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Published August 25, 2014, 10:04 AM

Good news for SD milk industry

South Dakota milk production continues to rise, and North Dakota dairy officials hope to repeat that success.

By: Jonathan Knutson, Agweek

South Dakota milk production continues to rise, and North Dakota dairy officials hope to repeat that success.

Producers in Minnesota, whose powerhouse milk industry has declined for decades, also see reason for optimism.

South Dakota produced 179 million pounds of milk in July, 2.9 percent more than the 174 million pounds in the same month a year earlier, according to a new report from the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture.

The state’s long push to increase milk production — which includes building South Dakota’s dairy processing industry and recruiting out-of-state dairy farmers — is far from over, says Marv Post, a Volga, S.D., dairy producer and chairman of the state Dairy Producers Association.

“We have about 96,000 (milk) cows now, and we’ll be adding 20,000 more” as new facilities now in the permitting process come into use, he says.

South Dakota milk production and milk cow numbers will rise even higher after more sites apply for and receive permits, he says.

The Bel Brands USA milk processing facility in Brookings, S.D., is beginning production this summer, Post says. He notes that it has the potential to process the milk from 30,000 cows.

The most recent NASS report didn’t include July milk production numbers for North Dakota. But NASS says the state’s milk production in April, May and June of this year totaled 83 million pounds, down 6.7 percent from the same period a year earlier.

In contrast, South Dakota milk production rose 5.8 percent from April-May-June 2013 to April-May-June 2014.

ND

North Dakota now has fewer than 100 dairy farms. The number of farms and dairy cattle has been declining for years, in part because some producers weren’t close enough to a processing plant.

But members of the North Dakota Dairy Coalition, which represents dairy producers, leaders of crop groups and the dairy industry, are working to boost the state’s milk production.

The group is making progress and could have a plan in place by early 2015, says Amber Boeshans, North Dakota Department of Agriculture livestock development specialist, who’s involved with the project.

“It’s an exciting time. There are so many opportunities,” she says.

Post also sees “tremendous opportunities” for North Dakota’s dairy industry. “I think it’s poised to expand,” he says.

Faster-growing, more drought-tolerant varieties of corn, an important feed for dairy cows, already is helping dairy expand into western South Dakota. Better access to corn will boost dairy expansion into western and northern North Dakota, too, he says.

Stronger prices

Dairy prices have strengthened recently, which improves the outlook for industry expansion, Post says.

Producers generally receive a base price of about $21 per hundredweight for their milk. That rises to $22.50 to $30 per hundredweight when the milk qualifies for bonuses, he says.

In 2009, a horrible year for the dairy industry, producers received as little as $9 per hundredweight.

“It’s as good now as 2009 was bad,” he says. “This (current profits) is doing a lot of good for financial statements.”

Record-high beef prices also help the dairy producers. Typically, dairy farmers cull their relatively poor-producing cows, sell those cows’ meat and buy other cows that produce more milk.

Post says he remembers many times when the cost of raising the replacement cow was two to 2.5 times greater than what the producer received from selling the cull cow.

Now, however, the “sale of her meat pays for the cost of a replacement animal. It’s a scenario I’ve never seen before.”

Calif. connection?

The dairy industry is “very capitol-intensive,” Post says. “It takes a lot of dollars” to expand or build a new operation.

Establishing a dairy of 3,000 to 5,000 head requires a $12 million to $15 million investment, he says.

But such an investment is less troublesome for dairy producers elsewhere in the country who sell their operation and move to the Midwest. He notes that some dairy producers in California, which leads the nation in milk production, are struggling with water shortages and looking to move.

“There’s an inherent problem in California. They’re excellent operators, efficient at what they do,” he says. “Those with a passion for dairy are looking for a place to relocate.”

The Midwest can be that place, “if they can get over the winter,” he says.

“I think dairy’s future is in the Midwest. I’m in South Dakota, but I think it’s a team thing. If it’s the Midwest, it grows the industry,” he says.

Dairies of all sizes have an important role, both in South Dakota and the Midwest, Post says.

Minn. milk

Minnesota doesn’t always get its due as a major dairy state, in part because its milk production is much smaller than that of neighboring Wisconsin, says Patrick Lunemann, a Clarissa, Minn., dairy producer and president of his state Milk Producers Association.

But Minnesota ranks among the nation’s six top milk producers. And though South Dakota’s dairy industry is a praiseworthy success story, Minnesota still produces more milk than the Dakotas and Iowa combined, he says.

Nonetheless, Minnesota has struggled with declining milk production for years. As is the case in many other states, retiring dairy farmers haven’t always been replaced by younger ones.

Minnesota’s dairy production continued to slide in July, with the state producing 764 million pounds of milk, a drop of 0.1 percent from the same month a year earlier, according to NASS.

The number of dairy cows in the state this July fell to 460,000 from 465,000 in the same month a year earlier.

But Minnesota dairy officials see potential for a rebound, Lunemann says.

Minnesota has many of the ingredients needed by the dairy industry, including plentiful water and feed.

And the state’s business climate “is better than it’s usually given credit for. Minnesota has gotten a bad rap over the years as not a place to go for dairy. We don’t think that’s right,” he says.

The greatest potential for growth lies with existing dairy producers, Lunemann says.

Exports, technology

Greater use of technology, including robotic milkers, holds particular potential for small and medium-sized producers, Lunemann says.

He thinks Minnesota dairy operations of the future will continue to come in all shapes and sizes.

“I think it will be a mix, (reflecting) our geography and the background of dairy farmers we still have,” he says.

Some Minnesota dairy producers have “gone the organic route. They’re fulfilling a market niche,” he notes.

Domestic milk demand remains strong, and milk exports are growing, Lunemann says.

The Midwest isn’t a big source of exported milk. But producers in the region gain domestic sales when milk from states such as California is sent overseas, he says.

Minnesota dairy producers welcome their industry’s growth in surrounding states, Lunemann says.

“We’re glad. It helps to support the region’s infrastructure. To keep our infrastructure strong, we need each other,” he says.

Lunemann repeats a line he’s heard elsewhere: “All dairy farmers need all dairy farmers.”

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