Building Value on the Farm in Tough Times

I grew up on a dairy farm in North East Pennsylvania.  Not a large dairy, only about forty milking head out of total herd of sixty or so.  It seems unfathomable to me now that my parents raised eight children on a 130 acre dairy farm.  But during the 1960’s, much like now, farmers supplemented their income with other sources of income.  We happened to run a tavern.  An odd combination I know, but it seemed to work.

On a recent visit to Wayne County, PA, I met a family friend running one of the few dairy’s still operating in my old stomping grounds.  While engaging in small talk on the prices of gasoline, my friend commented that the price of everything seems to be going up … except for the price of milk.  She said she sells her milk for $11.50 per hundredweight.  That might sound fine until you realize it costs her $16 to produce that much milk.  And it’s been that way for about a year.  It doesn’t take an economist to figure out that this is a bad time to be a farmer.

In an October 3rd New York Times story entitled “The Family Farm, Also Battling the Downturn“, Phyllis Korkki writes that farm incomes are down 38% from 2008.  Korkki claims that over 92% of the income earned by family farms will come from non-farm sources.  That’s not 92% of their household income from farm related activities like selling milk, that’s 8% from farm related income!  In my friends’ case, that means selling vegetables and pumpkins at a roadside stand and this year, running a corn maize during the fall.  Others drive school buses, paint homes, sell canned goods or work evenings and weekends wherever they can find employment.  Some farms in this region sit on top of Marcellus Shale, which is now a hotbed for natural gas, so they may have an opportunity to sign a lease for natural gas exploration.

A down economy forces each of us in business to evaluate the best way to leverage our skills, competencies, products, intellectual property and services.  What are your company’s core competencies and skills and can you leverage them in another way, in another market, for another product?  This market has been particularly hard on the family dairy farm and they have had to scramble.  My guess is that many of you are doing the same, and leveraging your current skills into new markets may be a way to build enterprise value or just stay afloat in tough economic times.

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