State of the Industry

Dakotas recruit dairies from near and far to grow industry

By Rena Archwamety

Editor’s note: As part of our monthly “State of the Industry” series we take a look at the cheese and dairy industry across the United States. Each month we examine a different state or region, looking at key facts and evaluating areas of growth, challenges and recent innovations. This month we are pleased to introduce our latest states — North Dakota and South Dakota.

MADISON, Wis. — Abundant food supply, agriculture-friendly communities and land stretching as far as the eye can see are just a few of the perks North Dakota and South Dakota have to offer, according to dairy specialists in the two states.

“It’s a great place to raise a family. It’s a quality of life issue,” says David Skaggs, dairy and agricultural development specialist, South Dakota Department of Agriculture. “We’re showing a lot of dairies plus green field sites for new dairy construction to out of state and out of country people.”

In recent years South Dakota has experienced a surge in dairy growth. North Dakota hopes to move in a similar direction and also has been recruiting to grow its dairy industry.

“We’re trying to attract all sizes,” says J.W. Schroeder, associate professor and extension dairy specialist, North Dakota State University. “We have a broad base of appeal in terms of opportunities. We’re just loaded with opportunities.”

North Dakota, like many of its neighbors in the Midwest, has been losing dairy farms at a steady rate over the last several decades. Attrition, combined with the lack of growth on existing farms, has led to milk production numbers tumbling to unprecedented lows.

According to the National Agricultural Statistics Service (NASS), in 2007 the number of dairy operations in North Dakota fell to 460, almost a third of what it had been a decade ago and only a fraction of the 2,700 dairy farms that existed in the state two decades earlier. Milk cows fell to 29,000 in 2007, bringing milk production down to 444 million pounds — a 40 percent drop from 1997 and the lowest production numbers in more than 80 years.

“My hope is that we’ve plateaued,” Schroeder says. “We’ve dropped below 30,000 cows. We are at critical mass. We need to turn it around, and that’s starting to happen.”

One beacon of hope for the state’s dairy industry has been the North Dakota Dairy Coalition, organized four years ago by dairy farmers and businesses as well as other agricultural groups as a cooperative effort to reroute the dairy industry. The coalition is supported by funding from the state, agricultural and rural electric groups and other grants.

“Our industry got to the point where we had concerns from existing dairy producers about losing our infrastructure,” says Gary Hoffman, executive director, North Dakota Dairy Coalition. “Our dairy industry wasn’t reinvesting in itself. We encouraged kids to go away to college and get into businesses other than agriculture. We didn’t have the same mind set in agriculture as other parts of the country.”

The coalition’s mission first is to help the state’s existing dairies that want to expand and then to recruit dairy farmers to North Dakota from outside the state and even outside the country. Although the net farm and herd numbers have continued to drop in recent years, the coalition has helped bring 3,700 new dairy cows and six new dairies into the state and is working with more potential newcomers.

“We’ve had people move in from California, New York, Wisconsin, South Dakota and Pennsylvania,” Hoffman says. “This summer we have a family from Canada building a new 1,500-cow dairy.”

Some of the benefits that attract out-of-state dairies to North Dakota include financial incentives, plenty of inexpensive land, supportive communities and infrastructure and a close and abundant supply of feed.

“The last legislature passed incentive programs that include a pretty attractive interest buy-down program,” Hoffman says, adding that the state also does not collect personal property tax.

With a population of less than 640,000 people, North Dakota offers space to grow and communities that welcome new dairy businesses to producers that might be feeling the pressures of urban sprawl.

“We’ve identified communities that want animal agriculture, as opposed to some areas of the country where it is being squeezed out,” Hoffman says. “We have thousands of acres of forages and grains produced and can feed a lot more animals than we are. We keep moving ahead, identifying those communities and areas of the state that want animal agriculture.”

North Dakota, however, is not without competition for new dairies.

“All the states around us are competing for dairymen as well,” Schroeder says. “The Great Plains is one of the only frontiers left.”

South Dakota started increasing its dairy recruitment efforts around 1999 and 2000, and the results are beginning to show. While many states are seeing animal numbers decline, the number of dairy cows in South Dakota is increasing along with production. The state added more than 6,000 new cows in 2007, driving the net total from 81,000 to 85,000 dairy cows in the state from 2006 to 2007. Skaggs, who does dairy recruitment for the state, says he expects about 7,000 more cows to enter the South Dakota this year as more projects near completion.

“I see the dairy industry continuing to grow in South Dakota and in the Midwest as a whole,” Skaggs says. “Processors have taken notice of our growth and the availability of feed to the cow source that cuts down on transportation costs.”

Many dairies have moved in from California as well as from Canada and Europe. Like North Dakota, South Dakota attracts dairy farmers with the state’s availability of land and feed, low business costs and taxes and dairy-friendly communities.

“We have rural communities out here that are in school districts that welcome dairies with open arms,” Skaggs says.

“It’s a great business climate, too,” he adds. “No corporate tax, no personal income tax. We have some of the lowest costs of electricity in the nation. And with the amount of hay and corn being shipped out of South Dakota, transportation costs are reduced greatly for the dairies located here.”

More recruitment, as well as better production efficiency within the state, has helped South Dakota’s dairy industry gain momentum.

“In the last four years, we have seen a steady increase ... not only has the number of cows increased, but also the amount of milk produced per cow,” says Alvero Garcia, dairy extension specialist, South Dakota State University.

Average milk produced per cow in South Dakota jumped from less than 15,000 pounds in 2002 to 19,306 pounds in 2007, according to NASS. Total milk production during the same years rose from 1.29 billion pounds to 1.64 billion pounds.

The increase in milk production also has fueled expansion at two of South Dakota’s largest dairy processors. This spring Davisco’s Lake Norden, S.D., plant completed a $8.2 million expansion that increased capacity by 60 percent. Last fall Valley Queen Cheese Factory Inc., Milbank, S.D., started a $45 million expansion that is expected to be complete in fall 2009 and increase processing capacity by 30 percent.

Valley Queen CEO Mark Leddy says South Dakota’s growth in milk production has encouraged the company’s current and future expansion plans.

“We think this is a good place to produce milk and are committed to increase our processing capacity to keep pace with milk supplies,” Leddy says. “We have this current project underway, but we are working on additional plans as we see continued strong growth.”

North of Valley Queen and Davisco on Interstate 29 is the Fargo, N.D.-based Cass Clay, one of North Dakota’s largest cheese manufacturers, which was recently acquired by Associated Milk Producers Inc. Cass Clay also has a smaller plant in Hoven, S.D.

“South Dakota has seen some gain. North Dakota is losing producers, but staying pretty stable in volume,” says Cass Clay division manager Keith Pagel, who says the Fargo plant hasn’t been affected by the state’s decline in milk production.

“In Fargo, the plant is on the I-29 corridor, and the growth has been phenomenal in this region for the business we’re in,” Pagel says of the eastern section of the Dakotas where many new farms have settled close to the major dairy processors.

However, the demand for milk in North Dakota still is strong.

“We do have some processors in North Dakota that have told us they could use a little more milk,” Hoffman says. “Right now they’re still looking for milk.”

While he doesn’t expect farm or production numbers to return to where they were 20 years ago, Hoffman says he does anticipate North Dakota’s dairy industry will rebound and grow stronger.

“I’m pretty optimistic that when people see what North Dakota has to offer — feed availability, wide open spaces, room to grow — when you look at that, I think we have a pretty bright future,” Hoffman says. “At this time North Dakota doesn’t even show up on the screen, but I’m optimistic what we will see changes, turn that around and be a player in the industry.”

Members of South Dakota’s dairy industry also are aiming toward a modest but respected position among other states.

“The vision I have for the state is a very strong, viable dairy industry,” Garcia says. “Not up with the big producing states, but a state that has efficient, viable production and is known for the high quality of its dairy products. I believe we have room for growth.”

CMN

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