October 20, 2016
Question: I’ve got $55,000 in the bank, a 5-year-old pickup truck, a John Deere 4040 tractor, a manure spreader, 30 heifers that are breeding age and no debt. I keep the heifers at my parents’ farm. They sold their cows eight years ago, and the buildings are not suitable for milking in. Feed is cheap. Is this a good time to get started dairying? How many cows do I need to milk?
READY TO FARM: A young man has 30 breeding-age dairy heifers, and he wants to know if this is a good time to start milking cows.
Hodorff: First, your $55,000 should be invested in a fund that returns 3% to 5%. I also assume you have other employment. I feel you should breed your 30 heifers and sell them as springers; then take your profits and repopulate your yards with younger heifers and sell them as springers. I feel this is a risky time to start dairying. Milk processors and co-ops are reluctant to add milk to an already oversupplied market. My suggestion would be to find an existing dairy and work out a way to partner with them to start dairying.
Miller: Congratulations on building up some assets. These can provide a great start if you want to get into the dairy business. Now is the time to complete a business plan. Work with a qualified dairy business consultant to develop a plan. Start by compiling a balance sheet, and then work on completing a budgeted income statement for the startup year, the second year and a steady state.
In addition, you will need to complete a pro forma balance sheet with the expected assets, debts and equity for your business at startup and after each of the three years in the income statement forecast. The consultant will assist in completing a cash-flow budget and a source and use schedule for acquiring and funding the rest of the assets. Your consultant can assist in identifying how many cows you can handle from an equity standpoint as well as from a management standpoint. Renting or buying a facility will also become part of the business plan. You have a lot of work to do on paper before determining if you can get into the dairy business. It will be time well spent should you decide to pursue this as a career. Good luck with your plans.
Wantoch: I’m not sure if there is a good time to start a new business venture. I do know that those entrepreneurs who take the time to plan a startup or business expansion are statistically shown to be more successful in their endeavors. I would encourage you to work on a business plan with a local Extension agent, consultant or banker. Create a cow flow chart that reviews how your dairy herd will expand with the freshening of heifers and additional purchases that will need to be made.
Be sure to discuss your plans with your parents and identify how many cattle can be housed at this facility before you need to seek other housing options. You could consider raising heifers for a while until you have grown your herd and need to locate a milking facility. Review several options before you make your decision. Best of luck!
Agrivision panel: Doug Hodorff, Fond du Lac County dairy farmer; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, Dunn County Extension agriculture agent specializing in economic development. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919, or email [email protected].
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