pdpw dairy's bottom line september 2014

Volume 16: Issue 5September 2014

Managing dairy debt in this economy

Projecting the true cost of production and breakeven

ALSO IN THIS ISSUE:

Texas Dairy Tour ..............4OSHA’s Impact .............. 10Dairy Technology Tours ..19

4

Sharing ideas, solutions, resources and experiences that help dairy producers succeed.

Projecting the true cost of

Professional Dairy Producers™ I 1-800-947-7379 I www.pdpw.org

Page 8

Sharing ideas, solutions, resources and experiences that help dairy producers succeed.

B O T T O M L I N E

Page 22

Build your team

Most farmers want to transfer their farms to involved children or employ-ees, and many even tell their neighbors that they have met with an attorney, accountant or consultant to develop a succession plan.

While farmers want to do the right thing, few, how-

ever, truly understand the meaning and benefi ts of establish-ing a formal succession plan.

Many farms have continued to survive under the leadership of a second, third and even further generations. However, for every farm that successfully transitions to the next genera-tion, many more stumble.

DEFINING SUCCESSION PLANNING

The online dictionary Wikipedia defi nes succession planning as the “process for identifying and developing internal people with the potential to fi ll key business leadership positions in the company.” The two key ele-ments in that defi nition are 1) identifying the right people and then 2) developing the right people.

Identifying the right people means choosing the appro-priate people to be the suc-cessors. Sometimes in family farms, the qualifi cation of being a future owner means having the right last name. The successors to the farm, however, should be judged based upon business qual-ifi cations instead of family qualifi cations.

The family inherently stresses its core values, such as unconditional love, emo-tional support, loyalty, accep-tance and inclusion within the family. Because family values hold the ongoing family relationship as most important, mistakes, bad conduct and underperfor-mance are often overlooked or tolerated.

Conversely, business values are based on results with business decisions and actions being carefully

assessed and often chal-lenged. Business values view effective effort, pro-activity, teamwork and fl exibility as healthy. Job performance and conduct are evaluated. Underperformance or poor conduct is not overlooked and has consequences.

Developing the right people means providing development experiences to the successor or succes-sors. The senior generation must change the farm’s environment from that of a dictatorship to that of group planning and delegation of authority and responsibility.

A succession plan should establish a formal method of development, motivation and training of the successors.

CORE CONCEPTSIn order for farm suc-

cession to be successful,

An overview of farm succession planning

Troy Schneider

See SUCCESSION, on page 2

Putting these pieces together for a farm succession plan increases your farm’s chances for long-term success and creates a legacy for generations to come.

2 PDPW - Dairy’s Bottom Line • September 2014 ST

PDPW Board of Directors

PresidentKeith York

Lake Geneva262-903-6265

[email protected]

Vice PresidentMitch Breunig

Sauk City608-643-6818

[email protected]

SecretaryKay ZwaldHammond

[email protected]

TreasurerCharlie Crave

Waterloo920-478-3812

[email protected]

Jeremy NatzkeGreenleaf

[email protected]

Brian ForrestStratford

[email protected]

Marty HallockMondovi

[email protected]

Walter MeinholzDeForest

[email protected]

Linda WhiteReedsburg

[email protected]

PDPW Advisors

Matt RepinskiLand O'Lakes Winfield Division

Amherst

Dr. Richard WallaceZoetis

McFarland

Dr. Steve KelmUniversity of Wisconsin-River Falls

River Falls

Steve SchwoererBadgerland Financial

Fond du Lac

Dairy’s Bottom Line is published six times a year by PDPW with cooperation from Agri-View.

EditorialMarian Viney

[email protected]

AdvertisingTammy Strauss608-250-4157

[email protected]

PDPW OfficeProfessional Dairy Producers™820 North Main Street, Suite D

Juneau, WI 53039800-947-7379

[email protected]; www.pdpw.org

SUCCESSIONContinued from page 1

the farm’s senior generation must adopt the following core concepts:

Start early. The senior gener-ation must start early to transfer responsibility and authority to successors. This will assure that the next generation will gain experience from the senior owners while also gaining new and more progressive skills.

If the process is not started early and an event, such as an unexpected death or illness, causes the transfer of manage-ment, the successors may be unprepared for the change.

In addition, if the process is not started early, the people who may be the best successors may become frustrated and leave the farm.

Communicate. A forum should be developed for the farm’s members to share their perspectives and learn the facts about the farm business. Openness builds trust. Periodic meetings provide the successors objective information about the farm, an opportunity to share their thoughts and the assurance that their opinions will be heard and considered.

Formalize the plan. A farm succession plan should be in writing, detailing how the management, and ownership of the farm will transfer from the current owners to the succes-sors. The succession plan is really three interrelated plans: a business plan, a management succession plan and a future ownership plan.

The business plan should address the ongoing cash flow needs of the farm. The plan must assure that the financial needs of the withdrawing owner are met.

The management succession plan must establish a formal method for the development, motivation and training of successors. The plan must be developed to delegate responsi-bilities and authorities to succes-sors. It should include equitable compensation planning to recognize the real contribution of both family and non-family employees and active and inac-tive owners.

The ownership succes-sion plan must set forth how the farm’s ownership will be transferred. Lifetime transfers should be considered, along with using one or more business entities to make such transfers. The senior owner’s estate plan is also important to assure that succession of the farm and all of its critical assets can be accomplished in the event of an untimely death.

Finally, the succession plan should be designed to capital-ize on ways to reduce taxes for both the senior owner and the continuing successors.

Assess the process and the progress. Effectively transfer-ring the farm to the next gener-ation is not an event but a well

thought out process. It does not take some time; it takes a lot of time.

Because farm succession planning is a process, the suc-cession plan must be period-ically reviewed and updated and changes must be made as circumstances require. The progress of the succession plan must be analyzed because, as the famous management professor Peter Drucker once said, “What gets measured gets done.”

If your wish is for your farm to be operated by successors, a formal succession plan that identifies successors, develops the decision-making abilities of such successors and sets forth the method to transfer ownership to them is extremely important.

Putting these pieces together increases your farm’s chances for long-term success and cre-ates a legacy for your farm for generations to come.

by Troy SchneiderTwohig, Rietbrock, Schneider &

Halbach, S.C.

You can learn more about business succession at a one-day PDPW-developed Business Transition workshop. Choose the date and location that works best for you:

Tuesday, Dec. 2, Eau Claire

Wednesday, Dec. 3, Green Bay

Thursday, Dec. 4, Madison

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PDPW’s Texas Dairy Tour slated for Nov. 4-5 will take place in the Texas High Plains, the milk production capital of Texas where the number of dairy cows in the region increased nearly tenfold between 2000 and 2012.

Developed by dairy producers for dairy producers, the Texas Dairy Tour will start and end in Amarillo and will take in six stops.

Day 1 tour stops• Hilmar Cheese Company,

Dalhart, Texas: Built less than 10 years ago, the Hilmar Cheese Company’s Dalhart processing facility has grown to process almost 1 million gallons of milk per day into cheese and seven varieties of whey protein.

Its latest expansion, scheduled for completion in late 2014 or early 2015, will allow the plant to process up to 20 percent more milk, providing opportunity for

dairies in the Panhandle. We will zero in on the company’s core value of constant improvement and innovation.

• Avi-Lanche Jerseys Dairy, Dalhart, Texas: Avi-Lanche Jerseys, owned by Richard Avila and his wife Jennifer (whose father co-founded Hilmar Cheese Company), was the first herd from California to start milking cows in the Dalhart area and is the home to 2,400 milking Jerseys. Avi-Lanche Dairy’s Saudi-style barns provide input cost advantages over freestall barns while offering protection from adverse winter weather familiar to Dalhart.

The dairy uses 80 percent genomic sires and focuses on creating a healthy cow with lon-gevity that is strong on produc-tion and conformation. A new business entity in the works is an embryo service to fit the needs of producers both domestically and internationally.

• Dalhart Jersey Ranch, Dalhart, Texas: Owned by five California families, this unique ranch can house up to 27,000 heifers, ranging from 6 months

of age to confirmed pregnant. The heifers move through four stages in carefully designed drylot pens with well thought-out wind-breaks and return to their home dairies at 20 months of age.

The entire operation is so computer-oriented that it requires minimal full-time employees. We will learn about the ranch’s A.I. systems, with each source farm determining which sires are used on their heifers.

Day 2 tour stops• Del Rio Dairy, Friona,

Texas: Owned by Rocky and Liz Gingg, Del Rio Dairy first started milking cows in June 2006. Today, the dairy’s 3,800-head herd is milked between two parlors. The herd is about 80% Holstein and 20% Brown Swiss or Swiss/Holstein cross, with the Holstein cows now being bred to Norwegian Red. Cows are fed three times a day from one commodity barn location. Approximately 3,600 Del Rio Heifers are also raised on site from 5 months in age to calving. Manure is captured in a Double Lagoon setup with solid separa-tors and a composting operation is currently underway.

In addition to the dairy having an automated wash system, milkers have the ability to press a code in the electronic key panel and, if there is a mastitis cow, she is automatically sorted and put in a catch pen where she can be treated. We also will learn how management knows if the dairy drops below its desired throughput average of 420 to 444 cows per hour.

Join us for a 2-day Texas Dairy Tour

See TOUR, on page 5

ST September 2014 • PDPW - Dairy’s Bottom Line 5

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• High Plains Dairy, Friona, Texas: Owners Harry and Mar-gret DeWit, in partnership with key team members, own and operate High Plains Dairy based on the motto, “If you can’t measure it, you can’t manage it. If you can manage it, you can set goals.”

To that end, the dairy uses a software system that measures metrics at every step in the business for its 10,300 head of milking cows, dry cows, heifers and calves. The dairy’s 72-cow rotary milking parlor handles 430 cows an hour.

With feed being a big expense, the dairy grows a large percent-age of its feed, farming 7,400 acres that supplies 90 percent of the silages for the two dairies and heifers.

• Dairy Fountain, Plain-view, Texas: This family-owned dairy has a 5,700-head milking string comprised of 70 percent straight-bred Holsteins and 30 percent crossbreds and a similar

number of dry cows and heifers. An 80-cow rotary is used for the dairy’s Holsteins and crossbreds. The Ruynes are both heavily involved in the dairy, with the wife overseeing the heifer-raising

program. The couple also farm about 5,000 acres of land, with more than half that acreage irrigated.

We will learn about the dairy’s Holstein and crossbred program that includes every heifer being bred for a crossbred calf, as well as its emphasis on production and low cost.

Make plans now to join fellow dairy producers and other industry professionals Nov. 4-5 on a two-day dairy tour swing through the Texas High Plains. You are bound to see and learn about new ideas, ways of doing things and technology that can help you at home. More benefits are yours as you sit by fellow dairy producers on the bus and talk with them between tour stops.

For more information, visit www.pdpw.org or contact PDPW at 800-947-7379.

TOURContinued from page 4

This is just one of the six stops lined up for the Nov. 4-5 Texas Dairy Tour that promises to have lots of ah-ha moments.


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Check out PDPW educational events for September through April.

We grow YOU!PDPW’s 2014-2015 Calendar of

Events includes 63 educational events to help dairy producers, their farm employees and other industry pro-fessionals stay in step with the latest ideas and issues in the dairy industry.

Designed by dairy producers for dairy producers, this year’s programs include learning opportunities for dairy professionals at all levels and career stages, from those just beginning a dairy career to the seasoned dairy producer looking to be challenged.

Highlights of the 2014 calendar include:• Sept. 17: World Class Webinar featuring ag economist Dan Basse,

“The New Landscape of Feed Costs for Dairymen: How Best to Pro-tect and Profit into 2016.”

• Sept. 24: Dairy’s Visible Voice™ training, enhancing leadership through more effective communication, Baldwin.

• Oct. 8: World Class Webinar featuring ag economist Dan Basse, “Risk and Opportunities as the EU Liberalizes Trade in a World Seek-ing Greater Supply.”

• Oct. 14: Dairy Technology Tour, Janesville area

• Oct. 15: Dairy Technology Tour, Juneau area• Oct. 16: Dairy Technology tour, Onalaska area• Oct. 28: Calf Care Connection® Workshop, Arlington.• Oct. 29: Calf Care Connection® Workshop, Chilton.• Oct. 30: Calf Care Connection® Workshop, Marshfield.• Nov. 4-5: Texas Dairy Tour.• Nov. 12: World Class Webinar featuring ag economist Dan Basse,

“How Long Will Good Times Last? The Merging of U.S. Dairy and Beef Industries’ Profit Cycles.”

• Nov. 13: Dairy’s Visible Voice™ training. Location to be announced.• Nov. 18: Dairy Feed and Nutrition Conference, LaCrosse.• Nov. 19: Dairy Feed and Nutrition Conference, Oshkosh.• Nov. 20: Dairy Feed and Nutrition Conference, Madison.• Dec. 2: Business Transition Workshop, Eau Claire.• Dec. 3: Business Transition Workshop, Green Bay.• Dec. 4: Business Transition Workshop, Madison.• Dec. 10-11: Multi-Cultural Management Workshop, Wisconsin Dells.Additional events will be added as needed by members, with changes

and additions posted to the PDPW website.Professional Dairy Producers of Wisconsin is a dairy-producer

founded organization that provides educational programs and services to fellow dairy producers. PDPW’s mission is to share ideas, solutions, resources and experiences that help dairy producers succeed.

For more information, visit www.pdpw.org or contact the PDPW office at 800-947-7379.

PDPW Calendar of Events

These events and other PDPW-developed programs are made possible thanks to the following PDPW sponsors.MISSION SPONSORS:Badgerland FinancialBoehringer Ingelheim Vetmedica, Inc.Land O’LakesMorganMyersWisconsin Milk Marketing BoardZinpro Performance Minerals

CORPORATE SPONSORS:Agri-ViewAgStar Financial ServicesAlltechAmerican Foods GroupANIMARTArm & Hammer Animal NutritionAtten Babler Commodities LLCBMO Harris BankBouMaticCP Feeds LLC

Cargill Animal NutritionDairy Management Inc.Dairyland Seed Co., Inc.DeWitt Ross & StevensDiamond VDuPont PioneerFarmFirst Dairy CooperativeForemost Farms USAGEA Farm Technologies, Inc.Greenstone Farm Credit ServicesHastings Mutual Insurance Co.Progressive DairymanQuality Liquid Feeds, Inc.Roto-MixRural Mutual Insurance CompanyStewart-PetersonTwohig Rietbrock Schneider & Halbach S.C.USAgNet LLCWestway Feed ProductsWisconsin Cheese Makers Assoc. Zoetis

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Dairy producers are reminded by lenders, consultants and possibly even themselves that it is important to know their cost of production (COP) and their breakeven (BE).

Those reminders create a link between the operational

and financial management of their operation.

Identifying your cost of production and your breakeven can help you

understand where the dairy has been and, more importantly, plan for the overall success of the future of the operation. The new Margin Protection Program (MPP) of the new Farm Bill will create even greater incentive to be able to project COP.

While COP and BE may seem like simple, straight-forward terms, several items need to be considered.

First of all, a dairy producer should be most concerned about his or her own COP and BE and how it applies to their own situation.

While there may be some benefit for dairy producers to compare their numbers to industry averages, it is far more important for dairy producers to understand and compare their own COP and BE with their own operations and ultimately with their specific revenue sources.

While COP and BE can be expressed in either absolute dol-lars or on a per hundredweight basis, many dairy producers are starting to realize the benefit of expressing COP and BE in terms of per hundredweight as that is the measuring stick for

comparing with milk revenue.Understanding COP and BE

will be important especially when considering how, or whether, to participate in the MPP since that program does not directly ensure individual profitability.

Since the MPP only attempts to calculate a generic industry milk-over-feed cost margin for lactating cows, it will not have any direct relevance to the over-all COP or BE for any particu-lar dairy.

So what is the true cost of pro-duction for a dairy operation?

Like many other terms used in the dairy industry, a true cost of production definition may vary from producer to producer, or even amongst industry pro-fessionals. In addition, COP and BE should be calculated on an accrual basis.

Let’s examine at a high level the various components (as shown in the chart with an example) to address that ques-tion and identify key items to project true COP.

Let’s start with feed cost, which will be the largest and

most volatile portion of the calculation. Feed cost should be based on what is projected to be fed on the dairy. That means a dairy producer should consider factors such as:

• What does the stated ration call for?

• What is actually being fed (does the producer feed above the ration dry matter pounds or feed for more head that are actually in the group being fed)?

• What shrink levels does the dairy have for each of the ingredients?

• Are any feed ingredients grown by the dairy itself ?

• If so, how are those being incorporated into the overall feed cost (actual cost of pro-duction or market prices)?

• Feed inventories need to be considered so that the dairy can actually calculate and project proper usage amounts.

• Finally, a reasonable approach needs to be considered to project the actual costs of any purchased feedstuffs during the projection period. This may include using future prices from the Chicago Board of Trade

(CBOT), with proper basis adjustments, for certain items, projected market prices from feed suppliers or brokers for certain commodities and feed-stuffs, actual costs for purchased ingredients, actual contract prices locked in via feed contracts or a combination of the above.

Now let’s consider the cost to maintain the cow herd. Con-sider the following to properly calculate the costs: cull rate and value, the herd raising its own replacements, using custom calf-heifer growers or buying replacements and the related income and expenses related to the herd’s situation. If cattle (either mature cow or young-stock) inventories are increasing or decreasing, that also needs to be considered.

What about other major costs of production? All costs related to labor should be considered, including salaries, wages, payroll taxes, Workmen’s Compensation and other benefits.

Your COP also must include operating costs and interest. All other operating costs besides depreciation should then be considered and incorporated into the projection, again on an accrual basis so as to exclude the impacts of any cash or tax basis strategies.

The question arises regarding which to use: depreciation, prin-cipal payments or market value changes. If you asked 10 dairy producers which is most crucial to them, you will most likely get different answers.

Each has merit when properly used. However, if depreciation is used, I suggest a straight line method rather than an IRS accelerated method. Bottom

Projecting the true cost of production and breakeven

Calculating true cost of production may take significant time, but it’s time well spent. Consultant Mark Linzmeier, front, reviews numbers with a dairy producer to ensure all important data has been captured.

See COST, on page 9

Mark Linzmeier


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COSTContinued from page 8

line answer: Choose the one that makes the most sense for your dairy’s financial goals and objectives.

Another area to include when calculating your COP is other income and expenses. Consider the impact of bull calf sales, crop sales, patronage divi-dends—cash and non-cash por-tions—and any other unusual non-operating expenses.

With that said, the following are a number of considerations that each dairy producer should keep in mind when calculating and projecting true COP and BE:

• It may be helpful to flush everything back to the per hundredweight net cost. Other income should reduce operating expenses.

• Consider milk basis and show a separate COP and BE before and after milk basis to

address Class III or Class IV prices and the gross milk price.

• Do not fully rely on histori-

cal COP or BE amounts as feed price volatility will invariably affect future results, so imple-ment a plan to account for that. You should, however, consider historical results for certain operating expenses and other projections.

• Consider calculating your COP or BE on an energy cor-rected milk, or similar basis, to fine tune your projections further.

Once you have reasonably projected COP and BE num-bers, you will be better equipped to make informed decisions to manage your dairy operation and address the MPP provisions of the new Farm Bill.

Mark Linzmeier is a Certified Public Accountant (CPA) and owner

of Linzmeier Business Solutions, LLC, a CPA firm that specializes

in working with dairies. Linzmeier is based out of Green Bay.

Example of calculating cost of production or breakeven. Per CwtFeed Cost $ 8.50 Replacement Cow Cost $3.00 Less Value of Cull Cows ($1.50) Net Cost of Maintaining Cow Herd $ 1.50Labor Other Direct Production Costs $ 2.50Overall Major Cost of Production $ 0.50 $13.00Operating Expenses $ 5.00Interest $ 0.50Other Income (Bull Calves, etc.) ($ 0.50)Net COP Before Depreciation, Principal or Market Reduction $18.00Depreciation, Principal or Market Value Reduction $ 1.00Combined COP or Breakeven $19.00Less Average Milk Basis

(Gross Price Above Class III or IV) $ 2.00Class III or IV Equivalent COP or Breakeven $17.00


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Safety is a race without a finish line, with training and communication a never-ending challenge to ensure new workers or non-English speaking employees are aware of the hazards in their workplace.

The grand challenge is to develop a safety culture where workers recognize hazards and feel comfortable reporting hazards without fear of reprisal. Together we can create a think-safety-first environment.

In Wisconsin, the Occupational Safety and Health Administration’s (OSHA) goal is to inspect 12 dairies per year based on complaints, referrals, fatality reports or

randomly selected farms. Staff at OSHA have been surprised by the number of employee complaints they have received.

The annual LEP (Local Emphasis Program) review shows that inspections do not result in many violations or citations. That is directly related to the fact that agricultural standards are limited, and, if a hazard is present but no standard exists, OSHA would need to invoke the General Duty Clause to address the

hazard.A General Duty

Clause citation is not appropriate for all hazards. In order to address the hazard, the farmer is often sent a Hazard Alert Letter to inform him or

her of the hazard and possible solutions. This does not carry a penalty or fine.

During the walk around inspections, the compliance officer is often told that the only one(s) who operates or is exposed to the hazard is the farmer or his or her family

members. While OSHA cannot issue citations due to the farm family member exemption, farmers and owners need to recognize that their safety and well-being is as important as their workers!

Since the emphasis program, farmers have become more safety conscious, and fewer citations for push-off platform guarding, skid steer training and guarding of moving parts are being issued.

Areas that deserve more attention, as they are among common violations, include animal handling hazards, hazard communication and electrical.

OSHA’s impact on dairy farm safetyFarmers and

owners need to recognize that

their safety and well-being is as

important as their workers!

See OSHA, on page 11


PERFORMANCE

90 DAY

OSHAContinued from page 10

Due to the unpredictable nature of the animals, OSHA urges employers to train their workers on how to position and protect themselves. Additional focus should include providing barriers and eliminating the need to interact with the animals in certain pens.

Outreach among Wisconsin farmers has been successful, with Wisconsin farmers and associations proactive in learning why OSHA was developing the LEP. Farmers had input into the process of writing the LEP and participated in training sessions for OSHA staff.

Farmers took advantage of training offered by OSHA staff, UW-Extension, technical colleges, Susan Harwood Grants, State of Wisconsin Consultation Service, PDPW and insurance companies. New York State announced that it will implement a LEP for Dairy Worker Safety and plans to use Wisconsin as a model.

Wisconsin dairy worker safety has been a focus of OSHA since 2009 and was triggered by the death of a Hispanic dairy worker found in a manure lagoon after the skid steer he was driving went through the manure push-off platform. At that same time, farms were consolidating and the make-up of a typical Wisconsin farm was evolving. Herd size has increased, and the labor force has grown to include immigrant labor.

A Local Emphasis Program (LEP) has been in effect in Wisconsin since Fiscal

Year 2012, with the current LEP expiring on Sept. 30 of this year. At this time, the regional office is reviewing the information to determine if the LEP will be renewed.

Several factors indicate the LEP will be renewed:

• Concerns, in the form of complaints, are being raised by workers.

• A large percentage of the workforce may not be aware of their worker rights or be aware of workplace hazards.

• We are identifying hazards.• An emphasis program

justifies the outreach activities associated with the industry.

Nationwide, OSHA is looking at agriculture as an industry and the more involvement OSHA has, the more OSHA will understand how to serve the agricultural community.

To read more about safety and OSHA, see “Chang-ing Hands: Hired Labor on Wisconsin Dairy Farms 2009 – Briefing no. 1 Overview of Immigrant Workers on Wiscon-sin Dairy Farms” by UW-Mad-ison and UW Cooperative Extension Program on Agricul-tural Technology Studies.

Mary Bauer was raised on a 40-head dairy farm in Birnamwood. She is a Certified Safety Professional and Certified Industrial Hygienist and has served 29 years with OSHA. Bauer worked for 20 years as a compliance officer, and she is working as the compliance assistance specialist in the Eau Claire Area OSHA Office.

Mary BauerEau Claire Area OSHA Office


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2014 is shaping up to be a strong financial year for dairies. High milk prices and low feed costs have many dairy farmers

seeing improve-ments to their balance sheets. And, with taxpayers now in the second year since tax reform that increased

top tax rates for individuals, the general principle of defer income and accelerate deductions will apply in many instances.

Although it’s easy to put off thinking about taxes until the end of the year, it’s wise to

consider your tax situation now and start planning to avoid any surprises. Following are a few key items to keep in mind.

BONUS DEPRECIATION AND SECTION 179

As of January, federal bonus depreciation is no longer avail-able, and Section 179 expensing was reduced to a maximum of $25,000. These reduced limits will affect many farmers who have been using immediate expensing to control their income in the past.

Expensing of capital assets in previous years has left little depre-ciation on previously acquired assets coming into 2014, and if

the 2014 limit is not increased, there will be limited options on current year purchases.

There are proposals from the President and Congress that would raise the Section 179 limit. However, with 2014 being an election year, legislative action is not anticipated until after the November elections.

Additionally, the proposals are different when it comes to the dollar amount, with the President’s proposal at $500,000 and others at $250,000. There is also a chance there will be retroactive legislation in January, as was the case in 2012.

Obviously, any legislation in December or January leaves little

or no time to make last-minute, year-end purchasing decisions. As I mentioned before, consider your tax situation and have a plan of action ready.

One popular tool that I and other tax consultants are seeing is the use of a lease with an option to purchase. When done correctly, equipment can be purchased at any time during the lease, and with very short notice. This would enable you to acquire needed equipment and maintain flexibility at year end. If Section 179 is not increased, you would at least get a deduction for the entire lease payment made.

Uncertainty and higher incomes stress the importance of tax planning

Andy McCarty

See TAX PLANNING, on page 13


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DEFERRED PAYMENT CONTRACTS

Under a deferred payment contract, farmers sell their crops this year but delay receipt of cash until next year. For tax pur-poses, these contracts fall under the rules of installment sales.

When structured properly, they allow the option either to delay income recognition until actual receipt of cash, or to elect out of this treatment and accelerate income into the year the contract was entered.

For added flexibility, this election can be made on each contract independently. At Bad-gerland Financial, we recommend using many deferred contracts of varying sizes to give you maxi-mum flexibility after year end.

Specifics of these contracts

should be discussed with a tax consultant to ensure your indi-vidual needs are met.

PREPAID SUPPLIESWith the unknowns of depre-

ciation, many dairies will turn to prepaid farm supplies (feed, seed, fertilizer, etc.) even more than in the past. Just keep in mind the rules regarding these prepaid supplies.

Under the cash method of accounting, the deduction for prepaid farm supplies in the year they are paid for is limited to 50 percent of other deduct-ible farm expenses for the year, unless:

• The excess over 50 percent of other expenses is because of a change in business operations caused by unusual circumstances, or

• Total prepaid farm supplies expense for the preceding three

tax years is less than 50 percent of total other deductible farm expenses for those three tax years.

Prepaid livestock feed also must meet the following condi-tions (in addition to the above 50 percent test) to be deductible:

• The payment must be for the purchase of feed and not a deposit. Consider the following factors: non-refundable, specific quantity terms, seller’s treatment of the payment as a purchase, and no right to substitute other goods or products (can change ingredients).

• The prepayment has a busi-ness purpose and is not merely for tax avoidance. Examples of business purpose include: fixing maximum prices and securing an assured feed supply or securing preferential treatment in antici-pation of a feed shortage.

• Deducting the prepayment

does not result in a material distortion of income. Consider the following factors: custom-ary business practices on the livestock farm, the amount of the expense in relation to past purchases, the time of year the purchase was made or the expense in relation to income for the year.

RECAPThere is a lot of uncertainty

regarding taxes heading into the final quarter of the year. And in a year of higher income levels and lower expenses, the uncer-tainty makes tax planning even more critical. It’s a good idea to meet with your tax consultant earlier than usual to discuss available options and to avoid a tax-time surprise.

Andy McCartyBadgerland Financial

TAX PLANNINGContinued from page 12


The business of milking cows is a capital intense business. It is not uncommon to see investments per cow range from $15,000 to $20,000 and more.

With a nine-month running streak of positive milk prices in the U.S. dairy milk markets, the question on the minds of many producers is “What’s next?” Is it time to grow the herd and add additional debt to the balance sheet? Is it time to retire debt and just see what happens next?

Past lessons have taught agri-culture that timing can be every-thing when it comes to borrow-ing money. Become aggressive and make moves before the onset of the inflation of the 70s. Get overconfident and witness the pains of excruciating interest rates of the 80s as milk supports melt away. Dairy producer’s experienced increasing expenses along with volatile milk prices in the 1990s and the 2000s.

Although it has been just a few months, the profit cushion of 2014 in perspective compared with years past continues to be a time of ongoing decisions.

Let’s explore what is influenc-ing the mailbox milkcheck and then try to sort out the options in managing debt.

Milk prices have responded to a domestic appetite for cheese, yogurt and butter even though fluid milk consumption keeps ratcheting down.

Exports exceeded 15 percent of production last year and should outpace that in 2014. Countries and regions like Mex-ico, Canada, the Middle East, North Africa and China, along with Asia, are enjoying our safe and nutritious dairy products.

No longer is it what the local cheese factory is paying for milk, or what the once Green Bay Cheese Exchange bids were, that sets our price. We must now recognize we are dealing in a global market and competing with other countries.

Europe is coming off of quotas, and they are going head to head with us. World money currencies and geopolitical unrest will affect the milk-check deposited into your bank account. So, with this in mind, the money investment decisions continue.

One of the key questions for new borrowed money is: Will each new dollar invested generate $1.00 to $1.20 in gross revenue each year after the loan is made?

Factoring in this thought process will take some of the emotion out of a new invest-

ment consideration. Obviously you and your lender will want to make sure your equity remains acceptable and the projected cash flow can support additional debt.

Borrowing money now takes on a whole different perspec-tive in interest rate movement and where the new capital is invested.

The Federal Reserve has the keys to interest rate changes. They are focused on the U.S. economy. The Fed has stated goals of near 6 percent unem-ployment and inflation triggers of 2.5 percent. Rates will change dictated by these metrics and other economic benchmarks that they monitor regularly.

Let’s turn our attention now to interest rates and loan terms to help manage the farm’s income statement.

As of mid-August, very

attractive interest rates are still available from lenders. In fact, all lenders have an abundance of money sitting on their balance sheets just waiting for a loan to go.

Many dairy producers continue to choose variable, adjustable monthly interest rates because they have been, and still are, the lowest options from their lender. Fixed rate interest rates are higher reflecting what a variety of Bonds and Certifi-cates of Deposits used to fund those loans are paying.

A word of caution here: not only if but when interest rates start moving up, those now seemingly low fixed interest rates will move higher.

For the last five years con-sultants have been suggesting producers move to fixed rates. That day will come when inter-est rates do move, maybe not by much. While quick, fast upper movements are unlikely, they will move.

Along with interest rates, the terms of your loans should be considered as well.

Generally cattle and equip-ment loans are based on a three to seven year repayment or amortization schedule. Real estate, buildings and land will generally have a 10 to 20 year amortization. It is just good business to make sure the repay-ment period matches the life of the item being financed.

It might be tempting when extra profit is being generated due to higher milk prices to pay down loans with extra payments. After outstanding bills are cleaned up, paying down lines

Managing dairy debt in this economy

See DEBT, on page15


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DEBTContinued from page 14

of credit with your lender would make sense.

You need to have a discussion with your lender to make sure

those now-paid-off lines still remain available when you need them again.

Before you start paying off extra money on

cattle, machinery or real estate loans, make sure the equipment you use every day is maintained or replaced.

Even though you have not been keeping some cash in the checkbook, I suggest that you build a half-month’s milkcheck. Milk prices seem to come up slow, but they go down like a

rock. If you prepay term loans, you cannot get that money back without rewriting the loan. Make sure you review any prepayment penalties as well. You may not be able to prepay a loan.

Dairy producers have seen some good times recently. In tough times producers have few choices in money management. Sometimes it is just paying the bills. Money management may be tougher in good times because then there are more choices to make.

Gary Sipiorsky is a Vita Plus dairy development manager and a

consultant for ABC Consulting that works with dairy producers to assess

their operation, set financial and business goals and provide guidance in

making the important decisions that affect the success of your operation in

the short and long term.

Gary Spiiorsky

Dairy Feed and Nutrition ConferenceJoin fellow dairy producers for three one-day

conferences in three different locations.• Tuesday, Nov. 18: LaCrosse.• Wednesday, Nov. 19: Oshkosh.• Thursday, Nov. 20: Madison.For more details, visit www.pdpw.org or contact PDPW at

800-947-7379.

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See COLOSTRUM, on page 17

While feeding 3 to 4 quarts of clean, high-quality maternal colostrum within a few hours of birth is the gold standard

of the dairy industry, an adequate supply of high-qual-ity fresh or stored maternal colostrum may not always be available.

Dr. Sandra Godden, professor in the Department of Veterinary Population Medicine, University of Minnesota, says that is when producers should consider feed-ing a colostrum supplement or colostrum replacement product.

“A colostrum supplement or colostrum replacement product offers a simple, consistent and convenient means of delivering necessary immunoglobulins (Ig) and nutrients to newborn calves while reducing the risk of patho-gen exposure,” Godden states.

Godden explains that colos-trum supplements are designed to provide protective Ig to calves by augmenting poor-quality maternal colostrum (colostral immunoglobulin G less than 50 g/L). Most colostrum supple-ments provide 25 to 60 grams of immunoglobulin G (IgG) per dose and cost $9 to $18 per

dose.Godden stresses that feeding

one dose of a colostrum supplement alone will not provide a sufficient mass of IgG to prevent failure of passive transfer.

When maternal colostrum is not available, Godden says the alternative is to provide a calf with a colostrum replacement product. Colostrum replacement products cost $25 to $40 per dose and provide a minimum of 100 grams of IgG per dose.

“Immunoglobulins in com-mercial colostrum supplements and colostrum replacement

products are derived either from spray-dried bovine colostrum or bovine serum,” Godden states. “Some products are licensed through the USDA Center for Veterinary Biological (CVB) while others are not.”

Godden explains that CVB-li-censed products must contain IgG from bovine colostrum collected from Grade A dair-ies. CVB-licensed products also must be processed using accepted protocols and must undergo regular purity, potency and efficacy testing.

Samples from every lot are tested at a central U.S. Depart-ment of Agriculture (USDA) laboratory and annual site inspections are conducted.

Non CVB-licensed colostrum replacement or colostrum sup-plement products may contain colostrum- or serum-derived globulin protein and cannot legally claim that they can be used for prevention of failure of passive transfer.

Non CVB-licensed prod-

ucts fall under Association of American Feed Control Officials guidelines, and, while manu-facturers of non-CVB licensed products will conduct internal quality control testing, Godden notes that testing details will be at the manufacturer’s discretion.

Evaluating performance of colostrum replacement products

Godden says that achieving adequate serum IgG concen-trations (greater than or equal to 10 mg/mL) will be primarily determined by the dose of IgG fed and the efficiency of IgG absorption into the calf ’s circulation.

She points out that a dose of 150 to 200 grams of IgG must be fed shortly after birth to consistently achieve acceptable passive transfer rates.

“While most colostrum replacement products provide 100 to 130 grams of IgG per dose, some newer products now provide a larger mass of IgG per dose or provide label directions that suggest feeding increased masses of IgG,” she says.

Studies have demonstrated that several commercially available colostrum replacement products, when fed at a high enough dose (150 to 200 grams of IgG) within a few hours after birth, can provide acceptable to very good serum IgG concen-trations in calves. The goal is to get greater than or equal to 90 percent of calves with serum IgG greater than or equal to 10 mg/mL.

Godden notes, however, that not all products have proven to be equally efficacious.

“Producers should select products that have undergone

Why consider colostrum supplements and replacers

There is a time when a colostrum supplement may be needed, and a time when a colos-trum replacer may be needed. But remember: A colostrum supplement and a colostrum replacer are not the same.

Dr. Sandra Godden


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COLOSTRUMContinued from page 16

Summary of treatment means from 26 pub-lished studies investigating colostrum products.

Number of Means Average Maximum MinimumIgG Intake, gMaternal Colostrum 19 203 447 53Colostrum-based Replacer 21 126 210 18Serum-based Replacer 30 129 260 53Colostrum-based Supplement 8 157 297 85Serum-based Supplement 4 96 100 90

Serum IgG, mg/mLMaternal Colostrum 25 16 27 3

Colostrum-based Replacer 21 11 20 2

Serum-based Replacer 30 9 16 5

Colostrum-based Supplement 8 10 20 5

Serum-based Supplement 6 9 11 7

Apparent Efficiency of Absorption, %Maternal Colostrum 16 23 36 10

Colostrum-based Replacer 14 33 51 12

Serum-based Replacer 22 25 38 15

Colostrum-based Supplement 7 12 26 6

Serum-based Supplement 4 32 38 25

Why consider colostrum supplements and replacers

The above table summarizes the results of 26 research trials published in peer-reviewed professional journals with nearly 90 different treatments investigating colostrum supplement and replacer products.

The table provides a summary of treatment means, which reduces the variability that may have been observed within an individual experiment, or that might occur between individual calves on a farm, and provides a good overview of the performance that can be expected on average.

Because some of these studies were conducted during the development of replacer products, they provided less than 100 g/dose of IgG. If preliminary studies are removed from the summary to provide a better estimate of products currently on the market, replacer producers provided an average of 157 grams of IgG, with an absorption efficiency of 31 percent and serum IgG of 12 mg/mL.

Supplement products fed in addition to colostrum provided 136 grams of IgG with 19 percent absorp-tion efficiency and resulted in serum IgG of 9 mg/mL. (Source: Pennsylvania State University)

Num

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of m

eans

Ave

rage

Max

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Min

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independent evaluation of effi-cacy in controlled field studies,” Godden states.

She urges producers to contact the product manufac-turer and ask if efficacy studies have been completed and for the product manufacturer to provide study results.

Alternately, producers can read a review of colostrum sup-plement and colostrum replace-ment study results conducted before spring 2013, which is reported in the 5th edition of the textbook Large Animal Internal Medicine (2014).

“Measuring serum total protein concentrations by a refractometer offers a rapid and inexpensive method to monitor the colostrum program,” she interjects.

Serum may be collected from 12 or more healthy calves between 24 hours and seven days of age.

For calves fed either maternal colostrum or a colostrum-de-rived colostrum replacement product, Godden says a serum total protein test cut point of 5.0 or 5.2 g/dL most accurately predicts adequacy (a serum IgG value of 10 mg/mL).

In a successful colostrum program, at least 90 percent of calves tested will pass, with serum total protein greater than or equal to 5.2 g/dL.

For serum-derived colos-trum supplement or colostrum replacement products, she notes that the relationship between serum total protein and serum IgG in calves can vary widely among products, between 4.2 and 5.4 g/dL, depending on the source, level of inclusion or the degree of absorption of non-Ig

proteins.“Given this variation in

predicted serum total protein cut points, producers using serum-derived colostrum replacement products should use refractometry to monitor the effectiveness of the colos-trum replacement feeding program, but only if studies are available describing the rela-tionship between serum total protein and serum IgG for the specific colostrum replacement product in use on the farm,” Godden states.

“If such studies are not available, then the herd veterinarian should periodically submit frozen serum samples for direct serum IgG analysis using laboratory methods such as radial immunodiffusion or enzyme-linked immunosorbent assay.”


Today’s dairy farm faces unique challenges and opportunities.AgStar Financial Services is focused on providing you tools so you canrise to the challenges and shine with success.

Our clients benefit from our understanding of the industry combinedwith local expertise and our full range of financial management services,customized to help you find what’s best for your operation. For moreinformation, please contact one of our experienced Financial ServiceOfficers today.

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Our clientsrise to the top.

Last spring at the Profes-sional Dairy Producer’s Business Conference ag economist and commodity marketing guru Dan

Basse pro-claimed 2014 “the year of the cow.”

Calling 2014 an angelic time, Basse predicted that export

demand, excellent cow prices, reduced train prices and recog-nition of dairy products as the cheapest protein on the table would spell significantly better times for dairy farmers.

Basse is in the know as he spends his days focused on commodity markets, studying factors impacting the commodity markets and traveling the world

to get a first-hand look at agri-culture around the globe.

Raised on a dairy and grain farm in Waukesha, he is the pres-ident of AgResource Company, a domestic and international agricultural research firm that forecasts domestic and world agricultural price trends. Basse has a keen sense of production agriculture.

Dairy producers and industry individuals wanting to know more about potential risks and rewards in the dairy industry are encouraged to participate in one, two or all three World Class Webinars that Basse will lead this month and the coming two months. They include:

• Sept. 17, “The New Landscape of Feed Costs for Dairymen: How Best to Protect

and Profit into 2016,” with registration required by Sept. 10.

• Oct. 8, “Risk and Opportunities as the EU Liberalizes Trade in a World Seeking Greater Supply,” with registration required by Oct. 1.

• Nov. 12, “How Long Will Good Times Last? The Merging of U.S. Dairy and Beef Industries’ Profit Cycles,” with registration required by Nov. 5.

Each World Class Webinar is 60 minutes in length, starts promptly at 12 noon Central Time and closes with a question and answer session. Individuals with a date or time conflict can watch a fully recorded version at their leisure as long as they have pre-registered for the webinar.

PDPW’s World Class Webinars are open to all interested indi-

viduals, and one paid registration allows as many individuals who can gather around one computer to participate.

Webinars are available on a stand-alone basis, with a cost savings to those who wish to participate in all three webinars in this series.

For more information, visit www.pdpw.org or contact PDPW at 800-947-7379.

Webinars to discuss strategies to minimize risks, maximize rewards

Dan Basse


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PDPW members have been asking for farm tours and the opportunity to see new on-farm technologies and to witness robotic milkers in action. PDPW listened!

Three one-day Dairy Tech-nology Tours are on tap for Oct. 14, 15 and 16.

PDPW Dairy Technology Tours will visit nine robotic milking farms in three different regions of the state The farms will have anywhere from one to eight robot units. Tour stops also will focus on other technologies, such as robotic feed pushers, auto calf feeders, heat technology and the latest technologies affecting the dairy industry.

During the tours, you will hear firsthand from dairy producers why they switched

to new technology, how it has changed their operations and the technology’s impact on

management, production and labor.

With each day of tours hitting a different part of the state, the tour bus will depart from a different location each day. Tour areas Oct. 14, Janesville area; Oct. 15, Juneau area; and Oct. 16, Onalaska area.

In addition to a full day of information and education and an opportunity to network with fellow dairy farmers and other industry enthusiasts, everything you need for the day, such as transportation, restrooms, lunch and refreshments, comes with each Dairy Technology Tour.

For more details, visit www.pdpw.org or contact PDPW at 800-947-7379.

Save the dates for Dairy Technology Tours: Oct. 14, 15 and 16

Using robotic milkers means data can be at your fingertips.


Calves started off right are key to your future profit.

For that reason, calf raisers and dairy farmers designed a profes-sional training program to address leading issues and to deliver new research to calf caretakers. The results of this group, a commit-tee of PDPW, are the upcoming PDPW Calf Care Connection® workshops.

This committee asked for the dream team of calf trainers, and that is what they got.

Four calf care management gurus, Dr. Sandra Godden, Uni-versity of Minnesota; Dr. Frank Garry, Colorado State University; Dr. Becky Brotzman, The Dairy-land Initiative; and Dr. Richard Wallace, Cattle Technical Service veterinarian for Zoetis, will join forces in Wisconsin and share the latest calf care information at three PDPW-developed Calf Care Connection workshops.

Workshops will be held at the following dates and locations: Oct. 28, Arlington; Oct. 29, Chil-ton; Oct. 30, Marshfield.

The three workshops combine high level classroom training with hands-on wet labs designed to challenge even the most seasoned calf care provider. The workshop brings to dairy farmers and calf specialists, the industry’s more sought-after experts.

This training also is for other industry experts like nutritionists and veterinarians. Continuing education credits are available.

American Registry of Profes-sional Animal Scientists (ARPAS) members participating in a Calf Care Connection workshop can receive 4.0 Continuing Education Units (CEUs) while the School of Veterinary Medicine, UW-Madi-son is offering 5.7 CEUs.

The opening session of each

workshop will focus on the “Pros, Cons and Best Management Practices for Group Housing of Pre-Weaned Dairy Calves.”

During this session, Dr. God-den will hit upon four key topics: 1) Pros and cons of group vs. individual housing systems for pre-weaned calves; 2) Man-agement of computer feeding systems; 3) Best management practices to minimize disease risk; and 4) How to improve calf performance when using group housing systems.

Participants will then be divided into three groups for a more interactive, hands-on setting and will rotate through three breakout sessions.

Dr. Brotzman’s breakout session, “5 Key Considerations for Housing Calves and Heifers,” will focus on The Dairyland Initiative’s best practice recom-mendations and will zero in on practical considerations and real-life solutions. Dr. Brotzman will examine five categories of utmost importance: inventory, environ-ment, resting area, nutrition and management.

Dr. Godden will lead a

hands-on Colostrum Manage-ment Updates breakout session. Calf Care Connection partici-pants will learn new at-side test methods for estimating colostrum quality and evaluating passive transfer methods in calves.

Dr. Godden also will discuss management strategies, colostrum replacers and heat-treating colos-trum, to reduce bacterial counts in colostrum fed to calves.

This hands-on session will have participants working with fractometers, serum samples and colostrum samples to determine results. Participants will learn how to manage their findings, as well.

Expert trainers Dr. Frank Garry and Dr. Richard Wallace will team together and show participants the world of calf care from the inside out.

Participants will roll up their sleeves and discover what affects a calf under the hide. This truly unique experience is bound to be an eye-opener, and attendees will quickly understand the reason behind some calf care manage-ment techniques.

After each small group has been through all three breakout

sessions, participants will come together for 45 minutes of table talk. Attendees will sit with fellow calf raisers and share calf-rais-ing ideas, solutions and lessons learned.

Dr. Garry will lead the final workshop session: “When and How to Properly Euthanize Calves.” This session will focus on the compromised calf and how to assess the calf in question and determine if euthanization is necessary.

Dr. Garry also will address special considerations when determining acceptable practices for calves facing pain issues and terminal conditions.

Registration for a Calf Care Connection workshop is $125 for PDPW members, $250 per person for non-members, and $75 for each additional attendee from the same dairy farm. When registering, indicate your choice of date and location.

Boost your calf care knowledge and skills

Three one-day Calf Care Connection® workshops are on tap: Tuesday, Oct. 28, Arlington; Wednesday, Oct. 29, Chilton; and Thursday, Oct. 30, Marshfield. Take advantage of these workshops to increase your knowledge of calf care.

Register today for one of three Calf Care Connec-tion® dates and locations.

• Oct. 28: Arlington Agricultural Research Station, Public Events Building, N695 Hopkins Rd, Arlington.

• Oct. 29: Chilton Fox Val-ley Technical College, 1200 East Chestnut St, Chilton.

• Oct. 30: Marshfield Agricultural Research Sta-tion, 2611 Yellowstone Dr, Marshfield.

Register at www.pdpw.org or by contacting PDPW at 800-947-7379.

Boost your calf care knowledge and skills


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People are the driving force of a business, with teamwork vital to the health, vitality and agility of a well-functioning business.

Productivity experts agree that teamwork helps businesses accomplish work and goals more efficiently and faster, takes advantage of multiple skill sets, increases learning oppor-tunities and pro-motes synergy.

As Vince Lombardi said, “The achieve-

ments of an organization are the results of the combined effort of each individual.”

The 2015 Managers Academy for Dairy Professionals™, Jan. 13-15, in Charlotte, N.C., will put teamwork front and center. Trainers and executive-level tours will provide dairy industry execu-tives, dairy owners and managers, industry executives, processors, marketers and distributors with highly valuable information so they can attain uncommon results in today’s business environment.

This unique executive training workshop will provide partici-pants with the keys to hiring right and the secrets to creating and sustaining high-performing teams. Yes, the 2015 Managers Academy for Dairy Professionals will take esprit de corps to a new level.

Managers Academy executives will spend two days in a classroom setting, with sessions peppered with an abundance of hands-on learning. In between the two

days of classroom learning will be a day of executive-level tours at Atlantic Caviar and Sturgeon Company, Porter Farms and then a teambuilding exercise at the Richard Petty Driving Experience at the Charlotte, N.C., speedway.

Day 1 of in-class training will feature Mel Kleiman, president of Humetrics, a leading provider of pre-employment attitude assessments, best practice infor-mation, training and resources for recruiting, hiring and retaining frontline employees. Kleiman’s two sessions will focus on “Hire Right” and “Separating the Winners and the Whiners.”

Trainer Dr. Bernard Erven will capitalize on the racing environ-ment and deliver two sessions: “Building a Team, One Lap at a Time” and “Victory Lane Team.” Erven, a former college profes-sor, brings more than 40 years of experience to the table, special-izing in issues such as hiring, training, motivation, discipline, compensation and performance feedback. Specific topics covered by Erven include team building, leading teams, communication, delegation and being a better boss.

One thing is for certain: When you leave this training, you will be aware of choices, armed with strategies to build and lead a win-ning team, and you will not be in danger of being stopped by fear.

Additional information about the 2015 Managers Academy for Dairy Professionals™ is available online at www.pdpw.org or by calling PDPW at 800-947-7379. It’s never too early to book your place where you will rub elbows with like-minded, busi-ness-savvy dairy executives.

2015 Managers Academy for Dairy Professionals™: Because ‘Working Together is Success’

Those involved in the car racing world will tell you that the secret to winning is not nec-essarily high technology or big budgets. It’s people, how they work with each other and with their equipment. The same applies to the dairy industry. The 2015 Managers Acad-emy for Dairy Professionals™ is going to the home of the Charlotte Motor Speedway, Charlotte, N.C., and will focus on building and keeping a successful team.

Mel Kleiman

Bernard Erven


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See TEAM, on page 23

The ability of the individuals to bond together to form a team offers numerous advantages to a dairy. Yet, the ability for any

group of people to become a team can be quite challeng-ing—even really tough.

If you’re a pro football

fan, you know a team is com-prised of individuals who are typically the cream of the college crop, with these top college picks coming from college teams of

up to 100 players. Even though an NFL team has 53 players who have been handpicked, have you ever wondered why some of these teams with such tremen-dously talented players repeat-edly lose year after year?

In a nutshell, any team is only as good as the contribution from each person or member of the team. Some players just play the game and fail to see the big picture. Other players want the team to gel and give that extra oomph needed, keeping team as their focus. When this happens, the team ends up—as it

should—playing better than the sum of its parts.

Think for a minute of a football team that over-achieved this past season. Now think about a football that looked good on paper, had all the players to take the team to the Super Bowl but then imploded. While sometimes the implosion relates to injuries, a lot of times members of the team just couldn’t get beyond the bickering in the locker room and could not find the trust within each other when everything was on the line to win. Bottom line: They failed as a team.

Football teams aren’t alone with it comes to assembling peo-ple and trying to form a highly functioning team. Family busi-nesses are right there with them and, like some football teams, can really struggle when it comes to teamwork. A lot of times, emotional issues get in the way as they are hard to overcome when working with siblings, parents, cousins and in-laws.

FORMING, STORMING, NORMING, PERFORMING

Every group of individuals who come together as a team goes through stages, including forming, storming, norming and performing.

In the family enterprise, the forming happens at birth – and many times the storm-ing comes quickly after. Getting to the norming and performing in the business is the tough part, and many times it is two steps forward and one step back process.

Parents or older generation members often step in when individuals of the younger generation are not getting along. While this remedy seems like it should work, it often doesn’t work. As hard as it is, parents are often ahead to stay out of the disagreement, give siblings space and let the siblings figure out what works best for them.

The norming stage is the time when individual members agree on the roles, responsibil-ities and measurement of the

Build your team: Key components to a competitive advantage

An effective team communicates with each other.

Every group of individuals who come together as a team goes

through stages, including forming,

storming, norming, and performing.

Dr. Deb Houden


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TEAMContinued from page 22

responsibilities:• Who holds whom

accountable?• How are we going to com-

municate with each other?• How are we going to work

through the disagreement when inevitably the mem-bers are at odds?

• Are we going to respect the individ-ual differences as assets or liabilities?

• How do we overcome an impasse?

A team gathers, in this case, as a means to accom-plish a goal that all members want. In a family business, there is frequently a presumption that everyone has the same goal—althought no one may have explicitly stated what that goal is. That’s why many consultants suggest that families in business together talk about a mission statement, and talk about the vision of the future. How do all of the members of the team know where to focus their efforts and in what manner if there is no vision of what to achieve?

A business’s vision statement addresses its goals while their mission and value statements provide a specific set of oper-ating principles. When owners, managers and workers have shared goals and vision, reaching them together creates a stronger bond. Just remember to celebrate reaching those common goals and acknowledge each member’s contribution.

An effective team must also

communicate effectively with each other—and this can be really difficult for some teams or team members. Effective communication is not only important with relaying expecta-tions but also when differences arise. Communicating during differences requires that both parities keep an open mind, really

listen to the other, take the other’s perspective and let go of all of the past baggage, while conceding that their way may not be the only way.

The best stance to take when com-municating with family members is one of curiosity:

• Why is that important to them?

• Why are they doing certain tasks a certain way?

• What is keep-ing them from

coming to work on time?• What is it that I keep reacting

to when it comes to them?By interacting from a place of

curiosity instead of entrench-ment, a group of individuals can really develop into an effective team.

Teamwork is important because it can minimize conflict and produce more than if indi-viduals were working singularly. Teamwork can also bring a deeper and satisfying attachment between people.

While the storming stage of team development may have started a long time ago, the norming and performing stage can be developed now. Working through disagreements towards a shared vision, guided by values that are often deeply ingrained

within families while defining roles and responsibilities and communicating often and effec-tively from a place of curiosity is a recipe for not only a successful financial operation, but one that is deeply satisfying for the family.

You can create that extra oomph that wins the game.

Deb Houden, PhD, is the Director of the University of Wisconsin

Family Business Center. Dr. Houden is also a consultant with the Family

Business Consulting Group Inc, specializing in helping family-owned businesses with family communica-

tion, transition and next generation development.

When owners, managers and workers have shared goals and vision,

reaching them together creates a stronger bond. Just remember

to celebrate reaching those common goals

and acknowledge each member’s

contribution.

Teamwork is like a puzzle: All pieces must fit together.

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