South Dakota's dairy industry is feeling optimistic about its future, especially along the Interstate 29 corridor.
South Dakota dairy farmers are looking to grow with the help of strong milk prices, stable feed supplies and the benefits that come from having nine plants in South Dakota that process one or more dairy products.
Dairy has been an attractive growth target for the past two South Dakota governors, the Argus Leader reported.
Since 2012, Gov. Dennis Daugaard has tried to entice West Coast milk producers to relocate to South Dakota. A decade ago, when Sen.-elect Mike Rounds was governor and Midwest milk production had dipped to a 40-year low, the state's first use of the controversial EB-5 investment program was to provide loans to European farmers willing to move dairying operations to the state.
Now, South Dakota has 263 licensed dairy herds, and 94,000 cows are milked in the state. South Dakota ranks 21st in largest milk production, according to the U.S. Department of Agriculture. Its farms generate $388 million in milk sales annually.
The industry was hit hard by the recession, according to Marv Post, a Volga farmer and leader of several dairy associations. However, "2014 has been as good as 2009 was bad," he said.
Farmers along I-29 "have some of the strongest milk prices in the country. It's based on competitive processors," said Mike Kruger, Midwest Dairy Association CEO.
This year in South Dakota, milk prices have ranged from $23.90 per hundredweight to $26.60. That's competitive with nearby Minnesota, where the spread has been from $23.40 to $26.70.
Texas, California and Idaho are huge milk producers and closer to large numbers of consumers than South Dakota. In Texas, prices have ranged from $23.30 to $26.0, in California from $22.10 to $23.41, and in Idaho from $22.50 to $25.10.
South Dakota's dairy industry overcomes its distance from large consumer markets by processing milk into cheese, yogurt and other dairy products that travel well and have longer shelf lives than milk. This should continue to be the model as the industry seeks to expand, according to Lloyd Metzger, South Dakota State University professor and director of SDSU's Midwest Dairy Food's Research Center.
"We want value-added growth," he said.
Allen Merrill milks 150 head of cattle near Parker. He notes there is growing interest in extracting dairy protein from products such as whey. He and Post agree the state's dairy farmers are well served by the SDSU dairy food center, and its research capacity to explore new dairy products is more than adequate.
A Midwest Dairy Association market study this year suggests that as West Coast milk producers are expanding their production of dairy products in addition to fluid milk for export, there might be opportunities for South Dakota. Cheese made in states such as Washington and Oregon that goes overseas might leave a void on the West Coast that cheese made in South Dakota can fill.
Also, compared to farmers in other regions, production features line up well for South Dakota farmers, Post and Merrill said. To feed their cattle, Western farmers have to vary the animals' diets based on seasonal availability of feed, and dairy cow rations at times of the year can even include citrus fruit. South Dakota cattle, by contrast, commonly eat corn, soybean meal and dried distillers grain year round. That helps keep milk production steady.
"It's like humans, we tend to eat the same thing for breakfast every day," Merrill said.
The size of South Dakota dairy operations continues to grow. While a 250-cow dairy was average in 2005, it's now is closer to 1,500 cows, according to Roger Scheibe, director of industry outreach for the Midwest Dairy Association. Large dairies now milk 3,000 to 6,000 cows, although at that size there has been some public push back based on environmental concerns.
In the face of such numbers, Merrill admits his 150 cows are a small operation. But Midwest Dairy Association CEO Kruger insists there is room for all sizes of operators as the dairy industry expands, and Merrill agrees. A common theme that large operations force out small ones is incorrect, Merrill said. A larger industry means more veterinarians, more equipment suppliers available not only to the largest farmers but to people like him.
"Managed growth helps the infrastructure," he said. Without it, "you see some leveling off in the interest" of suppliers to add new technology. The right-sized dairy farm, Merrill claimed, "is whatever you can manage and feel comfortable with."
Capital for expansion is an issue, according to Kruger, especially because agricultural lenders following the recession are requiring producers to have more equity. But the No. 1 obstacle to growth is convincing the public the dairy industry can handle the waste from large numbers of cattle, Post said.
Merrill acknowledges his cows on the edge of Parker that frequently are visited by grandparents with their grandchildren probably receive a much more favorable welcome than if there were 3,000 of them.
Milk production per cow has increased dramatically from the days when South Dakota farmers were milking as many as 250,000 cattle, Post said. As the dairy industry looks to grow now, "it's an exciting time for South Dakota," Scheibe said. "In some ways, we're back to the future.
"Twenty or 30 years ago, South Dakota milked more cows than today. We could feed them and handle the waste," Scheibe said. "If we could get back to those numbers with today's efficiency and productivity per cow, we could grow the economy of South Dakota by how manifold?"