By Dave Coggins
Recent news showcased how more than 50 dairy farms were nearly devastated by the Canadian trade policies that forced Grassland Dairy Products to drop them as patrons. While that roller-coaster experience has ended with nearly all of the affected farms finding new processors, it should serve as a wake-up call for every farm owner to plan for the unthinkable.
Most farmers are well-equipped in terms of insuring their business against potential acts of nature. But many are not so prepared for other types of disasters that warrant having a “Plan B” if they want their business to survive.
While it’s human nature to want to avoid the unthinkable, planning for all types of disasters is a crucial part of farming operations.
Now is the time to take an inventory of the items below and to pinpoint your farming operations’ vulnerabilities. I suggest assigning a number to each of the six items below, with one being the area in which you’re most vulnerable and six the least.
• Public relations challenges. What’s your plan if your business experiences a significant manure spill, adverse animal welfare publicity or the injury/death of an employee while working on the farm? Communication and transparency are key, and determining messaging when you’re in the throes of such an emotional situation is not the right time to do so.
• Serious disease outbreaks/serious toxicity in feed. Most farmers are aware of recent examples of disease outbreaks in the hog and poultry industries, but dairy farmers are not immune. Have you worked with a veterinarian to identify key disease risks and protocols?
•Weather/acts of nature. You may be well-insured, but do you have a plan for what you do and how you will sustain operations while you’re waiting for the insurance check? Ask yourself if there are back-up locations where you could house your animals if shelter is destroyed. What if your power is cut off? Do you have fundamentals such as backup generators in place?
• Serious labor shortages. In today’s political environment, farmers are more vulnerable than ever because they have a large immigrant work force. Where would you obtain temporary help if you lost your labor?
• Serious injury/disability/death of key managers or employees. Life insurance is an obvious mitigant to this risk. But in the event of a serious injury or death, how do you operate without the know-how and labor of that key employee? Where have you documented key information only that employee knows?
• Loss of key suppliers, key advisers and other crucial partners. The Grassland situation raised the issue on the processor side of the equation, but what would happen if you suddenly lost your nutritionist, veterinarian, heifer raiser, custom farming operator or feed suppliers? To a large extent, many of these individuals are like members of your employee base in that they have an intimate knowledge of your operations and act as a trusted extension of your business. Sure, partners can usually be replaced (although finding a new custom farming operator is a challenge), but what do you do in the interim?
After you’ve listed the vulnerabilities in order of priority, I recommend brainstorming potential solutions to each with your management team. Document your plan and test parts that can actually be tested. Then, just as you revisit a business plan regularly, revisit your disaster plan annually. It may be the difference between your farm’s viability and its demise in the event of a disaster.
Dave Coggins is the chief banking officer/executive vice president for Investors Community Bank.