Got Milk?

SD calls for more dairy producers to support growing industry

BY ROB SWENSON

South Dakota is trying to grow its dairy industry, and the state is looking for help inside and outside its borders.

Continued growth will take more cows — ideally, at least twice the current herd size.

Some processing plants might be operating under capacity, but others in or near South Dakota want to expand to take greater advantage of rising global demand for products such as cheese, butter and dry milk.

“Clearly there’s a large opportunity for us to expand just to meet the current and future capacity of these plants,” says Paul Kostboth, director of agricultural development for the state’s Department of Agriculture.

South Dakota is well-positioned to help meet the increasing demand for milk and the production of dairy products, Kostboth says.

“The goal is to add dairy cows to the state because we have the necessary parts to make it a great opportunity,” he says. “We’re just trying to support those who want to grow and those who want to come to South Dakota and be part of the opportunity.”

The most sustainable growth in milk production is expected to come from South Dakota producers who expand their herds. However, state officials also are recruiting producers from other states. State government officials are working with local governments so that no single area will become overly concentrated with cows, Kostboth says.

Kostboth, Gov. Dennis Daugaard, Secretary of Agriculture Lucas Lentsch and others attended the World Ag Expo in Tulare, Calif., in February as part of South Dakota’s ongoing campaign to recruit dairy farmers. This was the third year in a row that Daugaard made the trip.

California is the largest milk-producing state in the United States. However, factors such as water restrictions and rising production costs have been putting a financial squeeze on some producers there.

The South Dakota delegation promoted a variety of state advantages to dairy producers in California who might be looking for a fresh start. Among the pluses that South Dakota promotes are a pro-business business climate (no corporate or personal income tax, for example), available land, plentiful water, high-quality feed and forage, and relatively low operation costs.

“With an annual economic impact of over $14,000 per dairy cow, both direct and indirect job creation, a market for locally grown feed, and high-value nutrients (manure) for surrounding cropland, the dairy industry has a very positive influence on the future of the South Dakota rural communities,” says Lentsch.

A study conducted in 2010 by Gary Taylor, an associate professor at South Dakota State University, calculated that each cow on a dairy farm has a $13,594 annual impact on the state’s economy. The total includes direct impact, such as the value of products, as well as indirect and induced benefits, such as business-to-business activity and increased household spending. Dairy officials now estimate the benefit to be more than $14,000 per cow.

History of Efforts

Agriculture is considered South Dakota’s No. 1 industry. It generates more than $21 billion in annual economic activity, and it employs more than 122,000 South Dakotans, according to the Department of Agriculture. South Dakota Dairy Producers, a trade group, considers dairy the sixth largest segment in the state’s ag industry.

State and industry leaders have been trying for years — with gradual success — to expand South Dakota’s dairy industry.

Roger Scheibe, executive director of the Dairy

Producers, used to work for the state as a dairy development specialist. He traces emphasis on growing the dairy industry to the early 2000s and Larry Gabriel, who at the time was the South Dakota’s secretary of agriculture. Gabriel saw economic potential in developing the dairy industry, Scheibe says.

About the same time, Davisco Foods International Inc. was interested in building a new cheese plant in Lake Norden to complement an existing whey plant, and then-Gov. Bill Janklow’s administration offered to help by promoting growth in dairy herds.

When he worked for state government, Scheibe traveled to other countries to promote dairy opportunities in South Dakota and recruit producers. He recalls taking trips to England, Ireland, Northern Ireland, the Netherlands and Canada. However, in recent years state officials have confined recruiting to the United States. Efforts to expand dairy herds have included sending officials to ag shows in Wisconsin, which is the No. 2 milkproducing state in the nation, as well as to events in California and Sioux Falls, S.D.

South Dakota ranked 20th in milk production among states in 2013, according to data from the National Agricultural Statistics Service. That put South Dakota above the neighboring states of Nebraska, North Dakota, Montana and Wyoming but below Minnesota and Iowa.

The region’s dairy industry is largely concentrated along or near the Interstate 29 corridor, which runs north and south through eastern South Dakota.

The Davisco plant, also known as the Lake Norden Cheese Co., remains one of South Dakota’s largest milk processors today. Valley Queen Cheese Factory in Milbank, which was founded in 1929 and grown through the years, also is a significant player.

The newest milk processor in the state market is a Bel Brands USA cheese plant in Brookings that is preparing to begin operations. Several smaller milk-processing plants also operate in South Dakota. Plants in northwest Iowa, notably an Agropur plant in Hull, also are close enough to South Dakota to influence milk production in the state. Agropur announced in June that its cheese plant had reached production capacity and that it wanted to double its output. At the time, the plant was oper- ating 24 hours a day, seven days a week, and processing 2.5 million pounds of milk per day.

Davisco also has indicated in the past that it would like to expand, if enough milk is available.

Expanding the milk supply will require that more farmers in South Dakota and neighboring states be willing to take on the potentially profitable but work-intensive duty of milking and caring for cows.

South Dakota had approximately 94,000 cows in 2013, according to NASS. That’s roughly a third as many as the state had in 1960, when more small farms were scattered throughout the countryside of rural America. For decades, the general trend has been that farms are decreasing in number but increasing in size.

The Dairy Producers estimate that there currently are about 275 dairy farms in South Dakota.

Brothers Greg and Jim Moes and their families operate one of the most modern farms, the MoDak Dairy near Goodwin. Their sons represent the fifth generation of the family business. The dairy operation includes more than 3,000 acres of land that is used to grow feed for the cows.

Five years ago, the Moes expanded their operation from 300 to 2,000 cows. Improvements in construction technology, specifically cross-ventilated barn design, made the expansion viable, Greg Moes says. Curtains serve as the south wall of the new facility; the north wall is lined with fans. Sand is used for bedding for the cows.

Temperature inside the mechanized facility can be controlled for the comfort of the cows. For dairy producers, dealing with excessive heat is a bigger problem than cold. “I always say cold is good. It gets rid of the bugs and flies. It’s sort of a cleanser,” Greg Moes says.

MoDak sells its milk to the Valley Queen Cheese Factory in Milbank.

South Dakota is different than some other states in that support for developing the dairy industry runs from producers up through the governor’s office, Greg Moes says. People from other dairies often visit the MoDak Dairy to check out the farm’s use of technology.

“Here in the Midwest, we have a history. We know how to make cheese. We know how to get rid of it,” Greg Moes says.

He suspects the state is just hitting the tip of the ice- berg in terms of growing the industry.

Growth of Processing

At times in U.S. history, milk production has exceeded demand. In 1985, the Farm Bill approved by Congress included provisions to buy down dairy herds to reduce production. These days, economic forces seem to be keeping production more in line with demand, which is rising.

Milk prices have approached record highs recently. However, milk prices, like crop prices, are cyclical. Producers and processors have to look beyond shortterm prices in making long-range plans.

The $100 million Bel Brands plant in Brookings will produce snack-sized Mini Babybel cheeses. Demand for Mini Babybel cheeses has been rising because the products are nutritious, taste good and fit on-the-go lifestyles, says Francine Moudry, Bel Brands’ project director in Brookings.

Construction of a 170,000-square-foot plant that began in July 2012 was completed late last year, Moudry says. Eighty percent of the equipment has been installed.

The first load of milk came in weeks ago so that equipment could be tested and adjusted. The plant will have 70 to 75 employees by the time production begins in July and 270 employees by the end of the year, Moudry says.

Bel Brands, which is based in Chicago, is a subsidiary of a French company and the producer of one of the biggest-selling cheeses in the world. Moudry, who previously managed a Bel Brands plant in Kentucky, was on the corporate search committee that selected Brookings for a new plant.

The company selected Brookings for multiple reasons, including the state’s business environment and the area’s ability to provide milk now and in the future.

“We have a lot of room to expand, and that is definitely a strong possibility,” Moudry says.

Another important factor in the selection of Brookings was the presence of South Dakota State University, which has a strong dairy science program, Moudry says. In addition to working closely with the dairy science staff, Bel Brands is establishing ties to SDSU’s engineering, nutrition and education programs, she says.