Business Strategy and the Dairy Farm

Over the last two decades, Wisconsin has lost almost 70% of its dairy farms. Most of these farms were small or medium sized operations that had been in the family for many years, often spanning multi generations. In contrast to this, US milk production has increased, including in Wisconsin, through larger and more efficient farms, animal productivity improvement through genetic optimization and nutritional breakthroughs, technology advances that include automation and digital data collection and analysis, business diversification to hedge against weakness in one area, and developing closer relationships with consumers themselves or with large corporate processors.

The farms that are thriving have taken the time to define their current situation, look at their options, and have developed a coherent, viable, and actionable strategy to move forward with. These strategies often have common themes that include but are not limited to:

  • Provide low cost, high volume, consistent milk to strategic customers by building relationships with large processors, by building facilities with many animals, lots of automation, utilization of best practices in water and manure management, and by managing herd health in a manner to maximize productivity.
  • Provide high margin, small volume, “home grown brand” dairy products to select local or regional consumer outlets by creating a niche dairy offering that includes milk, specialty cheeses, butter, and other associated dairy products to people that the brand resonates with.
  • Provide a set of diversified dairy and nondairy products to the target market that might include milk, cheese, butter, and beef products as well as live animals such as yearlings, heifers, beef calves, beef cattle, cows, bison, etc. In addition, these might also include non-bovine products such as goat derived products, honey, chicken products, etc.

Each of these three options are business strategies, albeit generic in nature. And this list is incomplete – many other strategies or combinations of strategies could be created that a dairy farm could pursue. What strategy a business, including a dairy farm, choses is a function of its current situation, what target market it wants to be the best within in the future, what resources it has to invest, and its sense of urgency to change what it’s doing.

If your business is not successful and performing in the manner you would like, you can sit down around your kitchen table and talk. You could blame the market, your employees, the weather, politicians, or whatever else there is out there that could impact you. Or you can talk and identify what your circumstances are currently, look at what strategy options are out there that you could compete in and be the best at, and develop a set of tactics to put your target business strategy into place.

Is there a guarantee you’ll be successful? Nope. But there is a good probability that if your analysis and chosen strategy is coherent, viable, and doable, you will be successful. Sometimes our results are a function of our indecision and continuation of doing the same old thing. Decision by indecision is a continuation of the status quo. Deciding and acting on your strategy at minimum gives you a shot at turning your business around and making money in a sustainable fashion.

Harvest Management Advisors can help you develop a strategy for moving your agribusiness forward. Our mission is your success and growth.