Attention to dairy details

Brad Krueger left the family's dairy farm in Markesan, Wisconsin, to pursue a degree in agricultural education in 2006. The dairy was in his rearview mirror when his father, Allan, shared that the farm was at a crossroads. He needed to know if his son wanted to come back to the farm full-time. If not, his father and uncle, Marc, would likely divest the dairy and transition to a grain operation.

While Krueger wanted to be a dairy farmer, he knew the family's current operation would not support three family members. As he continued to work toward his bachelor's degree, Krueger began to crunch the numbers, discuss options with dairy experts, research various dairy operations on the internet, and pull historical prices and herd averages.

"We needed to know what it would take to go from a 130-cow herd to something that would be viable for all of us," he says. Krueger then presented his plan to his dad. "I told him I didn't think we could make 200 cows work, but we could make it work if we expanded to 300 cows," he recalls. "My dad's jaw dropped. That was the beginning of our new operation."

Soon after graduating college, Krueger returned to the farm. Ten years and two additional rounds of expansion later, MAM Farms has grown to a 770-cow herd today. "I don't think we would be where we are if we had not taken a close look at our operation and really researched what it would take to be viable," he says, adding that the binder filled with his research still serves as a resource.

"That binder means a lot to me," Krueger says. "It's the road map we have followed to bring us to where we are today."

Interest in Dairy Remains

Despite market fluctuations and the mass exodus in the dairy sector (see "A Decade of Decline"), some, like 33-year-old Krueger, still want to become dairy producers.

"I continue to receive inquiries from people who want to be a part of the dairy industry," says Tera Montgomery, professor of dairy and animal science at the University of Wisconsin-Platteville. Backgrounds vary, including students who want to return to the farm and those seeking a rural lifestyle. "We even field calls from existing producers who may be near retirement who are looking for someone who might want to take over the operation."

The size and structure of dairy farms, especially for those just starting, often differ significantly from farms of even a few years ago. Producers without a lot of capital may start small and rely on off-farm income to support the operation, while others may diversify into on-farm production of dairy products. Still others may incorporate agritourism. "I've been amazed at the diversity we are seeing in some of these new operations," Montgomery says.

The pandemic and associated shortages of dairy products put an increased emphasis on locally sourced products, opening another niche for new and existing producers. Experts say these markets will likely see continued demand from a growing number of consumers.

Create a Plan

Whether you are starting fresh, joining an existing operation, or revamping the look of your current operation, it all begins with a plan.

"Success on the dairy starts with a strong business plan," says Tracey Erickson, Extension dairy field specialist with South Dakota State University. "You may have a vision of what you want your farm to be, but you have to have a road map to get you there."

Heather Gessner, Extension livestock business management field specialist with South Dakota State University, often works with new dairy producers. "If you know what your goal is, you need to determine the financial and production steps you need to take," she says. "What do you want to produce? How are you going to produce it? Where are you going to sell? What are your production goals, and certainly your own personal goals? These all need to be a part of your business plan. And each plan depends on the operation. It is certainly not a one-size-fits-all spreadsheet."

A Strong Team

Building a strong team is also a critical component of long-term success. "You need a banker who not only understands agriculture, but fully understands the dairy industry," Erickson says. Additional team members could be nutritionists, veterinarians, Extension dairy specialists, dairy professors, dairy industry business reps, dairy field reps, accountants, and business managers. "We can't be experts in every facet of a dairy operation, but strong managers develop those trusted resources," she says.

"As we look at successful dairy producers, and successful farmers in general, they're all really good at production agriculture," Erickson says. "Yet the successful farmers are those who spend the time analyzing the books, or they take the initiative to hire the right people to help out with the managerial tasks if necessary and then consult with them daily. Those aren't necessarily the fun tasks, but they are the ones that ultimately make or break your operation."

Krueger readily admits he can be a bit obsessive when it comes to pushing the pencil. "I have spreadsheets with monthly cash flows built out until 2024, even color-coded," he says. "Granted, those numbers can and will change throughout the year, and I adjust as needed. But I can look at that sheet, and it gives me a good snapshot of our operation."

It's taken Krueger several years to get his spreadsheet "just right." But it's an important tool as he forges ahead.

"There are people who still want to be a part of the dairy industry," Erickson says. "Success is in the details and putting those details in writing."