Remember when you were considered forward thinking if you could verbalize your 5-year plan in 5 minutes or less? At a milk board meeting? Well, those days are long gone. Today, dairy strategists are urging passionate dairy business owners to plan using two-time frames at once.  First.  Set up a short-term plan to deal with actionable goals to be completed in three years or less.  Second.  Keep your eye on the long-term plan by knowing how you fit into a 50-year dairy cycle.

Don’t Be Backward About Looking Forward 50 Years

A colleague recently said to me, “If you don’t have a plan for where you are going, you shouldn’t be surprised if you don’t get there!”  Without strategic planning, a modern dairy farm manager is left with two options—reaction or randomness.  Reaction is rarely a path to success and is usually expensive.  Randomness, or considering everything and moving in all directions hoping something will stick, is time-consuming and resource wasting. Of course, the best case scenario is to have access to someone with vision, experience and dairy knowledge that could look ahead and, with supported reasoning, provide us with a glimpse into the future of dairying.

Jack Britt, PhD, Professor and Associate Dean Emeritus from North Carolina State University, Raleigh, NC, USA is exactly such a person.   His recent publications in the Journal of Dairy Science take the long-term view of 50 years, which from his starting point, refers to 2066 (Journal of Dairy Science Britt et al, 2018). One of the notable forecasts refers to the number of herds and their size. “My projections along with those from other dairy specialists, indicate the number of cows and herds in the U.S. will decline sharply by 2066. The U.S. Census projects a population of 410 million people by 2066.  If milk consumption is similar to today’s per capita or per person consumption, we will need around 5 million cows to produce the milk, depending on actual yield per cow.  At 3,500 cows per herd, that means that we could produce the country’s milk with 1,300 to 1,900 herds, depending on the actual production level per cow.” Nineteen hundred herds.  Thirty-five hundred cows per herd. Picture that!

Is Strategic Planning A Waste Of Time? Or A Money Maker?

Having read Dr Britt’s forecast on herd numbers and cow production numbers, you could decide to dismiss it as not relevant to your situation.  However, the clearer the picture we have of the future, the more likely it will be that we can make decisions now that will move us in that direction. To determine if this is possible means taking a second look and considering the changes in the dairy industry in the future as foreseen by the nutritionists, geneticists, veterinarians, reproduction specialists and dairy farmers who joined with Britt in considering the longer view.  

“Dairy farmers in 2066 will meet the world’s needs for essential nutrients by adopting technologies and practices that provide improved cow health and longevity, profitable dairy farms, and sustainable agriculture, “says Jack Britt.

Furthermore, Britte et al. forecasts “that larger dairy farms will continue to make greater use of automation to reduce costs. Improvements in genetic selection will lead to dairy cattle lines that are healthier, produce milk more efficiently, and are more disease and heat-resistant.”

Is Your Planning Strategic Or Standing Still?

Strategic planning, especially long-term strategic planning, is absolutely necessary in a fast-changing dairy industry. There are many records showing that the root cause of many dairy disasters can be attributed to pursuing short-term goals ahead of long-term ones. Unfortunately, too often many dairy operations, especially those with considerable investments or those with generations behind them, are tempted to consider that the process that leads to an annual budget can be a substitute for strategic planning.  The once a year dreaded exercise of preparing a detailed budget is indeed great for clarifying the reality of financial dependencies of the dairy, but it is not a strategy.  Instead, the effective dairy strategist determines what future success looks like, which problems to face head-on, which size and production milestones to target along the way, and where to allocate resources. Financial numbers are part of the process but not the only determining factor.  

Prepare A Quick Response Action Strategy

With long-term understanding and goals identified, it’s time for short-range innovation strategy to make sure that your dairy operation is profitable and sustainable. Looking back fifty years and saying, “Well. We’re still here!” is no guarantee that the same will be true in 2066. Where is your farm relative to automation? What progress has your herd made regarding feed inputs and milk production outputs?  It isn’t always the lowest cost that results in the best production.  What management strengths will keep your herd viable?

The science behind determining the future of dairying may provide good signposts for decision making, but like any forward planning, the critical part is the action plan that gets you there. 

Many of us have been motivated by five-year-plans and are fans of the 50-page strategic outline and marathon team building exercises.   But just like longer hours don’t automatically mean that you have done better work, longer business plans don’t necessarily mean better ones. We need to carry out long-term plans without being distracted by every dire prediction that comes our way.  At the same time, we need the short term consistency that builds efficiency. We need to plan ahead, start today and be flexible when things don’t work out as expected.

New Frontiers – “Dairy Cows Will Be Gene Based Rather Than Breed Based”

If we are to keep the dairy industry moving into a future defined by sustainable success, we need to have a clearer understanding of the way in which dairy breeding could be carried out in the future. Brett paints an interesting picture. “By 2066, the dairy cow will be decidedly different from today’s average bovine. Almost everyone predicts cows of the future will comprise genes from several breeds.  In addition, much of the crossbreeding between and among breeds may occur in the test tube where desirable genes from one breed will be moved into another breed via gene editing.  This reproductive and genetic philosophy essentially represents controlled crossbreeding.  It would be a much more efficient strategy to move desirable genes from one breed into another breed. It differs from conventional genetic engineering because the genes are being moved within species and maybe even within a breed. For example, a gene that codes for improved resistance to a particular disease within a breed might be moved into male embryos being used to produce bulls for A.I. or into embryos for sale.” If we resist these types of changes, are we fighting progress? What alternatives do you see happening in the next decades? Is staying the same an option?

Do You See Your Cows Clearly Or Is Blind Optimism Preventing Progress?

Expecting the banks and consumer to suddenly “see it our way” is not strategy, it is unsupported blind optimism. You may not be able to control the future, but strategic planning can create a direction for your dairy.  Without strategy, you will likely take action only to address immediate problems—a kind of crisis management approach. Strategic planning gives you the structure to make day-to-day decisions that follow a larger vision.  For instance, let’s look at the 57,000 pound figure forecast by Jack Britt. He gives us his reasoning.” This 57,000 pound figure represents a tremendous amount of milk per cow.  However, it stands below top records that individual cows have produced over the last five decades in the U.S. About four decades ago, the record Holstein produced 55,000 pounds of milk in one year, and since then, records have climbed to nearly 75,000 pounds as of December 2015.” He continues putting it in perspective. “An average cow today produces 2.65 times as much milk annually as an average cow did 50 years ago.  If we take today’s average and multiply it by 2.65, we project 59,341 pounds per cow, so our forecasters seem to be right on target and maybe a bit low…” Something to think about.  How does it apply to your dairy operation? Your cows?

New Market Demands. Real World Challenges.

There are several long-term challenges beyond the farm gate that face agriculture over the next 50 years.  One of the most threatening is the growing negative perception that consumer’s have toward modern agricultural practices. They take for granted that modern agriculture has a negative environmental impact.  These handed down stories from the mid-1900s are used as proof.  The facts that are rarely getting headlines actually are much different. “Virtually all agricultural practices have decreased their environmental footprint on a per product basis.  The US beef industry in 2007 used 70% of animals, 82% of feed, 88% of water and 67% of the land than what was used to produce the same amount of product in 1977 (Capper, J.L Journal of Animal Science, 2011). Unfortunately, these statistics are not receiving the proactive dissemination that will lead the millennial generation to believe in the benefits of progressive agriculture. How does this fit into our forward planning?

THE BULLVINE BOTTOM LINE … Big Picture Action Or Passive Dreamer?

We all love dairying, but we must commit our strategic planning away from annual one night stands to proactive long-term commitment. Like most things in life, it comes down to facing your fears.  If you can muster the courage to address the challenges head-on, you can reap the rewards. Whether you agree or disagree with the ideas discussed here, we hope that you have an idea of how you will move with or ahead of change. This applies whether we are dairying today or dairying fifty-years from today.

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Successful trade talks and glasses of milk.  Can they be compared? Is it all merely political rhetoric?  Perhaps both will end up going down the drain. Does it matter?

While logic says there is more at stake than a glass of milk, NAFTA trade talks certainly stir up endless arguments regarding the state of dairying in the North American Free Trade Agreement negotiations.

Is It Clear What We Are Arguing About?

The optimist says the glass is half full and there is hope for expanded dairy market opportunities. The pessimist says the glass is half empty and regulations must prevent countries, such as Canada, from reducing what is available for others. The pessimist says the glass is twice as big as it needs to be and that dairy markets need to cut production. The realist says the glass contains half the required amount of liquid for it to overflow and says until supply and demand in the entire dairy market is analyzed, the resulting decisions will fail to achieve profitable results.

What Does Class 7 Pricing Mean at the Farm Gate?

Canada’s Class 7 pricing program has hit the headlines and, of course, depending which side of the argument you fall on it seems to inspire this half-full, half-empty debate. As of May 9^th, the NAFTA discussions have not mentioned dairy issues. However, USA industry leaders are confident Class 7 will be addressed before the deal is done. Michael Dykes, CEO of the International Dairy Foods Association feels that dairy will probably be one of the last things discussed. He says, “I remain optimistic we’ll get something done on Class 7.” This stems from his feeling that the Trump Administration understands both the short and long-term impacts that Class 7 has on American dairy farms. The example is given of the way Trump defended Wisconsin dairy farmers early in his administration (Trump Fabricates False Dairy war with Canada). Once again, the side you choose depends on where your farm-gate profits are made.  Your perspective changes as your real profits change. 

If Markets Improve for One Side, Is it Always Bad News for Everyone Else?

From the Canadian side of the market, there are signs that things are looking brighter for Canadian farmers.  Of course, you must remember the relative size of the two marketplaces.  The entire Canadian dairy is only one-tenth of the size of the US market.  I recently heard the comparison that, “All of the Canadian dairy is the same as the state of Wisconsin and the Chicago market.” However, it is perceived as threatening, when simple percentages are quoted which note that Canadian milk production is expected to increase this year by 4% to 21.6 billion pounds.  When that statistic follows three consecutive years of growth in Canadian milk production this summation of Canada having its cake and eating it too, is supported with more statistics: “Since 2014 Canada’s milk production has grown by more than 16%”. This is undoubtedly a glass-half-full analysis that might inspire a cynical look at Canadian competition. Is there any value in wanting all layers of the market to operate at a profit? 

Red Flags.  Milk Powder. Lost markets.

It would be so simple if the dairy market dealt with fluid milk only.  But it doesn’t.  The vast majority of milk is consumed in solid form. Furthermore, the principal point of comparison is now becoming concerns over the exporting of skim milk powder. Globally dairy farmers may be partly to blame for the oversupply of solid milk products.  Now that butterfat has a renewed life with support for the idea that fat does not cause heart disease and fat gives dairy product their taste. The US is almost balanced on fat produced and consumed.  However, the fact remains that there is too much powder.  IfIf the components of the milk produced were 4.5% Fat and 3.0% Protein, instead of the current 3.8% Fat and 3.0% Protein, there would be proportionately less powder.  Of course, that assumes that less milk would be shipped.  An added benefit of more concentrated milk would be less transport costs per unit of solid.  Demanding less milk volume but the current level of solid would be a three-way winner: less stress on the cow; less fossil fuel used and less environmental impact.

It’s Not Fair! What is the Measure of Fairness?

Both the amount of the Canadian exports and the cost-of-production concern Mr Dykes who notes that Canada has “gone from [exporting] about 20,000 MT to last year they did 70,000 MT of skim milk powder.” From his perspective “It defies logic when the highest cost milk producer in the world can land skim milk powder in Mexico three cents cheaper than we can in the U.S. Skim milk powder is a thinly traded product, even a one cent difference can mean the loss of a sale.” When it comes to competition for non-fluid milk products, lawmakers urge Lighthizer to press for elimination of Canada’s Class 7 pricing program. 

What’s the Point of It All?

There are points to be made on the plus and minus sides for all parties involved in the dairy negotiations.  It is probably redundant to consider that the point of trade agreements is to reach an agreement…. Something that works for all the parties involved.  There is an assumption that there will be give and take.  However, especially in the news headlines, dairy producers want to see themselves aligned with the government that provides them with more “take” than “give”. 

To Deal? Or Not to Deal?  That is the Question

Canada gave up 3% of its production in the CETA (Comprehensive and Economic Trade Agreement) negotiations between Canada and the EU.  In the twelve countries TPP (Trans-Pacific Partnership), the Trump administration pulled out of TPP in January 2017.  The US would have had the opportunity to compete in the Canadian market if it had stayed in TPP. The remaining eleven countries have signed the TPP, now known as CPTTP.  So the 3% share of the Canadian market is open to countries like New Zealand and Australia.  Obviously, with multiple trade deals being considered simultaneously, the issues are not simple to resolve.

Not all Production is as Simple as Produce a Product and Then Sell it. 

There are many layers in between the farm field and the grocery store shelves.  Processors play a crucial role in dairying.  Their profits change the playing field every day. “Processors never ship at a loss.” This is a key factor that, long before trade negotiations, has a significant impact on US producers’ bottom lines.  Canada’s supply management is intended to avoid the problems of over-supply — but it’s not seen as the answer to problems facing small to medium sized US milk producers. Additionally, NFU (National Farmers Union) in the US recently reported that dairy farmers receive 20% less of the retail food dollar compared to 2014. The dairy industry needs to find out and take action in dealing with the root cause of this decline.

The NAFTA agreement has much to work out.

There are thirty-two identified chapters to be negotiated in the NAFTA agreement.  At the end of April 2018, only six were concluded.  If trading parties can’t effectively negotiate to open markets between themselves, they will be forced to look at the even bigger world market, which also has its own what’s-in-it-for-me perspective on dairy trading. All countries get wrapped up in the blame game, but when you’re dairying 24-7, the real discussion always comes down too how to effectively sustain a profitable dairy industry. The glass half full or half empty is only relevant as long as the milk producers remain relevant.

The Bullvine Bottom Line

Let’s hope that throughout the bombardment of upcoming headlines, the milk consumer opportunist says, “Thanks, folks! While you are debating whether the glass is half full or half empty, I drank it!”

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