Farm liquidity has become a greater issue in recent years because of the increased volatility of earnings and cash flow. While no one knows what the future holds for sure, there are a few things we do know: 2014 was a great year for most dairies, and 2015 is shaping up to be a down year. We know good times are unlikely to continue forever uninterrupted.

The dairy industry has seen much change in just the past few years. Extend the timeline out further and it has seen tremendous change in terms of productivity, technology and even financials. The Northeast Dairy Farm Summary (DFS) is an excellent source of actual data from which we can make observations over the last 33 years. While the farms included generally have above-average results for the overall industry given the sophistication level of their management reporting, some continuing trends can be drawn, particularly between the most and least profitable of the group.

Price volatility is an opportunity. Well-managed dairies are seeing long-term benefits from the current market volatility. While price volatility may also be a threat requiring increased risk management focus, those that are able to manage the higher risk and cash flow challenges successfully are experiencing better margins overall. Most farms look at large milk price swings between years as creating difficulties and promoting a stronger emphasis on financial management rather than production. Higher volatility, which we have seen in milk price, input costs and most other aspects of our economy, increases risk and is rewarded in the marketplace with increased profits.