ERIC VANSTROM- An Example of the Next Generation of Farmers.
One of the most exciting things about being a New York Farm Net consultant is being able to work with the next generation of farmers. Eric Vanstrom is a good example of the next generation. I have worked with Eric since he first started his dairy operation in 2006. Eric started with 40 cows in a rented facility, since his father was still milking cows on the home farm. Our first task was to find financing for the 40 cows. Most lending institutions avoid lending to start-up dairy operations, and Eric was able to only borrow from FSA, the so called "lender of last resort".
The rented facility provided Eric with the start -up he needed to plan a move back to the home farm. This would enable him to expand his herd to 60 cows, but there were a lot of improvements that would be needed to make the expansion of the herd possible. Eric planned and constructed a six stall flat parlor, and made improvements in the barn resting area.
The first two years were nothing short of a nightmare for Eric. Money was tight, and expansion funds were not available. The difficult cash flow crunch that hit all dairy farms in 2009 hit Eric just when he was in the expansion, building mode. Although often discouraged, he never gave up!! He continued to believe that he could make this dairy farming thing work.
In the spring of 2010, Eric asked for more assistance from Cornell Cooperative Extension, and a Dairy Profit Team was set up for the farm. Specialists from extension, nutrition, crops and his lender agreed to meet several times each year to discuss options for the farm, and to assist Eric with suggested improvements. NY FarmNet was invited to participate on the Profit Team, and provided Eric with annual cash flow budgets, and other financial projections. The Profit Team continues to meet 2-3 times each year to measure progress and to discuss changes for the farm. Eric has been chosen to participate in the Dairy Acceleration Program, and NY FarmNet will be providing him with a five-year business plan.
Success does not come easy- it often involves a lot of hard work. A review of the accomplishments on this farm is a testament to Eric's tenacious attitude, and his willingness to make hard choices. Eric operates an intensive grazing system, and has perfected his rotational grazing by following recommendations given by experts in that field. There is water in each paddock; gravel walk ways have been extended to all paddocks. High tensile fencing with a very good fencer, keeps the cows where they belong! Free stalls have been installed in the barn, and a concrete feeding area has been built. Production continues to improve each year, and operating expenses are kept under control.
Although Sam, Eric's wife, does not work at the farm, she is his biggest supporter. They recently enrolled in the David Ramsey "Financial Peace University" course, because they wanted to have more control over their finances, both personally, and on the farm. It has already provided them with information that will assist them with making intelligent financial decisions.
We all face many unknowns in life, and being prepared to meet challenges head-on is usually a pretty basic strength, whether in our personal lives, or in a business. Eric and Sam meet their challenges with good information, a positive attitude, and a desire to be successful. I expect them to be examples for others in the dairy business as they continue to improve their own operation. It's a joy to be involved in their progress.
BARNES NEED MORE BARNS
When the Barnes’ needed more barns, they knew how to get it done; they reached out to FarmNet to bring the resources to the kitchen table.
Mike and Tammy Barnes had a successful 100-plus cow dairy business in 2010. They grew all the forages plus soybeans and HMSC needed to support the dairy on the 540 acres they operated. Their two sons worked for Mom and Dad, Jed full time and Jake part time. In 2010 they were in an expansion mode with a target of milking 240 cows. This posed a number of questions about what should be the best business structure to bring the sons into a financial involvement with the business.
After their initial research into business structure, including partnerships, S-Corps, and LLC’s, Mike called NY FarmNet to get help in better understanding what option was best for them. Dewey Hakes, FarmNet financial consultant, worked with the Barnes family. The family discussed their ideas, farm workload, individual aspirations, risks, and concerns.
To help bring it all together, Dewey suggested that Jed put together a written business plan as a tool to communicate his expectations for the farm. The FarmNet Business Plan Template was offered to get the process started. In a couple of weeks, with several exchanges between Jed and Dewey, Jed developed a solid business plan. This business plan became the basis for subsequent discussions with their accountant, attorney and banker, as well as the family.
The business plan not only addressed the business transfer to the next generation, but it also pointed to the need for an estate plan for Mike and Tammy.
NY FarmNet arranged a meeting with Attorney Jeff Fetter at the Barnes Farm. This meeting also included their accountant, John Wheeler. About three months after this, Jeff Fetter presented his proposal for the legal documents to “make it all happen” based on the business plan. An estate plan was also formalized with Jeff’s help.
Three years later, the “Cobar Dairy LLC” has accomplished two building programs. Both sons, Jed and Jake are engaged in the business full time, and they are now milking 300 cows. Even a house fire in 2012 has not derailed their well-executed plan.
NY FarmNet Consultants Integrate the Next Generation into Moserdale Farm
Andrew Moser contacted NY FarmNet when he wanted to evaluate the potential of returning home to Moserdale Farm in Copenhagen, NY to work with his father Doug, and business partner Patty Beyer. A recent divorce in the family was a point of concern for Andrew, and he wanted an objective opinion on whether he should consider entering into a business agreement at Moserdale Farm. Financial Consultant Donald New was assigned to work with Andrew, and encouraged him to go into business with his father and business partner Patty, provided certain changes were made.
Properly entering into a business agreement required significant work, and New first evaluated the financial performance of Moserdale Farm to determine whether the business could support another member. A bank that financed the Mosers recently dropped all agricultural loans, and Doug had to find a new lender. New saw an opportunity to restructure debt, which would alleviate cash flow concerns that Moserdale encountered. In addition, he also worked with Doug and Andrew to complete a NY FarmLink-developed workbook on intergenerational farm transfer. New’s personal experiences farming with family helped him gain confidence with all parties involved at Moserdale Farm.
Financial considerations are merely one aspect of formulating a business agreement. Personal issues such as communication, having a shared vision, and jointly setting goals are equally important. Personal/Family Consultant Leonard Freeborn worked with the Moserdale Farm management team on issues such as improving communication to set goals as a team. Andrew and Patty both credit Doug as being a people person and having a desire to create a harmonious working environment. This desire helped Freeborn achieve successful results in enhancing the Moserdale team’s interpersonal communications skills.
Valuing each individual’s skills and seeing potential for Moserdale Farm’s future provided encouragement for Doug to create an opportunity for other business partners to gain equity. Such long term thinking has benefited the farm business in many ways. For example, Andrew recently purchased property that Moserdale Farm had rented for the past six years. This purchase added another 260 acres to the farm and illustrates the benefits of cultivating a positive land lord/tenant relationship.
Business growth is also allowing Patty Beyer to have an opportunity for building equity in the farm business. In the 1990’s, she left Cornell Cooperative Extension to start a heifer boarding business. Beyer presently boards heifers for Moserdale and keeps financial records. Her goal is to begin building equity in the milking herd. This goal will be realized when the farm begins expanding from the present size of 340 cows to 500 cows.
Enlisting the assistance of others is helping the management team at Moserdale Farm realize a goal of expansion. A key factor in moving the business forward, cited by all three members of the Moserdale team, is persistency from NY FarmNet in keeping the team focused on implementing a plan for the future. Part of the plan begins with forming a new business structure to allow for protection against liability, as well as providing opportunities for partners to build equity. In addition to assistance from NY FarmNet, Moserdale is working with Farm Credit to place farm assets into a Limited Liability Company.
Wake Robin Farm’s Transition to Value Added Dairy Production
Bruce and Meg Schader established Wake Robin Farm in 1999 as a family owned vegetable and cut flower farm business. The farm started operating under the Community Supported Agriculture model, where customers purchase shares of production prior to harvest season. Over time, demand grew, and the Schaders still continued to supply all labor and management for their farm. Owning and operating a vegetable farm requires considerable labor during peak production months, and the Schaders were looking for options to spread their labor more evenly over the year. An option they wanted to explore was the feasibility of incorporating a value added dairy enterprise into their overall business.
Meg was looking for assistance on project feasibility and suggestions for marketing a new product. As a result, she contacted NY FarmLink to discuss a multitude of factors related to finalizing a business plan. A renewable grant from the NY Farm Viability Institute provides funding for NY FarmLink to work with farmers such as the Schaders, who request business planning assistance. An initial step involved evaluating production costs on a per unit basis to identify which container volumes would offer the best returns when selling milk. Starting a dairy enterprise from the ground up required significant inputs, and construction cost overruns are of great concern in such instances. A 15 percent contingency was added on to construction cost projections, which turned out to be conservative.
Producing a dairy product with a limited shelf life requires astute marketing, and the Schaders did considerable homework in establishing outlets for their dairy products. Before purchasing cows, they surveyed potential customers and projected product demand. Pasteurized whole milk and yogurt are two products produced at Wake Robin Farm, and there are a plethora of establishments that now carry Wake Robin Farm dairy products. Local grocery stores such as Green Hills and Big M are merely two examples of outlets that sell either whole milk, or plain or vanilla yogurt from Wake Robin Farm. Another market outlet is the Syracuse Regional Market, and the Schaders have found that Eastern Europeans, who purchase food at the market, have a fondness for whole milk.
At the present time, the Schaders are processing 100 gallons of milk per week from their herd of Jersey cattle. Future plans include significantly expanding the amount of milk processed. Allocating production between bottled milk and yogurt is described by Bruce as a “balancing act”. All products are marketed within a 30 mile radius, and a business goal is to continue to sell everything locally. The Schaders have transitioned from cultivating vegetables to cultivating markets. An illustration of this transition is that their cultivating tractor is now for sale.
NY FarmNet Newsletter, Spring 2007: 25, p.1