Value Added Products Help Dairy Beat Problematic Milk Prices

Last week, Rose Wilson introduced us to some tools for setting our own goals as a first step in planning for success.  This week, we’ll see how things are working out for one of her clients, Kingdom Creamery in Vermont.  You can skip straight to the embedded video, or you can read the summary here if your computer speeds are a little slow.

When Jeremy and his brothers decided they wanted to run the farm that has been in the family since the 1950s, their father told them, “You’re foolish!”  After all, they had all been sent to college in the hope that they would find something different.  But Jeremy says, “When it’s in your blood it’s hard to shake that.”  So they worked together to create a successful dairy.

But when the price for milk bottomed out in 2009, the Michauds knew they had to do something different in order for the farm to survive.  “There are flaws in the milk system” says Jeremy.  While prices to produce milk continue to go up, the amount paid to farmers for their product has not kept pace.  “It’s like rubbing pennies together to make nickels,” he says.  Their business had expanded to its limit in its current location.  They knew that if they continued to simply sell milk, they’d have to expand, which would involve a major move, and a huge investment, all to get the same commodity milk prices.  Noting that there was a booming market for local and value added products, the Michauds began to consider the option of changing what they sold and using their milk to make ice cream and yogurt.  But to make the switch, they needed an investment of a different kind: a plan that would successfully lead them to their new niche.

Writing a plan of that magnitude was something that no one in the family was familiar with, so they asked for help through Vermont’s Farm Viability Program.  Jeremy says, “It was the best decision we could have made, working with Rose [Wilson].”   As Jeremy describes it, “You start with a blank sheet of paper and in the end you have a 700 page business plan.”  The plan was tested by sending it to lenders and using feasibility analyses.  As holes were poked in the plan, Rose and the Michauds worked together to come up with solutions.  They knew that when there were no more holes to poke, they had something that would give them the best chance at success.

Without her help, the Michauds might have simply set the plan on the shelf.  But with continued pushing and finding ways to plan around challenges and road blocks, they made it.  As Rose says, “It’s their future, it’s their business plan.  I don’t come in and tell you what to do, but it’s a relationship and we continue to check in, because someone’s future is an important thing!”

With the start of their ice cream business, the Michaud’s learned to market their product.  Their business plan identified the need for this new skill and provided job descriptions for those that would be doing the marketing.  Now the Michaud’s are expanding their market by attending trade shows to tell their story and offer taste tests.  Leslie Michaud says:  “We are selling our story.  We have a farm family from Vermont and we’re working hard to make a quality product and we are succeeding at that.”

Hopefully, this story made you wonder what markets you might be able to sell your products to, or how a business planner like Rose could help you look at your business in a new way.  While we might be great farmers and ranchers, we may not know a lot about cash flow analysis, or sales and marketing strategies, or it might be that it helps to have an objective outsider help us pull all the pieces together.  To look for a business planner in your area, check to see whether your state has a Farm Viability Program, several do.  Another good place to look is your state department of agriculture, and your land grant college extension offices.  Additional organizations that often offer farm business planning are state community loan agencies, such as New Hampshire Community Loan Fund, and state small business development centers.  Programs from any of the organizations noted above are often funded in part by their respective organization, which means less out of pocket expense for participating producers.[/wpcol_1half] [wpcol_1half_end id=”” class=”” style=””]

Examples of Organizations Offering Farm Business Planning

• Maine Department of Agriculture, Food and Rural Resources Farms for the Future
• Maryland Agricultural & Resource Based Industry Development Corporation
• Massachusetts Department of Agricultural Resources Farm Viability Enhancement Program
• Minnesota Department of Agriculture
• New England Farmers Union
• New Hampshire Community Loan Fund
• NY Farm Viability Institute
• Vermont Farm Viability Program

The second national farm viability conference for farm business planners takes place this September.  We’ll have a more complete list for you then.