Breaking free from the chains of the past Where
truth moves faster than a Holstein calf No law
waiting on some printed page We're charting new
ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Welcome to the Bullvine Podcast,
where we tackle the tough conversations that
shape the future of dairy. I'm your host, and
today we're diving into one of the most critical
challenges facing our industry, succession planning.
If you think your farm's biggest threat comes
from volatile milk prices or rising feed costs,
think again. The statistics we're about to share
will shock you. 83 .5 % of family dairy operations
fail to survive to the third generation. That's
not a typo. Eight out of ten dairy legacies simply
vanish. With nearly a quarter of operators retiring
within the next five years and most lacking any
real succession plan, we're staring down a crisis
that could reshape the entire North American
dairy landscape. But here's the thing. It doesn't
have to be your story. In today's episode, we're
breaking down why most succession plans fail,
what separates the survivors from the statistics.
and giving you a roadmap to beat the odds. Whether
you're planning expansion, maintaining current
scale, or haven't even started thinking about
succession, this episode could determine whether
your farm becomes a lasting legacy or just another
casualty. Let's get into it. Welcome, welcome.
Another deep dive is upon us, and this one, it
hits right at the core of, well, the future of
your farm. We're staring down a number today
that Frankly, it feels a bit like getting kicked
by a dry cow. 83 .5%. That's the staggering percentage
of family dairy farms the research tells us won't
make it to the third generation. 83 .5%. Yikes.
It is a sobering figure, yeah. No question. Looking
at the material for this deep dive, it really
lays out the stark... reality -facing North American
dairies. And it's not just about hitting production
goals or chasing market prices. It's fundamentally
about the passing of the torch, the successful
transition of the operation itself. Okay, let's
unpack this 83 .5%. Where does that statistic
actually come from? And I mean, why are the odds
so much worse for dairy farms compared to, say,
a family -owned hardware store? Well, that specific
83 .5 % number comes from research, like the
works cited from Iowa State. And what's fascinating,
what may be terrifying, is how much higher it
is. than the general survival rate for any family
business, which is already down around a dismal
16 .5%. 16 .5%, wow. Yeah. So dairy faces incredibly
steep odds when it comes to keeping the farm
and the family. The picture the research paints
is pretty blunt. It's an industry standing on,
like a cliff edge. They note that a quarter of
operators are planning retirement within the
next five years. And here's the kicker. Eight
out of ten farmers, according to that Iowa State
work, lack faith in their current succession
plans. Wait, hold on. So most people know they
need a plan. They maybe even have a plan on paper,
but they don't actually think it's going to work.
That feels like having a brand new, beautiful
rotary parlor system, but no way to cool the
milk. All the fancy tech is there. Looks great.
But the core function needed for survival just
isn't happening. Exactly. That's a great analogy.
And the ag census data, it really supports this
crisis of confidence layered on top of a crisis
of inaction. Barely half of farms, we learned,
have even started succession planning. Only half.
Right. And of those who have, only 20 % actually
believe their plan will be effective. It's this
widespread recognition of the problem without
effective action. So what are these massive hurdles
then? What's tripping up 83 .5 % of farms? The
sources point to three main areas. Financial,
familial, and, well, emotional roadblocks. Let's
dig into those, starting with the money mountain.
Yeah, the financial piece is huge. The research
highlights the sheer scale of capital required
in dairy today. This isn't your grandparent's
startup, not by a long shot. We're talking significant
numbers. Land costs north of, what, $5 ,500 an
acre in some places? Easily. A new parlor system
can easily set you back over $200 ,000. TMR mixers
costing more than luxury cars. And don't forget
the immense value tied up in breeding stock.
generations of genetic work right there. Trying
to convert your entire herd to A2A2 overnight?
That seems like child's play compared to this
financial hurdle. The research makes a really
pointed analogy here, expecting a successor to
somehow write a massive buyout check covering
all these assets while simultaneously keeping
the farm running and profitable. They state pretty
bluntly that the classic buyout model is effectively
crashing and burning for most operations today.
The numbers just don't pencil out for one individual
to shoulder it all up front. Exactly. Which shifts
us from the finances to the dynamics closer to
home. The research argues the real complexities,
the real time bombs, aren't ticking in the free
stall barn, but around the kitchen table. They
talk about issues like decades of smoldering
family conflicts left unaddressed, competing
visions for the farm's future that nobody dares
discuss. Oh, yeah. And communication breakdowns
so severe they make unreliable cell service look
like a stable connection. Right. And one critical
point highlighted by sources like Compure Financial
is that deep -seated need, you know, to treat
all children equally, it often seriously damages
the farm's survival. Trying to split things perfectly
evenly among siblings, some involved in the farm,
some not often means you end up having to sell
off productive assets just to square things up.
Exactly. It can leave nothing viable or certainly
nothing competitive to transition to the child
who's committed to running the farm. It starves
the farm to balance the scales outside of it.
That makes sense. And then you layer on the emotional
roadblocks, the kind no spreadsheet can navigate,
right? Oh, absolutely. The research talks a lot
about control. You might have mom and dad maybe
clutching the checkbook, wanting to maintain
control, while junior is desperate for enough
authority to actually make necessary changes,
invest, and move the operation forward. This
emotional standoff, it creates barriers taller
than your corn is in August. It's a bit like
trying to boost conception rates with premium
semen when nobody's checking heats, isn't it?
You can have the best technical plan, the best
genetics, the best intentions for the business,
but if you don't address the human dynamics,
the control issues, the communication, it's all
useless. Perfectly put. And the research from
Iowa State drives this home. 71 % of farmers
nearing retirement haven't even tagged a successor.
71 %? Yeah. So having a plan without addressing
the people involved, identifying who takes over
and preparing them, means all that technical
excellence amounts to, well, nothing. Okay, so
with those significant barriers firmly in mind,
what separates the successful 17 % from the 83
.5 % failures? According to the research, it's
not just luck or simply having deep pockets.
It's implementing a comprehensive blueprint,
one that tackles every dimension of the transition,
not just the balance sheet. Right, and a key
part of that blueprint seems to be getting started
early, like really early. Absolutely essential.
The research stresses that early planting isn't
just better, it's vital. Needing a 5 -10 year
runway. 5 -10 years. Yeah, that's roughly the
time it takes to grow genomically superior heifers
into the mature herd backbone. You can't rush
genetics and you really can't rush a successful,
sustainable transition. And research, like in
the Journal of Agribusiness, confirms this. That
waiting too long is basically setting yourself
up for failure. It confirms exactly that. Waiting
too long is fundamentally flawed, like planting
corn in November, as they put it. The timing
is just wrong for success. Okay, what about those
tough family discussions then? The ones everyone
avoids. Yeah, the research asks directly, are
you just hoping uncomfortable topics disappear
like mastitis without treatment? Huh. Good luck
with that. Right. Progressive families they found
don't leave communication to chance. They are
incredibly deliberate about it. How so? What
methods are they using? Well, they detail specific
methods used by successful operations. Things
like structured monthly meetings with actual
agendas, not just spontaneous high -tension talks
when someone's mad. Makes sense. They use listening
-first protocols where everyone gets their say
without interruption. They keep written records
of agreements and sticking points. to avoid that
he said, she said later on. Crucial. And crucially,
they aren't afraid to use professional facilitators
for baggage dating back to childhood because
some things just can't be resolved internally.
Think of applying this, like applying religious
dedication to your herd health protocols, consistent,
deliberate, non -negotiable. Okay, and that financial
mountain we talked about. Is the old way of doing
things just torpedoing chances from the start?
Pretty much. The research says smart operations
are dumping the old buy -everything -or -nothing
model faster than culling a three -quartered
chronic. It's like precision feeding versus a
one -size -fits -all TMR. The industry evolved
to be more precise. And succession finance has
to evolve, too. So what's the leading alternative,
then? One leading advisor recommendation the
research highlights is splitting operations.
This means creating two distinct entities. An
asset -holding company. where the senior generation
keeps the land and major equipment, and then
an operating company, which the successor runs,
focusing on the day -to -day production. Right,
right. I've heard of that. And there was a Canadian
Bar Association case study. Yes, exactly. It
provides a great analogy. It's cleaner than separating
dry cows from the milking string while efficiently
serving both purposes. This structure significantly
slashes the successor's upfront capital requirements.
They don't have to buy the land and expensive
equipment immediately. And it gives the senior
generation income. Exactly. It creates a guaranteed
retirement income for them via lease payments
from the operating company to the asset company.
It's a win -win, potentially. Okay, let's talk
advisors. Your advisory team is critical, right?
The research had a sharp point about that. Well,
yeah. It poses the question, would you let a
vet who only treats parakeets near your prized
genetics? Absolutely not. Right. So why trust
generic financial advisors with your farm's multi
-generational future? You need specialists. You
need agricultural estate planners who've actually
seen dairy transitions, who understand the nuances.
Financial advisors who can tell a TMR mixer from
a cement truck. Precisely. Don't trust your farm's
future to advisors lacking deep agricultural
expertise. Just like you wouldn't trust your
genetic program to someone who thinks an RHA
is some kind of book report. Expertise matters
immensely here. Okay, another interesting strategy.
Trial periods for successors. Dating before marriage.
Yeah, the research strongly suggests this. Forward
-thinking farms are now using structured trial
periods with clear metrics, clear responsibilities,
and importantly, escape hatches before signatures
hit paper and the formal transfer occurs. That
makes so much more sense than dropping six figures
on embryo work without genomically testing the
bloodlines first. Define specific responsibilities,
set performance benchmarks for the successor,
and crucially, create clear exit routes if the
fit just isn't right for either party. Seems
smart. It is smart. And finally, developing successors.
This needs the same systematic approach you apply
to building your herd, right? The research notes
successful plans include components like formal
education, maybe some crucial off -farm experience
for broader perspectives. And then not to see
how others do it. Exactly. Gradual increases
in responsibility to build confidence and...
management muscle, and regular feedback, both
positive and corrective, to catch problems early,
just like monitoring heifers for growth targets.
Because you can't expect half -baked training
to produce a fully capable successor. Nope. Like
managing replacement heifers, it requires dedicated
attention, a clear plan, and consistent execution
over time. Okay, so the research then pivots
a bit, looking at the strategic decisions about
scale that impact succession. They mention nearly
half of dairies see expansion as their ticket
for the next generation. But is that just, you
know, chasing trends? Like everyone chased those
super tall Holsteins in the 80s without asking
why. That's the key question. The research is
clear. Size for size's sake is folly. The fundamental
question has to be, does growth truly fit and
support your transition story? Or is it just
adding complexity and debt? If expansion is the
path, what needs to be considered? Well, the
economics absolutely have to pencil. Rigorous
analysis, you know, how fixed costs dilute across
larger herds, capital efficiency metrics down
to the penny, projecting cash flow through that
capital -hungry growth phase. And financing?
And critically, structuring financing to protect
both generations from excessive risk. That's
key. And technology plays a huge role here, right?
Especially with expansion. Oh, absolutely. Growth
is often linked to modernization rotary parlors,
that slash labor, sophisticated herd management
software turning data into decisions, automated
feed systems for consistency, precision repro
tech. Research, like from Dairy Business Innovation,
documents how these painful upfront investments
actually improve quality of life and resilience
for the next generation. It makes the farm more
attractive, frankly. But it needs to be strategic,
not just emotional, not just bigger is better.
Exactly. The research urges skepticism towards
that old mantra. While USDA ERS confirms scale
economies exist, innovation today creates success
at diverse sizes. What truly matters more is
strategic market alignment, operational excellence
at your chosen scale, differentiation, maybe
niche products, maybe components, and those robust
financial frameworks tailored to transition.
It's like selection indexes shifting from just
height to lifetime profit, valuing overall performance
over simple size. Well said. And research from
Michigan State found that investing in facility
capacity and superior genetics often outperforms
simply buying more land for successors with less
capital. Smart growth, not just land grab. processor
relationships too, that seems critical before
expanding. Absolutely crucial point, the research
highlights. You must lock down processor willingness
to take more milk and clarify terms, component
premiums, transportation, base excess rules before
you break ground. Nothing derails expansion faster
than surprise deductions or finding out they
don't want your extra milk. And involving the
next generation from day one. Do or die for expansion
success, according to the sources. Expansions
succeed when successors are involved from the
get -go, collaborating on business plans, defining
roles, discussing financial structures, documenting
timelines before any dirt moves. It has to be
their plan, too. Okay, but expansion isn't the
only answer. What about staying the course? Steady
state? Yes, and the research makes a strong case
for the strategic power of that. Maintaining
your current scale can be a brilliant move. Creating
a level of stability expanding farms might envy
during a tricky transition period. And the focus
shifts then, maybe towards components. Exactly.
Component focus literally transforms your milk
check, especially under MCP pricing. We saw that
2023 data, butterfat driving nearly 60 % of revenue,
protein adding another 31%. Wow. Maximizing components
often outperforms the obsession with just adding
more cows. The research details strategies. prioritizing
component genetics, dialing in rumen fermentation
for butterfat, eliminating acidosis, mastering
seasonal consistency. So you need to ask yourself,
income per cow? or income per pound of components?
That's the question. The research suggests analyzing
this often reveals more profit potential in the
current herd than you might think. And risk.
Steady state must have a different risk profile
during transition. Generally, yes. Risk profiles
rarely match perfectly between generations. Maintaining
scale often creates a saner risk profile during
transition, lower fixed costs, potentially reduced
debt, simpler management, more nimbleness when
markets inevitably shift. It's like everything
rations for optimal room and function. not just
maximum production. It's about health and stability
for the long haul. So success means optimizing
resources you already have. Yes. Obsessing over
return, per unit per acre, per labor hour, per
dollar of capital, tracking costs religiously,
maybe strategically outsourcing non -core functions,
mining DHIA data for every ounce of insight,
that relentless pursuit of efficiency gains.
And lifestyle. Does that factor in? Increasingly
so. The research acknowledges that maintaining
a manageable scale can support quality of life
during a complex transition. That's incredibly
valuable for young families needing flexibility,
for multiple generations needing predictable
income, for seniors wanting continued involvement
but not the full burden. Or just when work -life
balance trumps bragging rights about herd size.
Precisely. Analogy time. Your best cows need
dry periods for lifetime productivity. Perhaps
your family business needs to operate sustainably,
not just maximally, to ensure its long -term
health. So these individual decisions, expand,
stay steady, retire, are collectively reshaping
the whole industry landscape. Absolutely. Understanding
this macro trend positions your operation advantageously,
whatever path you choose. And the consolidation
trend is undeniable. Oh yeah, the research details
this steamroller. U .S. farm numbers plummeting
from, what, 648 ,000 in 1970 down to barely 24
,000 in 2022. 24 ,000? That's stark. It is. And
2 ,500 shuttered in 2020 alone. Meanwhile, milk
production climbs, absorbed by mega -dairies.
Operations over 2 ,500 cows now produce over
60 % of the nation's milk. But the research is
really clear. Bigger doesn't automatically mean
better. Innovation makes success possible across
sizes. Exactly. It's about that strategic alignment,
operational excellence, differentiation, and
those robust financial frameworks tailored for
transition. It's like selection indexes evolving
from just height to lifetime profit. Successful
dairies optimize their specific model for their
goals. And technology is a great equalizer here,
isn't it? Not just for the giants. It demolishes
old limitations across farm scales. Robotic milkers,
rumination monitors, precision feeding, heat
detection tech tools, unimaginable previously,
are now accessible. They slash labor needs, improve
work -life balance, especially robotics, allowing
more flexible milking schedules, enable data
-driven decisions that boost profitability. And
they attract a different kind of successor, maybe.
Definitely. They attract tech -savvy successors
who might be put off by the traditional drudgery.
Like genomics democratizing access to elite genetics,
technology is leveling key operational playing
fields. Component strategies are also reshaping
markets because of MCP pricing. You have to optimize
for that now. You really do. Are your genetics
and feeding programs truly optimized for this
shift? The progressive farms we read about prioritize
component genetics and actively cultivate processor
relationships that specifically reward composition.
It's a different way of thinking about maximizing
value from every cow. Environmental considerations,
too. That's becoming a bigger part of succession
planning. Increasingly impacting it, yes. Forward
-looking farms integrate sustainability not just
for the planet, but because it prevents regulatory
headaches and actually slashes costs. Things
like emission tech, carbon sequestration in soils,
smart nutrient management planning, water conservation,
energy efficiency is becoming a fundamental part
of operational resilience and future -proofing
the farm for the next generation. Okay, hearing
about real -world examples really helps cut through
the theory. What success stories did the research
highlight? Yeah, they provided some good ones.
One example detailed was an LLC formation on
a 220 cow operation. The owners formed a limited
liability company to hold the assets, land, buildings,
equipment. Then they sold incremental interest
in that LLC to their 30 -year -old successor
over time, lowering the upfront buy -in. Smart.
They also created a formal, decade -long employment
agreement for the senior generation to define
their continued role in income and establish
clear management divisions. And the benefits.
Liability protection, streamlined transfers over
time, potential tax advantages. It's like a well
-designed breeding program, adapting to market
signals. putting guardrails in place that provide
structure while preserving flexibility. And that
asset operations splitting model from Canada,
that saved a farm. It did. It saved a dairy that
seemed financially impossible to transfer otherwise.
The senior generation's corporation held the
land and equipment, while a second operating
company, which this successor primarily bought
into, ran the cows in production. Leasing the
assets from the first company drastically slashed
the successor's capital needs and, crucially,
guaranteed retirement income for the senior generation.
Analogy time. Like separating mature cows from
first lactation heifers for optimized management
of both groups, different needs, different structures,
same overall goal of herd productivity. Okay.
Targeted expansion. Ideal dairy farms. Right.
Their growth wasn't random. It was centered on
specific investments. A 72 -cow carousel parlor,
energy technology. They engaged external audits
for efficiency and incentives. The focus was
on achieving scale efficiencies in specific areas,
not just getting bigger across the board. So,
like, selecting genetics that express their full
potential under your unique management conditions.
Optimizing the system for a specific target.
Exactly. And then there were alternative models,
like Challenge Comb in the UK. A fundamental
shift. They went pasture -based organic. 100%.
Slashed feed costs, improved herd health, better
environmental impact, and allowed them to target
premium markets. It required a fundamental reconceptualization
of their dairy. Challenging conventional wisdom,
like innovative crossbreeding programs, questioning
Holstein dominance, but delivering potentially
better health and components. Precisely. It shows
there are multiple paths to success if you're
strategic. Okay, so after seeing what works...
The research also clearly states what kills transitions
dead in their tracks. Yes, and it's depressingly
consistent. Waiting until retirement is looming,
the planning needed to start years earlier. Fuzzy
math that ignores the genuine financial needs
of multiple households involved the senior generation
and the successor's family. Sweeping that fair
versus equal conflict under the rug. Until it
explodes and demands selling assets just to keep
the peace, undermine the farm. Half -baked successor
development that creates critical skill gaps
just when they're needed most. And handshake
agreements. Oh, the handshake agreements that
completely evaporate when memories differ down
the road or tragedy strikes. Fatal. It's the
brutal truth reiterated in the research. When
83 .5 % fail, the culprits aren't usually just
economics or market forces alone. No. It's insufficient
planning, poor communication, and inadequate
successor development. The industry analysis
consistently reveals these human factors do most
transitions more than milk price ever could.
So successful transitions aren't accidental.
They're built deliberately, brick by difficult
brick. Do you, the listener, have the stomach
for the uncomfortable conversations and tough
decisions required? The research we looked at
provides a battle -tested roadmap. It really
does. So based on everything we've dug into,
let's distill that action plan. Seven steps that
consistently show up in the success stories.
Okay, number one. Start planning yesterday. Seriously.
Document your current operational reality assets,
liabilities, management systems, performance
data. Establish baselines like comprehensive
milk recording and financial statements. You
can't measure progress or make informed decisions
otherwise. Two, talk, then talk more. Schedule
regular family meetings specifically for succession
planning, not just about day -to -day stuff.
Create safe spaces for honesty, acknowledge emotions
but focus on solutions, and don't hesitate to
use mediators for those long -standing landmines.
Apply the same dedication you would to your herd
health protocols, consistent and non -negotiable.
3. Hire specialists. not generalists. Get agricultural
attorneys who understand farm law, financial
planners focused on farm transitions, accountants
who know dairy taxes backwards and forwards.
Don't saddle your farm's future with generic
advisors. It's like trusting your genetic program
to someone who doesn't understand a sire summary.
Get the right people. Four, build successors
systematically. Map out the technical and management
skills needed for the future farm. Create meaningful,
increasing decision -making opportunities for
the next generation. Provide honest, actionable
feedback regularly. Develop your successors with
the same meticulous attention you give to your
replacement heifers. They are the future of the
farm. Five, rethink financial structures. Explore
options like entity splits, phased transfers
of ownership, strategic leases. Successful succession
demands creative approaches that balance opportunity
for the successor with security for the senior
generation. Like moving from conventional tie
stalls to robotics, sometimes it requires fundamental
restructuring. Don't be afraid to look outside
the old box. Six, put everything in writing.
Document ownership, management roles and responsibilities,
financial arrangements, and crucial contingency
plans what happens if someone gets sick or passes
away unexpectedly. Your succession plan deserves
the same detailed attention as your breeding
program. Clear objectives, measurable outcomes,
regular evaluation, no handshakes. And finally,
seven, review and revise relentlessly. Schedule
annual progress assessments with your family
and your advisors. Make necessary course corrections
as markets change, family dynamics evolve, or
plans hit unforeseen bumps. Like monitoring feed
efficiency and tweaking rations based on results,
this keeps the plan on track and adaptable. It's
not a one -and -done document. The future of
the dairy industry, whether it's expanding operations,
optimized steady state farms, or creative alternative
models, really belongs to those with enough guts
to tackle succession head -on. Intentional, documented
planning isn't optional anymore. It's survival.
So here's the brutal honesty mentioned in the
research for you to consider. Are you building
something that outlasts you, actively creating
a pathway for the next generation? Or are you
just maintaining an operation with an expiration
date that kind of matches your own? This industry
doesn't need another sad statistic. It needs
your farm as a lasting legacy. And unlike issues
like mastitis or repro problems that sometimes
strike despite your absolute best prevention
efforts, the research emphasizes that succession
failures Almost always trace back to things entirely
within your control. Inadequate planning and
poor communication. Things you can fix. So here's
the provocative thought to mull over as we wrap
up. You have a choice today. Join the 17 % success
stories or become part of the 83 .5 % failures.
There's really no middle ground here. Your action
or your inaction is already writing your farm's
final chapter. What will you choose? That's a
wrap on today's deep dive into dairy succession
planning. If those statistics didn't get your
attention, nothing will. Remember, 83 .5 % failure
rate isn't inevitable if you're willing to take
action. The choice is yours. Join the 17 % who
build lasting legacies or become part of the
83 .5 % who watch their life's work disappear.
There's no middle ground and waiting until tomorrow
just moved you one step closer to failure. Head
over to www .thebullvine .com to read the full
article Download our succession planning resources
and join the conversation with other forward
-thinking dairy professionals who refuse to become
statistics. If today's episode challenged your
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