Dugan Family plays a leading role in Arizona Dairy Industry

Farm Credit Services Southwest
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SUMMER 2011
Dugan Family plays a leading role in Arizona Dairy Industry
If you define “dynasty” as a succession of people from the same family
who play a prominent role in their
field, the Arizona dairy industry has
its own dynasty with the Dugan family.
“Mom and Dad worked us hard
when we were young,” reports
Dennis Dugan. “If it weren’t for
them, none of us would be where
we are today. We all love dairying.”
Delores and Mike Dugan started out
near Manitowoc, Wis., milking nine
Holsteins. They moved to Chandler,
Ariz., in 1962, with six boys ages 4
to 17. All six sons eventually followed in their footsteps. Today, the
Dugan brothers milk 20,000 cows.
That’s compared to Arizona’s total
dairy cow population of 177,000 in
2010, according to USDA. The new
generation of Dugans still raise Holsteins.
Each of the boys started his own
dairy business out of high school,
except for Dennis, who attended
the University of Arizona, taught
high school and sold insurance for
a few years before joining the family tradition in 1978. Of all the
brothers, only Richard is no longer
active in the business—he leases
his operation to Pat.
So far in 2011, times are relatively
prosperous for dairy operators in the
U.S., with milk prices at about $20
per hundredweight. “But about $18
of our selling price goes toward input
costs,” Dennis reports. Feed prices,
for example, skyrocketed in recent
years. Tom raises most of his own
feed, but the others purchase about
95 percent of their feed. Most harvest the feed through arrangements
with neighboring crop producers.
The Arizona Dugans credit much of
their success to United Dairymen of
Arizona, a milk-marketing cooperative owned by 70 farmers with an
average of 1,600 head per farm.
All six of Delores and Mike
Dugan’s children entered the
dairy business.
Back Row from left: Daniel,
Patrick, Dennis, Michael,
Richard and Tom. Front
Row: Delores and Mike.
The elder Mike passed away
early in 2011 at age 91, but
Delores remains active at her
home in Casa Grande. Many
of the family members
started out in Chandler, but
five of them now dairy near
Casa Grande. Michael dairies
in Idaho.
Dugan Family plays a leading role in Arizona Dairy Industry
Dairy by the Numbers
Arizona is ranked the 13th state in
dairy sales in 2007.
Number of dairy farms:
Arizona
U.S.
128
57,318
Value of dairy products sold:
Arizona
U.S.
$634 million
$32 billion
Source: USDA 2007 Census of Ag
United Dairymen members represent
approximately 90 percent of the milk
produced in the state. “That’s why
families are becoming stronger in this
business,” Dennis says. Dennis and
Tom serve on the co-op board of directors.
While you’ll still find small farms
milking fewer than 100 cows in traditional dairy states like Wisconsin, operations tend to be larger in Arizona.
“When we first came here 50 years
ago, there were 400 dairies in the
state,” Dennis reports. “A lot sold out
to developers.” According to the 2007
USDA Census of Agriculture, Arizona hosts 128 dairy farms with 112
of them with a herd size of 1,000
cows or more. As Dennis puts it, “To
survive today, you’ve got to get
large.”
The brothers experienced a few growing pains when starting out in Chandler. “Over the years, houses built up
all around us, but we never heard a
complaint,” Dennis says. “Most dairymen try to work with their neighbors.”
Still, most family members took advantage of rising land prices and
moved their operations further south
near Casa Grande and Stanfield.
The Dugan dynasty continues. Wives
and children have always been active.
Several of the brothers have adult
children in the business, including
Tom’s kids—Tommy, Timmy and
Tony; Mike’s kids—Chris, Dominick
and Matthew; and Pat’s kids—Sean,
Casey and Kelly. In addition, Dennis’s son, David, plans to join the
family farm after college. Dennis admits that the family worries about the
next generation. “The industry’s
changing so rapidly,” he says. “It’s
getting tougher all the time. World
market prices are so volatile.”
Trever Hall, Vice President of Farm
Credit Services works with the Dugan
family and says, “I’ve been impressed
to see the next generation take the
reins and build upon what their parents and grandparents started. The
Dugan family legacy is in good
hands.”
The American dairy farmer depends
increasingly on overseas buyers. In
2010, U.S. farmers exported 13 percent of their milk production, according to the U.S. Dairy Export Council.
Farmers especially felt the impact of
the global economy in 2009, when
exports dropped during the recession.
“If exports go away by just two or
three percent, milk prices could crash
again,” Dennis says. continued on page 3
In Arizona, he adds, the biggest challenges come from diminishing
land availability and the cost of energy and water to irrigate crops.
The physical labor involved in dairying takes less of a toll than in
the past. “These days, it’s more a matter of managing money and
managing people,” Dennis says. Employees handle most work
with the aid of automated milking machines and modern farm
equipment. The brothers raise their own heifers, except for Dennis, who says, “I don't want the headache.”
When it comes to financing, the Dugans depend on Farm Credit
Services Southwest, which specializes in lending to agriculture
and understands farming’s ups and downs. “FCSSW has been
wonderful to our entire family,” Dennis says, adding that he has
borrowed from the association since he first began farming.
Arizona dairies benefit from other components that form a strong
dairy infrastructure, he adds. “We’ve got some of the best vets and
nutritionists in the U.S.”
There’s always more to learn about the business. This summer,
Dennis traveled to Brazil to appear on an industry panel, to Canada
to study genetics, and to New York to meet with scientists at
Pfizer Animal Health. He enjoys working with people in the dairy
network, and has no plans to retire.
“Most of us enjoy farming or we wouldn’t be in it,” Dennis concludes. “We live a pretty good lifestyle.”
Dairy Fun Facts
Did you know…
Cows are milked for an average of 3-4 years.
An average cow is 2 years old when she has
her first calf.
Calves are fed milk until they are 4-6 weeks
old.
A cow drinks over 50 gallons of water a day.
A cow’s udder can hold 25-50 pounds of milk.
The best cows give over 20 gallons of milk
each day-that’s 320 glasses of milk!
U.S. cows give an average of 2,000 gallons of
milk per year—over 34,000 glasses of milk &
AZ cows give an average of 2,600 gallons45,000 glasses of milk!
25 gallons of milk can make 9 gallons of ice
cream, 25 pounds of cheese or 11 pounds of
butter. It takes about 30 cups of milk to make
1 pound of butter.
Americans eat about 350 slices of pizza per
second, or almost 3 billion pizzas per year.
People crave cheese more than any other
food.
The first cow in America arrived in Jamestown colony in 1611. Until the 1850's, nearly
every family had its own cow.
written for FCSSW by Nancy Jorgensen
Message from our President
Managing Risk
Has Globalization and Increased Volatility changed the Game?
Agriculture is facing new challenges everyday with new technologies, commodity and
economic volatility, global competition, free trade, and legislation. Now, more than
ever, identifying and managing risk is critical to the success of your farm business. In
the past, success was defined by those with the highest yield and the lowest cost to produce that yield. Efficiency is important, but just as important in this new highly volatile
environment is the ability to survive severe downturns such as the 2009 dairy crisis.
Gary Dyer, President and CEO,
Farm Credit Services Southwest
We have seen a major paradigm shift to more volatile commodity prices and input costs.
Successful future operators will need to adjust to this shift and implement effective risk
management practices. In an effort to create awareness and action, Farm Credit Services Southwest partnered with Arizona Farm Bureau and United Dairymen of Arizona
Page 3
Managing Risk
Has Globalization and Increased Volatility changed the Game?
to host a Young Farmer, Rancher and Dairy Producer Risk Management Conference in April. World renowned speakers, Dr. Dave
Kohl and Dr. Don Jonovic helped producers identify primary
sources of risk specifically inherent to farm family businesses and
explore ways to manage that risk. The two day conference focused
on five primary sources of risk: Human Resources, Financial, Legal, Production, and Marketing. As the group discussed each topic,
a risk management action plan was used to help producers through
the process to identify: risk factors, risk level (high, moderate, low),
risk trend (increasing, stable, decreasing), and a stabilization/proactive plan.
The following are points all farm families should consider:
Webinars
Understanding Lending—
understanding various entities, ratios,
legal documents, and loan covenants
Income Statements & Balance Sheets –
the importance of accurate record
keeping
Budget & Cash flow Statements, the
importance of outside resources, using
accountants, dairy consultants, farm
programs
Generational transition of management and assets - identifying
the potential impact, both positive and negative with approprirecorded and available online at www.fcssw.com
ate plans.
Maintaining the right life insurance policies and buy-out agreements to preserve the family business that has taken years to
Upcoming Live Webinars
build.
Expense management through an analytical approach to budgeting along with expense control, debt reduction, and strengthAugust 24, 2011 noon—Transition and
ening capital position.
Estate Planning, Life Insurance
Understanding key financial ratios and statements and how to
use financial information to clearly identify your risks and
September 21, 2011 noon—Insurance,
maintain adequate margins.
Hedging & Marketing Plans
Knowing your business and financial goals–what are your
breakevens? What margins are acceptable to you? What are the
October 26, 2011 noon—
strengths and weaknesses in your operation? Do you communiCommunication: tools and techniques
cate these strategies with your lender?
Keeping good farm records - a necessity in maintaining control
of your farm. These records provide historical data to help calA copy of the Risk Management Action Plan
culate financial performance measures and guidelines for future
is available online at www.fcssw.com or call
decisions. Effective performance tracking gives clear vision of
your branch office.
what is working well and what is not working well.
Recognizing and understanding the legal implications of the day-to-day activities and commitments involved in
farming and ranching, such as: legal business structures, tax and estate planning, contractual arrangements, tort
liability, statutory compliance, and environmental issues.
Using crop insurance to manage your risk and maintain your income stream.
Price protection–forward contracts, hedges through futures and options, inventory management, government
price programs, marketing/pooling coops.
Analyzing your operation to identify areas of risk and exposure is the first step. If you are serious about managing
risk in your business, Farm Credit can help. We have been helping farmers and ranchers manage risk since 1917.
Every credit decision we make includes a fundamental assessment of risk on behalf of our member and the association. We have created a Risk Management Action Plan as an assessment tool to stimulate thought on the various
aspects of your business. The old saying, “work smarter, not harder” holds true today in agriculture more than ever.
In today’s volatile environment, borrowers who manage their risk well will have a much better opportunity for long
term success. If you would like more information or would like to attend one of our upcoming webinars, please contact us at 1-800-822-3276 or visit our website at www.fcssw.com.
Page 4
Farm Credit Services Southwest’s Young Farmer and
Rancher Executive Institute
Dave Kohl and Donald Jonovic will be joining Farm Credit again in February, 2012 for the next Young Farmer and Rancher Executive Institute.
This program was established in 1994 and has had over 316 participants
attend and graduate. Additionally, the program has received national recognition for providing extensive outreach to the agricultural community
and helping young farmers and ranchers develop as successful entrepreneurs.
The next Young Farmer and Rancher Executive Institute is February 2325, 2012 at Hotel Del Coronado, California. The ideal participants for this
program are between 25-35 years old, who are working on the family
farm, ranch or dairy. The conference is designed for both generationsyoung farmer/rancher and spouse/significant other, as well as the parents.
For more information on this program, call your loan officer or our main
office at 800.822.3276.
Dave Kohl, Ph.D.
Don Jonovic, Ph.D.
New Solutions for Long-Term Care Insurance
Recent research on the internet found a 2011 study by Genworth Financial that concluded
about two-thirds of Americans over 65 will need some form of assisted living or long term
care during their lives. Average annual cost of nursing home care in Arizona and California is $79,113 and $91,250, respectively. Will Medicare pay for it? Probably not.
Medicare was designed to make you better when you are sick, not take care of you over a
long term. Medicaid might help, but only after you have “spent down” your estate to near
zero value.
So, who is going to pay these annual costs?
One solution is a long term care insurance policy. But, a common objection to these policies is “what if I don’t need long term care and all the premiums I paid are for nothing?”
There is another solution to consider; one that might protect your estate from this substantial expense and at the same time not ever go unused or the premiums you pay go “for
nothing”. Continued page 6
Long Term Care Statistics
67% of people 65 and older will need Long Term Care during their lifetime.
About 80 million Americans will turn 50 over the next eighteen years (one person every eight seconds).
By 2020, due to the rapid retirement of baby-boomers, approximately one in
three workers will be faced with providing some form of Long Term Care for
their boomer parents.
National average cost of care for one year in a nursing home is approximately
$80,850 with the average stay of 3 years.
Page 5
Ken Lassen, CFPtm
CFP and CERTIFIED FINANCIAL PLANNER are
certification marks owned by the Certified
Financial Planner Board of Standards, Inc. These
marks are awarded to individuals who successfully complete the CFP Board’s initial and
ongoing certification requirements.
All Securities through Money Concepts Capital Corp.
Members FINRA/SIPC CPP 11440 N. Jog Road, Palm
Beach Gardens, FL 33418 561-472-2000
New Solutions for Long Term Care Insurance
There are life insurance
plans now on the market that
include long term care options. The basic concept is
that you own one of these
policies primarily for the
death benefit provided to
your survivors. If during
your life you are faced with
long term care expenses then
the policy option is activated
to provide for your care
needs.
If you are among those fortunate people who do not experience the need for long
term care then your policy
will someday pay out a death
benefit to your family beneficiaries. It’s one way to
protect your estate from a
serious long term care drain
of assets but at the same time
be protected from paying
premiums “for nothing”.
This is a concept worth considering!
To find out more about Long
Term Care Insurance, call
me at 602-431-4150, email
[email protected],
or call Cassidy Ditchey at
602-431-4126.
Arizona Employers Have New Opportunities in a Restructured
Workers’ Compensation Marketplace
The world of Workers’ Compensation is changing and if you have employees,
it could affect you.
Arizona Governor, Jan Brewer, signed legislation last year which converts
SCF Arizona from a quasi state agency to a private mutual insurance company.
Until now, SCF Arizona has been a hybrid company, neither fully private, nor
fully public. Recent reports indicate SCF Arizona is responding to its
reorganization, by not renewing insurance for employers in hazardous
industries or with poor loss experience. Even if an employer has not received a
notice of non-renewal from SCF Arizona, this is a prudent time for all employers to review their options.
As part of the transition from a public to private entity, effective January 1,
2013, SCF Arizona will replace its board of directors, change its name, and
will receive authority to expand its product offerings beyond workers’
compensation in the State of Arizona. Additionally, SCF Arizona will no
longer have any actual or perceived subsidy from the State of Arizona.
Expectations are that this reorganization of SCF Arizona will lead to a newly
invigorated marketplace, as SCF Arizona pursues what it percieves to be new
opportunities. New companies are entering the state, and Arizona employers
now have a wide variety of choices of workers’ compensation carriers
competing for their business. It is a good time right now to shop for the
insurance services you need and ensure that you are getting the most
competitive deal. ~ Allen Tyler, Tyler Insurance
Page 6
Farm Credit Services Southwest
and Tyler Insurance Agency have
teamed up with a goal of providing services to meet the needs of
FCSSW members. Through this
partnership, members receive
competitive insurance products
and services, and Farm Credit
receives revenue that supports
members’ Patronage Refunds.
For more information contact
Tyler Insurance Agency. Allen
Tyler or David Tyler can be
reached at 760-352-2611 or
[email protected].
Arizona FFA — Hitting the Streets
The Arizona FFA recently
celebrated its 82nd Anniversary in Tucson at the
State FFA Leadership Conference. Agricultural Education in Arizona is thriving in over 75 high school
programs boasting, more
than 9,000 students and
6,000 FFA members. The
FFA motto, Learning to
Do, Doing to Earn, Earning
to Live, Living to Serve,
summarizes the philosophy
driving Agriculture Education programs and the FFA.
Today the FFA Organization and Agriculture curriculum encompass more
than 300 careers in everything from production agriculture and business management to biotechnology
and food science.
The success of FFA in Arizona is due in part to the
support provided by the
Arizona FFA Foundation
through its generous sponsors like Farm Credit Services Southwest. This year
the foundation presented a
check for $242,508 to the
FFA during the state conference. The FFA Foundation funds many state FFA
activities such as leadership camps and conferences, member scholarships and award programs,
and supports local FFA
chapters representing Arizona in national competition.
The Arizona FFA Foundation would like to thank the
many donors that made it
possible for the FFA to
make such a positive difference in the lives of Arizona’s agricultural youth.
The foundation had a successful past year, however,
there is more work to be
Front (left to right): Taylor Kirby, State Vice President At-Large; Angie
Lowery, State Reporter; Sarahbeth Bourland, State Treasurer; Keili N.
Summey, State Secretary. Back (left to right): Jed Ward, State Vice President; Caleb M. Gillispie, State President; Zachary Tucker, State Sentinel
done. The Arizona FFA
Foundation is still seeking
donors for the coming
school year programs. If
you would like to make a
contribution or if your
company or organization
would like to become a
named sponsor of an award
program please contact the
foundation online at
www.azffa.org/ or call
Bobbie Bolt at 602-7059211. ~ Bobbie Bolt, AZ FFA
This past year the Arizona legislature approved the creation of a special FFA/Agriculture license plate. The
FFA license plate allows individuals to proudly display their affinity for Arizona’s agricultural youth, the
FFA, and Arizona Agriculture. Farm Credit Services Southwest has proudly declared, “We Support Arizona
FFA,” by purchasing the FFA license plates for all FCSSW Arizona vehicles. In addition to making a statement, $17 of the $25 special license plate fee will be returned to Arizona FFA each year.
To publicly declare your support of the Arizona FFA, visit www.servicearizona.com or the closest MVD office to purchase your plate. The license plates are available for use on all passenger vehicles as well as
Farm/Ranch and commercial vehicles. FFA license plates may also personalize and can be registered as a
handicap plate.
Page 7
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Enjoy the convenience of remote
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The first 25 people to sign up
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Call our office for details.
800.822.3276
Cash Manager is a suite of tools that puts idle cash to work efficiently and profitably and can be tailored to the size and needs
of your business. Features include: online reporting with the
ability to initiate ACH transactions and wire transfers; the ability
to write checks that settle against your Farm Credit loan automatically; electronic deposits from your office; transactions are
netted and settled against your Farm Credit loan on a daily basis
which saves you time and minimizes your interest expense. Additional features such as fraud prevention services, reconciliation services, lockbox, merchant services, and purchasing cards
can also be included in your customized solution. For a limited
time, Farm Credit Services Southwest will include a remote deposit scanner for free (up to a $700 value) to the first 25 people
who sign up for the Cash Management Program.
Call 800.822.3276 or visit our website at www.fcssw.com
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PO Box 24138
Tempe, Arizona 85285
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