Fewer herds and more cows producing more milk—that pretty much sums up the past few years and defines the future in Minnesota, says James Salfer, Extension dairy specialist at the University of Minnesota.
Minnesota used to be one of the most difficult states to get a permit, but recent changes have allowed dairies to grow. Many smaller dairies are reinvesting in their facilities. This includes robotic milking, which improves producers’ quality of life by having to manage fewer employees.
- Extended commnets are highlighted in blue
Some young producers have returned home or struck out on their own. However, those who started out renting facilities and buying feed took a hit when feed costs spiked. Those who chose a different business model or returned to join the family business have fared better.
Looking forward, producers are optimistic. Here’s why.
Strengths. Minnesota has an abundance of productive land and water to support continued growth. Producers will need to continue to acquire more land for nutrient management—an incentive for dairy producers to own land and grow their own crops.
"We have tremendous infrastructure in many parts of the state," Salfer adds. Dairy-specific veterinarians, nutritionists, knowledgeable allied industry, a highly competitive milk market, a strong producer organization and many colleges with dairy-specific programs offer a supportive environment for the state’s dairy industry. Overall, the business and government climate is supportive of the dairy industry.
In addition, most areas of the state have lending institutions that not only understand dairy, but support expansion. At least some of that expansion is driven by young producers reinvesting in facilities.
Dairy is not the only strong agricultural venture here. Turkeys, hogs and broilers all have strong industries and supportive infrastructure. That gives dairy producers more options when looking at diversification.
Weaknesses. The state has a lot of old, very labor-inefficient facilities. These facilities have served the owners well, but young producers wanting to start will need to make a tremendous investment sooner than later. Often, young producers lack the capital to do so on their own.
In some areas of the state, service providers are several hours away.
Opportunities. Many of the state’s processors have been investing in plant upgrades, and some have expanded. A limited number of producers have started to invest in on-farm processing. And others have turned to organic production in order to maintain a higher, more stable milk price.
For many producers, careful, planned growth—with the land base needed to support that growth—has become the new benchmark. Many producers have developed large herd management skills and honed their business acumen, explains Salfer. The expansions that are planned today are well thought-out with accurate cash flows.
The entry of young producers and improved milking technologies in the past few years have resulted in new energy within the industry. Both of these have helped fuel a renewed sense of optimism for the industry moving forward.
Threats. While the state’s permitting process has improved, it is not perfect. Producers looking to expand still sometimes face challenges from local zoning ordinances, and the state permitting process can become drawn out. For smaller producers, those with fewer than 1,000 cows, the major threat to expanding their operation is regulation compliance. If regulations become too burdensome for smaller producers to afford, it could limit their options.
Immigrant labor plays an important role in agriculture. The lack of a workable immigration policy is a potential threat for all producers.
- April 2014