The benefits of pasture-based dairying are enticing, drawing traditional dairy producers to consider entering this niche. Although a traditional dairy cannot be transformed into a pastoral dairy overnight, there are certain management practices that will facilitate the transition process. From small family farms to investor operations, the best pastoral dairies achieve success through careful planning. Learn from experienced graziers When working with new and existing grazing dairies, it becomes obvious some are more successful than others. The difference is often found in being open to new ideas and actively seeking new information.

In 1921, cooperatives and cheese factories in Sheboygan County, Wisconsin, and surrounding areas created the Farmers Call Board. Weekly dealers would attend the meeting and bid on cheese. Dealers’ bids for cheese were written on a blackboard. The highest bid would get the sale and often that price set the price for all of the cheese offered. The creators of the Farmers Call Board argued it as a necessary counterpoint to the Wisconsin Cheese Exchange (WCE), formerly the Plymouth Central Call Board of Trade. The arguments were that the prices of the WCE represented collusive pricing between dealers, reflected a thin market and were an undue influence on the price of cheese and, therefore, milk.

As much as I’ve always enjoyed reading, my short attention span makes it impossibly difficult to finish really long books like Adam Smith’s The Wealth of Nations. And chances are you’ve never made it all the way through the 1,208 pages either. But if you ever took a basic economics course in school, you’re probably familiar with the economic term from Smith’s timeless writings called “the Invisible Hand.” Now, I’m definitely not an economist. But if you don’t mind, humor me as I attempt to give my simple understanding of how the Invisible Hand works. Essentially, it represents the way human nature affects how the economy functions ... whether it’s humankind’s self-interest, fear, competitiveness, greed, uncertainty or even common sense, the Invisible Hand is our basic humanness at work.

I have been listening to all the discussions about the need for dairy producers to “market for a margin.” This approach to risk management was born out of the pain of 2009 and the desire to find some way to lock in a reasonable margin in the midst of volatile commodity markets. While I understand the approach and why it has become a rallying cry, I believe that it sells producers short in the opportunity department. I believe our dairy producers are better than that. Or at least they deserve to hear the argument for how they could be better than that. I’m here to suggest that, in order to achieve continuing success under today’s financial pressures, a necessary mindset shift is in order: stop thinking about “marketing for a margin” and start thinking about “maximizing opportunity.”

The cattle market, including dairy culls, is expected to see continued strength in 2012, with the potential for double-digit gains again this year – which is good news for dairy operators. The dairy industry will continue to see strong prices for its culled cows through 2012, with more upside potential than in 2011. This rise in prices has been driven by severe weather in Texas, meat supplies lagging global income growth, a depreciation of the U.S. dollar, which encouraged beef exports and discouraged imports, and expanded export opportunities. This secondary income stream offers some reprieve to dairymen, as margins for milk have again tightened.

Planning for the year ahead with cash flow projections is a powerful business tool when done correctly. It is management’s blueprint on how to operate the business in the coming year based on what is known today. It is an opportunity to plan for improvements on operating efficiencies and methods due to new technology, new knowledge and the impact of different price and cost. Furthermore, with more dairy producers using price risk strategies such as forward contracting or pricing, it is even more important to not guess at your breakeven milk price. Guessing a dollar too low on your breakeven price and then locking in that price is a good way to invite a cash flow disaster.

Estate tax planning has never been an art of certainty, but the last two years have brought about a new era of uncertainty. Due to congressional indecisiveness, estate tax planners have been unable to give clear direction to their clients. In light of all the uncertainty, some significant new opportunities are now available for those willing to engage in the process of estate planning.