What is Causing Financial Volatility in the Dairy Industry? Digging Deeper – Part II

ZISK APP
Jul 30
1 min read

Updated: Jul 31

Part I of this analysis covered the extreme volatility in producer milk prices. The volatility of income on dairy farms makes for difficult financial issues. Managing the extreme financial issues detracts from the implementation best practices.

The final Chart in Part I is shown below. Every month the revenue changes. Between March 2023 and July 2023, the monthly revenue per cow changed from $433 to $307, a drop of 30%. That is a huge drop in revenue over the course of five months.

Farms have no warning of the drastic changes. It is not a seasonal fluctuation, and the payment changes come without any prior notice. That is like having a fluctuating paycheck that can change without warning at any time. How does a dairy operation manage this? Cash must come from some source like a significant cash fund held by the operation or a good banker with contracts to fill in the necessary low points. Other measures include changes in feed and other operating expenses. None of these allow for a smooth operating business.