RISK MANAGEMENT
Glenn A. Shirk
Extension Dairy Agent
Lancaster County
In the business of farming, there
is no shortage of risks and oppor
tunities. When we think of risk
management, all too often our fo
cus is primarily on market vola
tility and the use of futures, op
tions, and contracts, but risk man
agement is much broader than
that.
In addition to market volatility,
there are the risks of adverse
weather conditions, diseases, in
sect damage, health problems with
people and animals, labor short
ages, adverse public reactions, and
more.
The important question is
how can we protect ourselves
from some of these risks? Let’s
discuss some possibilities.
One of the best risk manage
ment strategies is overall good
management. It generates more
profit and it is less expensive than
some of the risk management
tools being sold.
The other challenge is to capi
talize on risks and turn them into
opportunities. For example, we
say we enjoy price stability, but if
feed prices never fluctuated we
would have a fewer opportunities
to pick up a good buy when prices
drop or to make a good sale when
prices escalate. • Boost the immune status of
Managing Feed Inventories thi; herd vrith good vaccination
Feed is a necessity on a dairy and colostrum feeding programs,
farm and one of the largest ex- • Adopt strict biosecurity mca
pe nsc items, especially in times of surcs to reduce the spread of dis
shortages. To help avoid shortfalls eases. Maintain a sanitary cn
and high prices, consider some of vironment for cattle. Don’t let
the following options; calves come in contact with man
•Ma inti an sufficient feed in- urc from older cattle. Maintain
ventories to carry you through clean, dry rest areas for cows and
PREPARE NOW for the FALL HARVEST SEASON
Model 98C
Gathering-chain
Unloader
Increases
ija BIO - wl " g ..
handles even more silage.
FOUR IMPELLER BLADES ADJUST for close tolerance
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STAINLESS STEEL blower is available.
Proven cutter-and-claw gathering chain provides high
volume delivery in frozen and hard packed silage.
FULLY AUTOMATED UNLOADING because the 98C is
self propelled on the silage surface without ca
support. No winch watching!
DEPTH-OF-CUT CONTROL ensures high
volume delivery.
AUTOMATIC SELF-LEVELING for uniform
silage removal, saving trips up the silo.
ALL PARTS GO UP THE CHUTE to install
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FOR 12 TO 30 FT. silos.
Owners of Patz 61, 66, 98,98 A and 988 po'w ci«w'» logo are
unloaders: This bigger blower will fit your unloader. ,r * d saiew *nc. P * tz
periods of shortages, feeding off
some of the old inventory and re
plenishing it to help keep it fresh.
■ If you expect upcoming short
ages, act early to lock in sufficient
quantities of good quality feed be
fore prices escalate, using lines of
credit and other available means,
such as contracts, futures, and op
tions to take advantage of good
buys.
• Reduce herd size to more clos
ly match feed inventories. Cull ex
cess heifers and poorer cows to
stretch feed supplies and to make
more feed available for the more
profitable cows. Avoid the temp
tation to shortchange cows, espe
cially the good cows, of the feed
they need. An alternative to cull-
ing cows is to contract them out
for someone else to feed until you
have enough feed to take them
back.
• Avoid the temptation of over
grazing pastures, it can really set
pasture productivity back for a
long time. A better alternative is to
offer cattle supplemental feeds.
• Start early to use forage ex
tenders and alternative feeds to
help stretch feed supplies and
minimize the need for making ma
jor ration adjustments.
Herd Health And Injuries
Losses from disease outbreaks,
toxicilics, and injuries can be de
vastating.
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WE CUSTOM DESIGN SYSTEMS FOR YOU
/ An optional independent
lectric motor rotates the
oader and distributor while filling
NEW Chain guide wheel mounted to track silo wall closely.
NEW Big 9-foot drive ring flanged to the inside for added
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Ideal replacement unloader for your suspension:
tripod
I • 3-cable hexapod
!W Distributor to deflect feed when filling for
(proved packing. For larger silos, a motorized kicker
;an be added
lEW The Polar Claw is ideal for frozen and hard
tacked silage. The cutters-and-claws chain
jgressively tears silage loose and quickly moves it
the blower. Fast (634 ft/min.) chain speed for high
ime delivery. ——«
Daft 9
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protect them from wet, sloppy
areas. Insist that visitors and ser
vice people sanitize their footwear
before entering your dairy facili
ties, and provide a wash station to
help them do this. Keep your herd
records in a “safe” area so service
people don't have to walk through
feeding areas to get to them. Use
single-service disposable needles
or sanitize needles before reusing
them. Maintain a closed herd and
minimize the movement of cattle
onto and off the farm. Dispose of
dead animals in a quick and sani
tary manner. Protect cows from
streams which can carry organ
isms and pollutants from farms,
businesses and other sources up
stream. Control potential disease
carrying vectors such as flies,
stray dogs, birds, etc.
• Avoid residues and injuries by
protecting cows from exposure to
toxins and poisons. Store chemi
cals and drugs properly and com
ply with label instructions.
• Reduce the risk- of mycotox
ins. Adopt good ensiling and feed
ing practices, such as ensiling at
proper moistures and chop length,
rapid filling and good packing into
an air-tight storage, proper feed
out rates, good bunk management,
good disease and insect control of
crops in the field, proper use of
preservatives to enhance good fer
mentation. screening feeds for
mycotoxini, etc.
• Prevent metabolic problems
such as laminitis, DAs, ketosis,
etc. with proper nutrition, good
feeding practices, and proper care
of transition cows prior to and af
ter calving.
• Reduce injuries by providing
cattle with a safe, comfortable en
vironment which includes good
footing, sole-friendly surfaces,
proper stall design, removing po
tential hazards from cattle areas,
gentle handling, etc.
Adequate Labor
There’s no shortage of work on
a dairy term! Cows need to be fed
and milked several times a day
every day. A lot of these tasks re
quire experience something
that can be hard to find in many
farm workers.
What happens when everyone
The New Model 2100
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SILO
UNLOADER
NEW Blower for easy servicing
Replaceable lower blower band
th extra-thick, 1/4-inch steel,
-swinging, adjustable, cupped
paddies with stainless
-‘•steel pins,
ible-groove pulley with taper
lub.
iient Locations
is carrying a full load when sud
denly one of the farm workers
falls victim to an unexpected
tragedy or suddenly walks off the
job without notice? Where’s the
experienced backup labor force?
Labor is one of the more crucial
things to manage on a dairy farm
both family labor and hired la
bor. Labor makes things happen,
and prevents things from happen
ing.
If you were a hired worker,
would you enjoy working for you?
Are you and your workers con
veying the message that your farm
is a good place to work, and do
you have job applicants seeking
you out for employment oppor
tunities?
If you aren’t good with people
and can’t manage them well and
don’t enjoy managing them, you
are at big risk if you expand your
business to a size that depends
heavily upon hired help, unless
you are able to hire a good labor
manager and give them the free
dom to manage.
Public Image
What kind of image do you and
your business convey to die pub
lic, and are you at peace with your
neighbors and the local power
structure? Is your business seen as
an asset to the community? Good
public relations can be a tremend
ous business asset
Managing Your Finances
Chances are, a lot of money
passes through your accounts in a
year’s time. The challenge is to
hang on to enough of it to support
your family, to lay some aside to
create an emergency fund, and to
have some to invest in your future.
To accomplish this you need to
generate enough income and have
a good handle on operating and
overhead expenses.
How much profit do you need
or want per year? Let’s say you
need $40,000 for family living,
and let’s assume you ship
2,000,000 pounds (20,000
hundredweight) of milk per year.
That means you need $2 profit per
hundredweight of milk shipped. If
milk prices drop $1 per hundred
weight, farm profits would drop
RD 2 Box 271
East Earl, PA 17519
(717) 354-0584
Lancaster Farming, Saturday, July 24, 1999-A2S
from $40,000 down to $20,000.
Ouch! Can you reduce your stand
ard of living to that level? If not,
do you have a reserve fund you
can draw from temporarily until
you have the opportunity to re
plenish the funds?
Now, let’s say your goal is to
clear $3 profit per hundredweight
so you have $60,000 profit per
year. That leaves you with some
extra monies to “lay aside for a
rainy day.” That same $1 drop in
milk prices reduces farm profits
from $60,000 down to $40,000,
which is still enough to live on.
So, to reduce your financial
risks, one of your goals should be
to maintain a comfortable profit
margin per hundredweight of milk
shipped. If profit margins are too
tight, which can happen when you
are heavily indebted, even a slight
drop in milk prices can wipe you
out
To maintain this 2 million
pounds of milk output (and cur
rent income level), the farm needs
to ship 5,479 pounds of milk per
day (2,000,000 pounds per 365
days). In a 100-cow herd, an aver
age of about IS cows will be dry
and 85 will be in milk. Those 85
milkers will need to maintain an
average production of 65 pounds
of milk per cow per day (5,479
pounds per 85 cows).
If this were your farm, are you
meeting your profit margin per
hundredweight, pounds of milk
shipped per farm, and pounds of
milk shipped per cow per day? Do
you know? If you’re not meeting
these goals, do you know why? Is
it because of a shortage of in
come? Are operating and over
head costs per hundredweight of
milk out of control? If so, which
ones need to be improved? Do you
know?
Good records can help you
track performance against the
goals you have set for yourself.
They can help you track costs and
itemize cost per hundredweight of
milk shipped, as well as determin
ing which farm enterprises are
profitable and which ones are not
Contracts, Options,
Futures, And Insurance
Contracts, options, futures and
insurance are good risk manage
ment tools, but they can never re
place all of the good management
strategies diseased previously.
(Turn to Pag* A 27)
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