By Shirley Chapman
From 1993 to 2012, Idaho’s dairy herd more than tripled in size. Milk production per cow climbed 37% to reach 23,376 lb. annually. Dairy production in the state was booming. Local processors were expanding, and a new Chobani yogurt plant opened in 2013.
Then, feed cost spiked and income over feed cost plummeted. This past year, producers culled heavily. Cow numbers dropped by about 8,000 head in 2013, says Wilson Gray, district Extension economist with the University of Idaho. Today, producers in the state do not produce enough milk to meet processors’ needs.
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But that should change soon. This year, feed prices have recently moderated, and milk prices have climbed to $20 per cwt. In addition, "prices on springers have moved up $200 to $300 per head in the last couple of months," Gray says. That indicates herd rebuilding has begun.
Idaho producers and processors are "cautiously optimistic" about the future, Gray says.
Strengths. Dairy producers here are resilient. Historically, they have been able to quickly change to meet growing demand. Idaho’s mild climate, an abundance of locally grown, high-quality feed, and water for irrigation make this a good place to dairy.
Idaho processors benefit from the large volume of high-quality milk that is produced here. They also have been active in serving the growing export market. In fact, several local processors regularly produce award-winning cheeses.
Weaknesses. Even though high-quality alfalfa and corn are grown in Idaho, drought in other parts of the country and increased demand from ethanol plants for corn affect the price that all producers pay for feed.
The high price of fuel has been another factor. The Idaho dairy industry does not have any major population centers nearby. That means most dairy products leave the state.
Opportunities. Demand for dairy products in the U.S. has been weak. With the U.S. economy finally, albeit slowly, improving, the hope is that demand will pick up. Greek yogurt has been a bright spot in domestic demand. Retail sales increased 50% from 2011 to 2012 and now accounts for 35% of refrigerated yogurt sold. The new Chobani plant in Idaho has worked out its initial production problems and is now running smoothly. Dairy producers need to produce more milk to meet local processor demand.
The export market seems poised for continued growth. There is a lot of engagement here by processors in the export market, explains Gray. Idaho processors are also well positioned to meet the demand of current overseas clients and develop more.
Threats. The industry needs immigration reform. According to the report, "The Role of Agricultural Processing in Idaho’s Economy: Status and Potential," about 41% of the labor supply in the dairy industry is foreign born, and 50% of U.S. dairies use immigrant labor. While producers here have not been subject to enforcement on farms, they are definitely concerned with what could happen without long-term immigration reform, Gray explains. Something needs to be done to ensure a workforce.
Another threat is the return of high feed costs. The price for supreme-quality alfalfa in Idaho has increased by $20 per ton since January. But any hint of a drought in major crop and forage-producing areas can quickly change the outlook. Feed prices are dictated by supply and demand nationally, and to some extent, globally. Producers are vulnerable to price volatility.
And while the growth in dairy exports bodes well for the dairy industry, it also opens it up to price fluctuations from changes in currency exchange rates and economic challenges in foreign countries.
For more information:
You can view the report, "The Role of Agricultural Processing in Idaho’s Economy: Status and Potential," at: http://www.cals.uidaho.edu/edcomm/pdf/BUL/BUL886.pdf