Head to the Lone Star State, and everything is bigger, or so they say. That doesn’t only refer to big hats and big hair, it also applies to dairies, as the average size in the Panhandle hovers around 4,000 cows.
Beyond cow numbers, the theme of growth is consistent, although for some operations that doesn’t necessarily equal milking more cows. Many producers plan to increase cow numbers, while some share growth revolves around efficiencies.
The growth Texas has seen in the past two decades in terms of milk production is noticeable. Jennifer Spencer, AgriLife Extension dairy specialist and assistant professor in the Texas A&M Department of Animal Science, says Texas produced 1.65 billion pounds in 2023.
According to Juan Piñeiro, assistant professor and Extension dairy specialist with Texas A&M AgriLife Research and Extension Center, the Lone Star State will continue to increase cow numbers and milk production, especially in the Panhandle, over the next five years.
“When business is good, dairies continue to expand,” Piñeiro says. That’s why we have seen an increased rate of consolidation in the dairy industry, especially in the past 15 years in the U.S.
70% of Cows Live on 5% of Dairies
Net profits tend to be lower in smaller herds, Piñeiro points out, which is why 70% of the cows in the U.S. live on 5% of the dairies.
“This certainly holds true in Texas,” he says. “This statistic will continue to grow.”
But to grow, processing plants must also expand. With more than $7 billion in planned processing investments in the pipeline, including in states such as Texas, growth
is promising.
Spencer says four processing facilities are just opening or under construction in the state, which could increase demand for Texas milk:
- Cacique Foods, a cheese plant, opened in May in Amarillo.
- Great Lakes Cheese Plant in Abilene is scheduled to be completed in late 2024.
- A milk processing plant in San Antonio to support H-E-B is under construction and scheduled to be completed in summer 2025.
- Phase 1 of a Lubbock-based Leprino Foods cheese plant is scheduled to be completed in early 2026.
Piñeiro says it is difficult to predict what the future of Texas dairy will be with all the challenges facing dairies today.
“Although I do think there is room for growth in Texas with all the upcoming processing plants,” Piñeiro says, adding he believes most of the milk to fill the upcoming processing plant needs in the state will come from Texas dairy producers, but some might come from neighboring states such as southwestern Kansas or eastern New Mexico.
Labor Costs Eat into Profits
With oil industries, among others, competing for labor, finding workers is also a challenge for Texas dairy producers. This has led some to incorporate technologies and automation to reduce labor needs.
Although Tom Alger, one of the owners of A-Tex Dairy in Friona, Texas, says his dairy has fared well with labor. He says their challenge with labor has been the overall costs it takes to pay for workers.
“That’s inflation, though,” he says.
Originally from Chino, Calif., Alger and his family moved to Friona in 2007. The family decided to move east after the southern California dairy they rented was sold. Alger and his brother Ray went into partnership together and built a 3,200-cow dairy in the Texas Panhandle to provide an opportunity for the future generation to dairy.
“We have a larger dairy than I ever dreamed of,” Alger says, adding that the operation is in the process of slowly purchasing his brother out.
With God’s blessing, he says dairying has been mostly successful for them. They now milk 5,300 cows and continue to look at how to improve efficiencies to sustain the family dairy operation.
“We’ve gotten a little bigger in terms of cows and land, and we will see where the next generation goes,” Alger says, adding that they currently farm with his son Derek and his nephew Jeff.
Water Scarcity Presents a Hurdle
While Texas has more than doubled its cow numbers in two decades, the biggest challenge to push the needle and continue the steady growth curve is water scarcity. Piñeiro says this is the largest hurdle facing producers in the state.
“The Panhandle is a semi-desert, with roughly 12" to 18" of precipitation a year,” he says. “Improving water efficiency with the use of new irrigation technologies, drought-tolerant crops, hydroponic systems and management practices considering soil health, among other strategies, will be key in the future.”
Water was an issue when Alger moved to Friona in 2007, but now he says it’s a major challenge.
“The wells’ average flow rate is 400 gal. per minute, and today they might get 150 to 200 per minute,” he explains. “I’ve got some wells holding, while others are dropping quickly.”
They have plenty of water for the cows, but when it comes to the feed side of the equation, Alger says that is another story.
“It’s obviously a concern every year,” he says. “We look at what water we have available before we make the decision what crop go into the ground.”
Combating water issues, A-Tex Dairy grows fewer acres of corn and more drought-resistant crops, such as sorghum or wheat.
“Double cropping is not an option anymore,” he notes.
They own 3,500 acres and rotate crops to help feed their cattle. He says they’ll likely allocate 900 acres for corn silage this year.
Factor in limited rainfall, especially if you look at the past two summers in the High Plains area, and it is no surprise water is a main concern for its producers. A-Tex Dairy works with neighboring farms to purchase additional feed, and Alger believes they are well positioned for their 2025 feed supply. In addition, the dairy feeds a lot of gluten and distiller grain, along with some cottonseed.
Beef-on-Dairy is a Blessing
One area that has been a blessing for A-Tex Dairy is beef-on-dairy calves. The family started dabbling in this alternative profit source seven years ago, and for the past four years, the majority of their cows have been bred to sexed semen or Angus.
“We have very few Holstein bull calves,” Alger says.
They retain the beef-on-dairy calves at different weights.
“We sell some at 450 lb., some at 750 lb., and we retain ownership on some all the way down to the kill floor,” he adds.
Strong beef-on-dairy prices have helped keep the dairy in the black for the past couple of years.
“Milk certainly hasn’t done that,” Alger notes. “Right now, beef-on-dairy has been by far the most profitable for our operation.”
Looking to the future, Alger says they plan to start hedging prices for their beef-on-dairy calves.
“We need some protection because they are worth too much right now not to protect the high prices,” he says.
Another profit opportunity A-Tex is looking into is carbon. Alger admits they have had a couple of offers, but being a drylot facility, the offers aren’t as enticing as some of the modern dairy facilities.
“We are still exploring our options,” he notes. “I know there are opportunities out there. We are generally not the first to jump on something but typically not last either.”
This holds true with investing in technology, as Alger says they, of course, expect a return on investment when incorporating any technology into their dairy.
“Our focus is improving efficiencies,” Derek Alger explains. “We utilize EID tags and FeedWatch and are looking to incorporating a monitoring system.”
Producers have taken a hard hit with falling milk prices in 2023. Spencer says the uniform milk price fell from $23.68 per cwt in 2022 to $18.98 per cwt in 2023. The price of cheese averaged about $2 per cwt below both of those.
At the end of the day, Alger thinks dairy is still a good industry to be part of and says he believes, at this point, 2024 will be a decent year, especially considering feed prices are significantly lower than last year.
While there are several dairies in Texas that are positioned to grow in terms of cow numbers, Alger isn’t planning to grow his herd. For now, they will continue doing what they do best, which is striving to produce the most efficient milk possible to help set the farm up for the next generation of dairy farmers.
