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About The daily Astorian. (Astoria, Or.) 1961-current | View Entire Issue (March 15, 2022)
COAST RIVER BUSINESS JOURNAL BUSINESS NEWS MARCH 2022 • 7 Dairies must look beyond government help, economist says By MATEUSZ PERKOWSKI Capital Press SALEM — Dairies need to sharpen their business skills because they can’t count on income from the gov- ernment anymore, according to economist Dave Kohl. Federal support has helped the agricultural econ- omy weather the turbulence of the past few years, but that time is ending, he said. “Basically, the government put us on steroids. Now we’re going to have to cut our teeth as we move forward,” Kohl said last week at the Oregon Dairy Farmers Association’s convention in Salem. Federal cash represented about 72% of dairy farm- ers’ net income in 2020, the year the coronavirus pan- demic broke out, he said. “There are still going to be some checks but they’re not going to be as generous as in the past,” Kohl said. To thrive in spite of the uncertainty, dairies should focus on incremental improvements to their planning, goal-setting and record-keeping, he said. “People who do well, do a lot of little things 5% better. A lot of the 5% is the boring stuû ,= Kohl said. <It9s called sweating the small stuû .= A thorough understanding of a dairy’s cost of pro- duction is key to û nancial health, but too few farmers heed that advice, he said. “Less than half of ag businesses know their cost of production,” Kohl said. The upcoming decade is going to see a major gen- erational transfer of capital — how that’s managed will also determine whether businesses thrive, he said. “If you don’t do that properly, you know who wins? Uncle Sam and a bunch of high-priced law- yers,” he said. The challenges facing farms will likely mark the 2020s as <the decade of economic and û nancial divide,” between those who adapt to the changes and those who don’t, Kohl said. “Volatility can be challenging but it can also be opportunistic,” he said. Oil prices will be worth watching: Current high levels are undermining consumer conû dence, and 80% of farm inputs track those û uctuations, Kohl said. “Our economy is very enmeshed with oil,” he said. The general economy can expect to face head- winds from the aging of the Baby Boomer genera- tion, since many are likely to see declining health this decade, he said. “Watch us get more conservative in our spend- ing,” Kohl said. Labor expenses are a major consideration for farms and other businesses, which will have to invest in robotics, he said. Until self-driving trucks become a reality, though, the U.S. is likely to continue enduring supply chain problems due to the trucker shortage, Kohl said. Dairies will need to compete with milk alterna- tives and the farm industry should generally expect impacts from a greater focus on environmental, social MATEUSZ PERKOWSKI/CAPITAL PRESS Economist Dave Kohl speaks at the Oregon Dairy Farmers Association’s convention in Salem. ‘BASICALLY, THE GOVERNMENT PUT US ON STEROIDS. NOW WE’RE GOING TO HAVE TO CUT OUR TEETH AS WE MOVE FORWARD.’ Dave Kohl, economist who spoke at Oregon Dairy Farmers Association’s convention in Salem and governance values, he said. Activist investors are leading the charge to improve company scorecards on these criteria, which is bound to aû ect farmers and cause controversy, he said. Kohl said his creamery business was evaluated on these “ESG” values by a major buyer. Its reliance on recyclable glass and minority and female employees helped the creamery pass the test, he said. “You checked these boxes, you can still sell to us.” WE HAVE THE EXPERTISE TISE TO HELP YOUR BUSIN INESS SS SUCCEED. We’re pleased to welcome Joe Schulte e to lead our Commercial Business Development t team on the Northern Oregon Coast. With 25 years of experience in Clatsop County an nd the financial services industry, he has the knowledge and passion to help local businesses plan for future financial success. Contact Joe today! Joe Schulte 503-738-6836 Market President, Commercial Business Development, Oregon Coast Region jschulte@fibrecu.com 2315 Roosevelt Dr. Seaside www.fibrecu.com Federally Insured by NCUA ILikeTLC FibreFamily