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Thanks to tight margins on commodities like milk, corn and soybeans, producers are searching for returns wherever they can find them. For some, that means exploring value-added opportunities outside their core operations.
Milk prices were strong at the end of 2019, and 2020 looked like it was going to be smooth sailing. But COVID-19 changed the equation as exports declined, the dollar strengthened and – most crucially – the foodservice channel collapsed. Amid such demand destruction, prices only had one way to go – down.
If you compare operating a dairy farm to driving a truck, ask yourself where your eyes are focused when you’re behind the wheel. Are you looking ahead, scanning for information both near and distant? Or are you looking in the rearview mirror? For that matter, are you doing all you can to make sure your vehicle is in optimal condition?
Robotic milking systems are not for every operation. As we’ve written about previously, some of the original assumptions the industry had about the types of labor savings dairy robots would bring haven’t panned out. And for many operators, the investment is simply too steep.
By now, the potential benefits of robotic milking systems are clear. Less obvious are the financial impacts. That leads to an important question: Should you dive headfirst into a fully automated facility, or is it better to invest incrementally?
Whether it’s a piece of property or a tractor, once you’ve decided to make an investment in your business, the question then turns to the source of capital to finance that investment. Do you invest your cash? If so, how much?
It’s safe to assume that most dairy farmers prefer to focus on the day-to-day management of their operations rather than their financial records. But, unglamorous as it is, maintaining detailed financial reports is critical for making sound business decisions and for managing your operation’s strategy in the near and long term.
