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March 2012 Archive for Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

A Four-Way Win for Dairy

Mar 23, 2012

Dairy Farmers of America’s announcement last week of its plan to build a whole-milk powder plant focused on exports in Fallon, Nev., has the potential to be a four-way win for dairy producers.

 
Win #1: The plant, with ground breaking likely to come by early summer, will require 2 million pounds of milk per day when it’s operational in late summer 2013. That will require Fallon dairy producers to essentially double cow numbers, or recruit other producers to the region. Already, some producers in the area are making expansion plans. Their greatest hurdle (more on this later) will be to convince local lenders to supply the capital.
 
Win #2: Fallon producers will no longer be required to truck their milk to California plants. The savings will come not only in hauling costs saved but peace of mind. Moving Nevada milk into California’s state-controlled order has always been a point of friction. Nevada producers live in constant fear that that access to market will be cut off, and with it their livelihood. Other than Reno, the next closest processing plant is 500 miles away. To get some sense of that distance, that’s like moving milk from Sacramento to San Diego or from Madison, Wis., to Fargo, N.D.
 
Win #3: The Fallon plant frees up California processing capacity. After 2009 and 2010, the California industry has rebounded to pre-recession levels. So the Fallon plant announcement should be welcomed news on both sides of the state border, particularly by DFA members from both states. And it should help boost California’s Class I utilization—at least until California producers make up the manufacturing milk losses to the Fallon plant.
 
Win #4: And probably the biggest win of all: DFA is showing global customers it is willing to invest in processing capacity specifically designed to meet their unique ingredient needs. Yes, the plant will be capable of producing domestic skim milk powder if world demand for whole milk powder evaporates. But the mission of the Fallon plant, first and foremost, is to supply products to meet international customer needs.
 
This is precisely the point of the Bain Study, which shows a latent supply gap of some 7 billion pounds of milk over the next few years. To meet this need, the U.S. must produce products that the global market needs—not products we produce for U.S. markets that we happen to have in surplus every now and then.
 
With this commitment comes market risk. The Fallon milk price is being targeted at Class IV plus 25¢ to 30¢/cwt. Year in, year out, this is essentially our basic manufacturing price. Few dairy producers have gotten rich at these levels. It’s one reason some bankers are already showing reluctance to finance new, $2 million milking parlors in Fallon. (See Win #1.)
 
In the end, the Fallon plant is not an automatic home run. It shows that while some will benefit by its mere existence, others will take the risk that it will be successful.
DFA and the local Fallon producers who are willing to step up to the plate should be commended. Kudos to these guys for slapping on their batting helmets against world-class competition.

Dairy Sustainability: Show Me the Money

Mar 09, 2012

Until dairy farmers can convert a pound of CO2 emissions into convincing dollars and cents, they’re not going to get excited about reducing greenhouse gas emissions and improving their carbon footprints.

 
A few years ago, at Dairy Today’s Elite Producer Business Conference in Las Vegas, we had Greg Thoma outline his project to document the carbon footprint of dairy farms, large and small.
Thoma is a University of Arkansas engineer; the project was funded by the Innovation Center for U.S. Dairy.
 
I was excited about the project and the talk, thinking it would infuse fact and reality into the discussion about the dairy industry’s contribution to greenhouse gas (GHG) emissions. At the time of the talk, in 2008, dairy and agriculture were being blamed for 20% or more of global emissions. In California, there was a belief that cows contributed more GHGs to California’s smog-plagued skies than cars.
 
Thoma’s talk came off with a resounding thud. Dairy producers understood that GHGs were a public relations problem for the industry; they even understood it could lead to more regulation. But if GHG reductions didn’t lead to cost savings and/or improved profitability, dairy producers were about as excited about reducing emissions as having a root canal. It might be necessary—but it was going to cause a lot of discomfort in the process.
 
Fast forward to last week. The Innovation Center for U.S. Dairy announced its first-ever sustainability awards. The four winning farms all have impressive environmental/ energy/sustainability records. 
 
Blue Spruce Farms, Bridport, Vt., has reduced milking-time electricity needs by 60% through the use of a variable speed vacuum pump control, and have cut other electricity needs in half by implementing new technologies in lighting, milk cooling, ventilation and water heating.
 
Holsum Dairies, Hilbert, Wis., is a large dairy milking 6,800 cows. It works with 40 local farmers and custom operators to supply forage for the herd. It has 11,000 acres under a single nutrient management plan—which allows Holsum to target manure applications to specific fields to reduce over-application and commercial fertilizer use.
 
Werkhoven Dairy, Monroe, Wash., uses a methane digester to produce electricity for the equivalent of 300 neighboring homes while producing Grade A compost as a natural fertilizer for its fields and those of neighbors.
 
Brubaker Farms, Mount Joy, Pa. (our 2011 Innovative Dairy Farm of the Year, by the way) also uses a digester and 10,000 square feet of solar panels on its heifer barn to produce electricity for both the farm and 200 neighboring homes.
 
All of this is good; all of it makes environmental sense. The problem--the reason rank and file dairy farmers have yet to get excited about any of this--is that we’re still failing to document cost savings or profit opportunities. We fail to talk about hard numbers: The investment required, the payback window, the return on investment.
 
Two weeks ago, I traveled across the northern half of Indiana on a road show with the Indiana Professional Dairy Producers and Purdue University. One of the corporate sponsors of the tour, Orion Lighting, guaranteed dairy producers it would their cut lighting costs in half by installing high-efficiency lighting. Orion should also be able to lay out what the investment in new lighting is, what the cost savings will be, how long it will take to recoup that investment.
 
Earlier that week, at the Indiana Grain, Forage and Livestock Symposium, Frank Mitloehner, a University of California air quality specialist, detailed dry matter losses from California silage piles. They’re driven by oxygen penetration of the feed pack, which allows microbes to consume and volatilize carbohydrates in the feed.
 
Losses are at least 20%--often more. So a 40,000-ton pile of corn silage (which is 25,000 tons of dry matter) can lose 5,000 tons of feed dry matter—a staggering $500,000  loss in feed, sweat and effort. By proper packing, covering and use of mechanical facers for feed removal, these losses can be reduced significantly, Mitloehner says. He is now in the beginning phases of a three-year study to document losses and potential savings.
 
The solution to getting dairy farmers excited about reducing GHG emissions and improving their carbon footprints lies in convincing them it is a key component to improved profitability. We need to be able to convert a pound of CO2 emission into dollars and cents. Then farmers will really get excited.
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