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By Sonja Heyck-Merlin
In this issue, we used a slightly different format for the featured farm. It is well known business assessment practice called a SWOT analysis, and is a tool that all farmers can use to assess their business.
What is a SWOT analysis?
A SWOT analysis is a tool used for business or personal analysis. SWOT is an acronym which stands for:
Strengths: internal factors that give a competitive edge to a company
Weaknesses: internal factors that can be harmful
Opportunities: external favorable situations which can bring a competitive advantage
Threats: external unfavorable situations which can negatively affect the business
Because strengths and weaknesses are internal, they can be directly managed by the business. Opportunities and threats are external and the business can only anticipate and react to them. The reasons for conducting a SWOT analysis vary, but in its most basic form it is a lens through which to analyze a business. This SWOT analysis provides an opportunity to both learn about Annie and Ryan’s farm, and to study their internal and external positioning as they begin to make their transition to farm ownership.
Annie and Ryan met at the 2015 NODPA Field Days and were recently married! Ryan (25) grew up on an 80-cow dairy, five miles outside of Truxton, New York. His parents went organic in 2007 in what was Ryan’s first year of high school. Post-high school, Ryan attended two semesters of college, but decided he’d rather find a way to milk his own cows.
In 2013, Ryan rented an 80-stall stanchion barn from a family friend. “When I got started, I only had a few cows at my parent’s farm,” Ryan said. “I started out by buying about 40 conventional unbred heifers,” which he began to transition to organic production in 2012. “The barn is small and antiquated but it works,” Ryan said.
Annie (21) grew up in Silicon Valley; her dad employed at Google and her mother at the University of Berkeley. She and her mother moved to New York when she was 16, and Annie joked that she had “almost never seen a cow before the move.” “My mother met a dairy farmer down the road and encouraged me to visit the farm. I began milking with him one night a week,” said Annie, explaining the roots of her farming career.
Through the end of high school, she worked on a 150-cow conventional dairy, and began to seriously consider agriculture as a career. “It seemed unrealistic,” she said, “so I applied to nursing school.” While in nursing school, she attended the NODPA Field Days and met Ryan. She will graduate from nursing school this spring, but her plan is to farm full-time with Ryan.
The couple recently closed a deal on a 248-acre hilltop farm in Cincinnatus, New York. Unable to obtain a traditional mortgage, they worked with a financing organization called Dirt Capital Partners, which holds title to the land. At either year six, or year nine, depending on when they find conventional financing, Annie and Ryan will buy the operation from Dirt Capital Partners. They currently live in the farm house on the new property and commute 14 miles to their rented facility. “The plan is to move the cows over during their seasonal dry period at the beginning of 2019,” they said, and added, “they are looking forward to walking out the door of their home and being at work.” They plan to continue leasing the land, but not any of the buildings, on the rental property.
Hidden Meadows is a seasonal dairy, freshening in April and May. The herd of 50 milk cows is 25% Jersey, 25% Holstein; the rest are crosses of the two breeds. By mid-October, they drop evening milking and milk once-a-day until dry-off. Their target production goal is 11,000 pounds per lactation. During the grazing season, the herd gets 75-80% of their DMI from pasture, supplemented with cornmeal. Other than the cornmeal, the cows eat baleage on both ends of the grazing season and during their dry period.
Youth and Optimism:
Annie said that she and Ryan are fortunate to have time on their side. “We’re able to focus on our work, we have plenty of energy, and no children yet,” said Annie. She went on, “We have a diversity of experiences which is beneficial to our partnership. We are both willing to crunch numbers and look at the books, and we both love reading, listening, and learning about everything.”
Relationship with Dirt Capital Partners:
“We were outgrowing our rented facility and decided to begin looking for a farm,” Ryan said. Their parameters were that the farm be the right size, able to certify, and close to both their rented farm and Ryan’s parent’s farm. They found a farm sooner than they expected, but didn’t have the 20% down payment required to obtain a traditional mortgage.
A local farmer encouraged them to contact Dirt Capital. Dirt Capital invests in farmland in partnership with farmers throughout the Northeast United States, promoting land access and security for sustainable farmers.
They filled out a preliminary application. Dirt Capital responded positively, and set up a farm visit. “They wanted to see our existing operation,” Ryan said. “We also provided them with cash flow reports, a business plan, and three years of records. After that, we got the go-ahead to start negotiating on the price of the farm.”
Dirt Capital purchased the property. Annie and Ryan lease the farm from Dirt Capital at a cost of 5% of the purchase value per year. “We have the option to purchase at either year six or year nine,” Ryan explained about the terms of the arrangement. “There is a set price at each of those times with the value increasing from year six to year nine.” Because of this, they hope to source traditional lending by year six. Taxes and insurance are covered by Annie and Ryan during the lease period.
“Another advantage of this lease is that any improvements made to the property during the lease period are not included in the future purchase price,” the couple said. “Dirt Capital has given us the opportunity to have secure land tenure to build enough equity in cattle so we can eventually obtain a traditional mortgage.”
“One of the reasons I like being seasonal,” Ryan said, “is that I don’t feel compelled to own my own haying equipment.” The length of the pasture season in central New York, and a two to three-month dry period means there is less demand to put up large volumes of high quality feed. A contractor put up 800 bales of baleage in 2017.
Another reason he prefers being seasonal is that he likes doing a lot of one thing at a time. “All the calving gets done and over with at the same time. We only have to milk fresh heifers for two months. All the cows get dried off at once,” he said. “I like being able to keep the cows on the same schedule,” Annie added. “It doesn’t take much longer to feed 20 calves than 5. When we pregnancy-check we can do it all at once.” “There are economies of scale on a small-scale dairy such as this by doing everything all at once,” noted Ryan.
Seasonality is also an advantage because they out-winter their milk cows. “I wouldn’t out-winter milking cows,” said Ryan. “This way I don’t have to spend all winter hauling feed in and manure out.”
During Ryan’s first few years, he was able to use his parent’s haying equipment to put up his stored feeds. When there are cows that fall out of the seasonal window, he was able to send them to his parent’s farm (barring conventional cows that he transitioned in the one-time transition allowance). “Our parents have been very supportive of our choices,” expressed both Ryan and Annie. “We trade labor and we can call on each other for reinforcements,” said Ryan, describing the benefits of being close to family.
Youth is a strength, but can also be considered a weakness in this circumstance. “We’re pretty green,” Annie acknowledged, “and are going to make a lot of mistakes.” A current problem facing the couple is that they are stretched between their rented farm and the new farm. “Having the two farms has been a strain on both our time and financial resources,” Ryan said. “We are always wondering how much we should be putting into the rented farm since we are leaving in a year.”
Since the previous owner of the new farm planned to raise elk, there is extensive fencing in place on the 50 acres of pasture. The existing infrastructure should allow for a quick start to rotational grazing once the herd is moved.
The bigger issue though, Ryan said, “Is that the land needs lots of work. Hay has been harvested from it for decades without much being added back.” Annie and Ryan joked about keeping their wedding small in order to save money to buy lime and chicken manure for the new farm.
As they build soil fertility, they plan to continue feeding their usual seven pounds of cornmeal per cow per day while the cow is lactating (grain is eliminated during the dry period). “Although we are trying to breed more to a 100% grass-fed phenotype, we will be feeding grain for the foreseeable future,” said Ryan. “Although we are interested in all-grass, grain is going to be our crutch as we work to improve the land on the new farm.”
The Starter Herd:
Ryan started his herd by buying in conventional unbred heifers which he began to transition in 2012. “This is something I would change if I did it all over again,” Ryan said. “I would have spent more money on higher quality animals.”
While many of the transitioned cows are still in the herd, Ryan also purchased 15 bred heifers from Dwight and Roman Stoltzfus. “Those 15 heifers have been one the best cattle purchase I have made,” he said.
Despite the challenges that transitioning cows has presented, Annie and Ryan maintain a low somatic cell count; 2016’s SCC averaged 71,000. Butterfat averages 4.68 and protein 3.6.
“The organic milk market is a great thing and it should continue to be a great thing,” said the pair. “Even though it looks kind of bad right now, I imagine it will turn around.” In fact, they see some opportunity in the recent price cuts: “If we can make it in this market, we are going to make it. We won’t be tempted to take out loans that we don’t absolutely need. We should be able to come out of this low-price cycle fairly lean and mean.”
The grass-milk market is also an opportunity that interests Annie and Ryan. Ryan said, “The more markets there are, the better. I see the grass-milk market as a good opportunity if there continues to be a watering down of the organic standards. It provides farmers who like grazing a good chance to maintain a market premium.”
There is a huge turn-over in land tenure going on in central New York according to Ryan. Many farmers are nearing retirement age and there are few young farmers to fill their shoes. “It is depressing,” they said, “but it provides us with a good opportunity. There is plenty of grazing land available.” Since it is the couple’s intention to increase their herd size from its current 50 head to 100, it is critical they have rental resources available.
Ryan and Annie ship to Upstate Niagara and said they are very happy with the cooperative. They are currently receiving $38.30/cwt. Ryan, however, said that if Upstate were to “apply some sort of supply control or quota that it would severely impact the farm.” Because they are depending on growth to cash-flow both a mortgage and farm improvements, Ryan said, “I would much rather see lower prices than a quota.”
The couple also expressed concern about over-supply and price-depression due to farms that may not be following the organic standards.
It seems fair to say that Annie and Ryan are exceptional. They are young and dedicated, and their choices in life are reflections of their passion and optimism for the future of the small family-scale farm. From this SWOT analysis, we see that there is much that is in their control. They can grow their herd, expand their land base, build a parlor, improve their fertility, and it seems that from the internal perspective, they have the community, resources, and know-how to be successful. Of greater concern to their future are the externalities that were discussed. Ryan and Annie are gambling on the integrity of the organic dairy standards to support the pay price required for their success.