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.”
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