Buckeye Dairy News: Volume 5 Issue 1

Tim Demland, Additional information about Ohio Dairy Producers

Over the course of time, individual dairy producers have disagreed on many issues. With the current availability of technology, wide market fluctuations, and increased regulation, however, all should be able to agree that the challenges of being successful will continue to mount. To help producers meet these challenges, it is widely believed that one voice is best on legislative and regulatory issues.

In Ohio's past, several different organizations have been representing the interests of their respective memberships, whether being based on marketing preference or supplies and services purchased. To some extent, this representation was effective but with dairy farm numbers decreasing dramatically over the last forty years, even the largest voices have lost a lot of their local strength. Part of this has been due to the trend towards national and global companies. As one state industry leader stated, "we are giving the car keys to another driver." This approach works great when addressing national and global issues, but without close supervision, state and regional issues can easily be overlooked. Also, as organizations grow larger, individuals are less likely to be actively involved.

During the past year, two organizations that have been speaking on the behalf of dairy producers in Ohio have decided to join forces, uniting their strengths. One organization, the Ohio Dairy Farmers Federation (ODFF), had an established track record of working cooperatively with groups like the Ohio Livestock Coalition and of having great industry support. They also initiated and administered the Ohio Dairy Research Fund. Another group, the Progressive Dairy Producers of Ohio (PDPO), concentrated on educational programming for Ohio's dairy producers in cooperation with Ohio State University. These two groups joined to form the Ohio Dairy Producers, Inc. (ODP).

During the December 2002 Ohio Dairy Management Conference the Ohio Dairy Producers (ODP) held its "Membership Kick-Off", offering dairy producers and industry representatives the opportunity to sign up for the 2003 membership year. During the event, organizational members COBA, DFA, DHI, and Genex provided "special edition" ODP hats.

The dairy producers that organized the Ohio Dairy Producer's (ODP) have developed the following mission statement to express their goal of representing all dairy producers in Ohio, regardless of their geographic location, marketing preference, or operation's size:
"Supporting Ohio's Dairy Production Industry, Optimizing Productivity and Profitability, and Addressing Issues Affecting Dairy Producers"

Immediate benefits that are available to ODP members are reduced conference and seminar rates at selected OSU and ODP educational events, access to reduced workers compensation group rates, and as announced by Farmshine's editor Dieter Krieg at the Ohio Dairy Management Conference, a two-year subscription to Farmshine's weekly Ag Newspaper. To help foster increased communication in the industry, members will also receive a quarterly ODP newsletter and, for those with fax or email access, a biweekly "ODP Enews Update". These updates will include events and developments that directly affect Ohio's dairy production industry.

Several types of ODP memberships are available. Memberships are classified as Organizational, Individual Producer, Industry Associate, and Individual Associate memberships. Much like ODFF and PDPO, dairy producer organizations and allied industries form the financial base of the new organization. Organizational memberships are open to dairy producer owned and controlled organizations and associations. The COBA/Select Sires Inc., CRI/Genex, DFA, Ohio DHI, Ohio Jersey Breeders, Ohio Guernsey Breeders, and Ohio Holstein Association are ODP's founding organizational members. Dairy producers affiliated with these groups will be considered as having a "representational" membership and will receive benefits as determined by each representative organization. Each organizational membership is entitled to a seat on the board, and multiple memberships are available to each organization. Dues for each new organizational member are $1000. Industry Associate membership dues are $200 and enables allied industries to be listed as a supporter in many ODP publications.

Individuals can either join as "Individual producers" (only one membership is required per farm) or as "Individual associates". Individual producer members will have a "direct" membership and will be put on ODP's membership roster to receive future publications. Only individual producers are eligible to vote or run for the 10 producer director seats that are distributed into five geographic areas. Individual associates are not allowed to vote. Both of these membership's dues are $50.

Other than offering direct immediate benefits to its members, the true benefits of ODP to producers will lie in its collaborative efforts in Legislative Awareness, Regulatory Involvement, and Educational/Extension Programming. The existing Ohio Dairy Research Fund will also be administered by ODP, allowing producers to voluntarily contribute to Extension and research projects that will provide benefits to producers.
The ODP leadership has already initiated these tasks and continues to develop contacts with Ohio's legislative and regulatory authorities in attempts to improve communication and to inform agencies of Ohio's Dairy Producers' new voice. To become an active apart of Ohio's Dairy future, contact Tim Demland at (419) 523-6294 or demland.2@osu.edu. You can also get more information about the Ohio Dairy Producers on the web at http://putnam.osu.edu/ag/ODP.html.

A dairy farm may operate with no debt and a few do. The majority of dairy farms, however, use some form of credit to finance their operations. Credit use ranges from long-term mortgages to finance the purchase of land, to loans for buildings, cattle, machinery, or equipment, to operating lines of credit , and to interest charges on open account balances. As a result of poor milk prices and poor crops in 2002, some farms have found themselves owing more money than they have been able to cash flow.

Symptoms include balances on open accounts that are higher than normal, existing lines of credit that are at maximum, loan payments made late or missed, family living that may have been dramatically reduced and/or no cash in the checking account. This situation is uncomfortable for the farm family and to those that they owe money. How can both parties work through these situations? Three important actions for both parties are to talk, evaluate, talk, plan, and talk.

Talk it over. The best time to start talking to creditors is when you first see a problem developing. Many customers of commercial lenders understand that paying their notes first is a priority because they call the soonest if a payment is late. However, supplier's margins are tight, just as dairy producer's margins are. Suppliers are much less likely to carry open accounts for as long or for as much money as they did in the past. Many are hiring specialists to help keep their open accounts to smaller, more manageable levels.

Call or stop in and visit with the business that you will not be able to pay in full as scheduled. Explain the situation and discuss payment options. Can you stay current from now on and pay off the existing balance over the next few months? Can you negotiate an interest rate less than the 18 to 30% frequently charged on open accounts? Farm suppliers also have businesses to run and bills to pay. They will be much more willing to discuss options before a big balance develops, which hurts their ability to do business as well as your farm's.

Evaluate. When accounts have unpaid balances, you forgo opportunities to get cash or early payment discounts,which costs your farm additional money. At some point, you will need to discuss an operating line of credit with your lender. If your current line is at maximum, you may be able to refinance some or all of the debt over a longer term. Extreme caution must be used before this strategy is followed. You must take a serious look at why the credit was allowed to reach the maximum limit. Was the line of credit truly used for operating expenses (such as feed, seed, fertilizer, supplies, etc.,) or was it used to buy cattle, equipment, machinery, or other items that should have been financed over a longer period of time to begin with?

If longer-term assets were purchased with the line of credit, the lender may fairly easily be able to refinance those over a longer term. If not, refinancing may be more difficult and costly. It is vital for the long-term survival of your dairy enterprise that current debt (whether it was used for operating or longer term expenses) not be rolled over into longer-term debt without determining why it was necessary and carefully planning, monitoring profitability, and cash flow in the future. A successful farm cannot afford to do this more than once or twice during its business lifetime.

Plan. Planning is important from two perspectives. First, thoughtfully and realistically develop a payment plan to pay off balances on open accounts, while keeping current with new purchases. No one is saying that this process will be easy. Planned purchases or projects may have to be delayed. The "extra" labor that just quit may temporarily not be replaced. If a workable plan cannot be developed, then hard questions have to be asked about the long-term viability of the farm as it currently operates.

What were the factors that brought the farm to this situation? Beyond the major factors of price and drought, each farm's situation will be slightly different. Then ask the hard questions such as "How can we be sure this will not happen again?" "What were some of the signals that we should have seen earlier?" "What were some of the actions we could have taken earlier to prevent the situation from getting as far as it did?"

Finally, keep talking. There may still be bumps in the best-made plans. Keeping family and creditors informed and talking keeps the lines of communication and understanding open and reduces the stress during tight times for all involved.