What does transition planning look like when you don’t have a next generation who wants to take over the farm? For Jay Weaver, a third-generation dairy farmer from Weaverline Holsteins in Lebanon County, Pennsylvania, it involved working closely with a business consultant to evaluate his cash flow and retirement options.
“My children are all off the farm and have no interest [in coming back to the farm]. I had a big decision of what I can afford to do and what I cannot afford to do as I thought about retirement. That’s where the Dairy Decisions Consultant (DDC) Grant came in. It was very helpful,” Jay shared.
Jay received a DDC Grant from the Center for Dairy Excellence with a focus on transition planning. He was paired with Dr. Brian Reed, a consultant who sat down with Jay and analyzed information about his assets, debts, milk production numbers, and the history of what they were doing with two neighboring farms they owned.
“Dr. Reed did a full-blown analysis of my cash flow and also my debt-to-asset ratio. Then, he gave me options of what I could do. We wanted to get off the farm. I had a knee that was giving me problems, so I needed to do something. And the price of cows wasn’t good. We had half of the other farm [that we bought 12 years ago] in debt still, so it was not an easy decision. We didn’t know what to do,” Jay explained.
Dr. Reed helped lay out three options for Jay – and what the cash flow and retirement options would look like for each. The options were 1.) Get a tenant 2.) Sell the cows and just raise heifers 3.) Liquidate a barn.
“One option was getting in a tenant and doing a split milk check. Another was selling the cows and just raising heifers. He even gave me some other options as far as liquidating one barn and what the tax obligations would be,” Jay shared. “He showed me what my cash flow would be if I raised heifers and whether I would be able to pay for a retirement home. He also created the cash flow set-up for the tenant option.”
While it was a big decision, having a consultant there to narrow down his options and put everything on paper made the process easier to navigate.
“He put everything there in black-and-white. I could see the cash flow and what I would have to live on or what I would have left over to build or buy a house,” Jay added. “With the third option being to liquidate or sell one farm, we weren’t quite ready to do that. The farms are side by side. I just thought you never know, maybe I’ll have a grandchild that would want to do that someday and it would be there.”
Ultimately, Jay and his family decided to find a tenant. What does their partnership look like? Jay gets 48 percent of the milk check, and the tenant gets 52 percent. Jay supplies all the feed and does the cropping, while the tenant owns the cows and supplies all the cow-side labor and management. This agreement ended up being a lot less labor for Jay, but still allows him to keep the two farms together. He also says it allowed him to maintain ownership and capture the investment of the farm.
“It has been three years now that our tenant has been in. He’s doing a real good job with the cows and has good production. The milk price was a little more favorable these last three years, so [the partnership] has exceeded our expectations,” he shared.
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The Center for Dairy Excellence has several consultants who can help dairy farm families with business planning, succession planning, or cash flow analysis through the Dairy Decisions Consultants (DDC) Grants. They are expected to open in the fall of 2025. Contact Melissa Anderson to learn more.