital expenditures for 2021 and share it with all stakeholders in the operation. Open communication with on-farm team members, advisors, and farm lender are essential to successfully implementing a plan for 2021.
In the last couple of years the net effect of milk prices has been positive. However large inventories of dairy products, increased productivity and a growing national cow herd can potentially pressure prices over the next 12 months. Feed costs also need to be top of mind, as there have already been some big jumps in the corn and soybean markets. Make sure to assess the degree to which financial performance is at risk. Continue to build on the last two years’ results to further strengthen the operation.
No one can predict when the government will intervene in an industry. If government intervention was detrimental to the 2020 strategy, maintain discipline and direction in 2021. And here’s to another strong year in the dairy industry.
