Can the Southeast Be Saved?

May 10, 2011 11:19 PM
Can the Southeast Be Saved?

Revitalization of the region's dairy industry requires cooperation among producers, processors, marketers, retailers and lenders.

In the wake of what many call the Great Recession of 2009, can the Southeast dairy industry revitalize? More to the point, is there enough profit potential to revitalize?

"The Southeast continues to be a milk deficit region, and that’s good news for dairy producers," says Rick Smith, president and chief executive officer of Dairy Farmers of America. "It signals unmet demand, which indicates that profit potential exists."

Order reform tops the list of challenges the Southeast must address in order to revitalize its dairy industry, says Farrah Newberry, executive director of Georgia Milk Producers Inc.

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Southeast grazing:

"Fluid milk market prices need to be stabilized. Producers need to know that their over-order premiums and Class I differentials will remain in the future before making the large investments required for more milk production," she says. 

Southeast revitalization depends largely on personal mindsets, says Michael Roberts, an Extension agricultural economist with North Carolina State University.

"It will take people who see the treasure in the trial, and those with a can-do attitude who are willing to work together with those they haven’t in the past," he says.

"It will take cooperation among all the players in the dairy industry, including producers, processors, marketers, retailers and lenders."

Roberts recommends using a toolbox that includes:

  • better seed varieties to increase feed production;
  • information systems that provide easy access to financial benchmarking data to help make sound risk management decisions and manage razor-thin margins;
  • information from the Internet and podcasts that can be listened to while working;
  • videoconferencing to gather Extension information and to network with other producers;
  • social media sites that support other players; and
  • marketing risk management strategies.

"Producers who pay more attention to running a business rather than producing more milk will thrive," Roberts says.

Some revitalization is already under way, says Matthew Lange, dairy development coordinator for North Carolina Dairy Advantage, a nonprofit program launched in 2008 by the North Carolina Association for Dairy Stabilization & Growth, Inc. Its goal is to help sustain and grow the Tarheel State’s dairy industry.

"Several Southeast dairy producers are building second or third operations or expanding their current cow capacity to produce more milk," Lange says. "In North Carolina, we have begun to see old dairy operations come back into use as new dairy producers lease these facilities, and we have new operations in the process of being built."

A successful turnaround in the Southeast dairy industry depends on several key issues, Lange says. "First, we need a strong collaborative effort between partners in the dairy industry."

Second, state political leaders must recognize that dairy revitalization is critically important to the region. "Much more can be achieved when political leaders create regulations and eliminate barriers to timely and efficient dairy infrastructural growth," Lange says.

Third, the outlook among the region’s dairy industry players must change for the better. "For years, many have been led to believe that the dairy industry in the Southeast cannot succeed, cannot be profitable and is ultimately a lost cause," Lange laments. "This is both inaccurate and untrue.

"We have incredibly successful dairy producers in the Southeast and strong profit margins—some producers actually made money in 2009, and many are looking to take advantage of opportunities for growth and diversification," he adds.

The Southeast’s profit potential is exemplified by the many producers who want to relocate to the area from other states and countries, Lange says. "Additionally, we have new local dairy operations starting up, several adding cows and many more addressing expansion possibilities," he points out.

A positive attitude is driving Neil Moye to establish a commercial Grade A dairy near Ayden, N.C.A lifelong producer of row crops, Moye is also diversified in hogs and turkeys. In early 2009, he launched construction of a double-eight parlor that can be expanded to a double-12. Having purchased baby Jersey heifer calves since that time, Moye expects to start milking in late September of this year and hopes to be milking 200 in a few years.

"People asked if I had my head screwed on straight when I told them about my plans," Moye quips. "Even though milk dropped to $14/cwt. after we started construction, we had to stay optimistic.

"We believe we can make the dairy work by utilizing equipment and additional resources already obtained for other aspects of our operation," he explains. "We can grow our own forages and grains, we have employees on board who can help with milking and my high school–age sons and nephews will be involved.

"We know there will be peaks and valleys," Moye says, "but we ran the numbers and determined we can sustain the operation through the valleys by growing our own feeds and grazing."

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