What is your number one challenge in the next five years? Is it commodity prices, trade wars or low yields? Or is it how you manage your operation, the resources available to you and your use of technology?

Like milk prices, no one can accurately predict the direction of interest rates in the future. That being said, I firmly believe farm loan interest rates will rise (and possibly sooner rather than later), and producers should have a strategy to hedge interest rate risk.

Dairy producers tend to focus on the production side of the business more than financial metrics. And when they do take a look at the financial picture, they tend to consider it in the aggregate. But there’s a better way of getting the full measure of your dairy’s finances: enterprise accounting.

As I write this article, January 2020 Class III futures are $18.15 per hundredweight (cwt), a $1.65 increase since my semester of teaching started in September and well above the annual averages for the last five years (Figure 1).

Even with milk prices trending up and 2020 looking to be even better, there is lots of uncertainty still in the marketplace. Continuing weather issues, trade and tariff issues, plus forage quality and availability all weigh heavy on producers’ minds as they struggle to finish the 2019 season.

For decades, our accounting firm has produced quarterly dairy farm cost studies for our dairy clients and others to use for benchmarking and profitability improvement.

The year has certainly flown by. After a drawn-out spring gave way to summer, fall is now here. We hope extended warm temperatures allow corn to continue to mature, allowing dairy producers to build adequate inventories of good-quality feed for the year ahead.

Preserving the relationship with your banker is important during good times, and it is essential to your survival in times like these.

Why do banks require financial statements? Financial statements provide the bank reassurance that the operation is in compliance with covenants as set forth in their agreements.