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State of the Industry

Dairies, processors see new growth opportunities in Iowa

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 state —Iowa.

By Rena Archwamety

MADISON, Wis. — Rolling farmland, welcoming communities and an abundance of milk processors make Iowa’s northwestern and eastern regions like a promised land for dairying.

Dairy herds are making pilgrimages from other parts of the United States, Canada and Europe to settle in Iowa’s far northwestern corner along the Interstate 29 corridor, and many existing dairy herds in eastern Iowa are continuing to expand.

“We are seeing a tremendous amount of growth in the northwest, where they have a little larger herds, and virtually all family-owned,” says Lee Kilmer, extension dairy specialist and professor of animal science, Iowa State University.

“A lot of the European herds are in the 300-cow range. Families from Canada and the West Coast have 1,000 cows plus,” Kilmer says.

Though not as immediately noticeable, there also is growth in Iowa’s other concentration of dairies in the eastern part of the state.

“We have seen growth in production and cow numbers, which has increased a lot in the last five years. More in northwestern Iowa, but eastern Iowa also is expanding,” says Erin Vagts, industry relations manager and executive secretary, Iowa State Dairy Association. “The northwest certainly is noticeable, with people coming in from other areas. The eastern part tends to be more internal expansion.”

Iowa is one of the rare states to have seen an increase in both its production and its cow numbers over the last five years. According to the National Agricultural Statistics Service, in 2007, the state’s dairy farms produced nearly 4.3 billion pounds of milk, up from 3.8 billion pounds in 2002. Iowa also rebounded from a low of 193,000 head of milk cows in 2004 to 213,000 head in 2007, its highest number in seven years.

Iowa produced more than 147.2 million pounds of cheese in 2007. According to the Iowa State Dairy Association, Iowa nationally ranks eighth in total dairy products processed, seventh in cheese production, sixth in cottage and American cheese production and fourth in ice cream production. The state’s capital, Des Moines, also is the No. 1 city per capita in milk consumption.

“We have a really great location here, and plenty of processors available,” Vagts says. “We’re pretty dairy friendly here. We’re proud of the dairy industry in Iowa.”

A strong dairy production base has attracted and kept several dairy processors in Iowa. Swiss Valley Farms, Dairy Farmers of America, Wells’ Blue Bunny and Wapsie Valley Creamery are some of the major names in the state.

Last weekend, approximately 3,500 people came together in northwest Iowa to celebrate the opening of Green Meadows Foods, a new 200,000-square-foot cheese factory in Hull, Iowa. (See “Green Meadows Foods hosts grand opening celebration for new cheese and whey facility” in last week’s issue of CMN.) The plant will produce 80 million pounds of cheese and 47 million pounds of whey powders each year.

Cheese produced at Green Meadows will be distributed nationally by Masters Gallery Foods, Plymouth Wis., and its whey will be sold both domestically and internationally. Milk will be supplied to the plant by Land O’Lakes Cooperative as well as by Green Meadows owner and founder Shep Ysselstein, who runs a 7,000-head dairy operation near Rock Valley, Iowa.

“Shep, our founder, having a sizable amount of milk himself, wanted to add value to his milk and provide a market for the milk in that region,” says Tim Czmowski, general manager, Green Meadows. “He had been thinking about it for 10 years and became very active in planning in 2005. Construction and breaking ground occurred almost exactly one year ago.”

The new plant also will help support current growth in northwest Iowa’s dairy farms.

“The region, what’s called the I-29 corridor, has been identified by many in the country as a very prime area for dairy development,” Czmowski says. “It was recognized by Shep that milk was plentiful and there was plant capacity needed. The fact is that there was wonderful opportunity for dairy development in this region.”

In addition to northwest Iowa, Czmowski says the region also includes southeast South Dakota, southwest Minnesota and northeast Nebraska. He says he has seen a reverse in the trend of Western expansion that now is favoring the upper Midwest.

“It’s reversing a little bit of a trend, where dairy expansion has been out in the West, in California, New Mexico, Idaho and Texas,” Czmowski says. “This is really an opportunity to return some of that lost dairy industry to the upper Midwest.”

Davenport, Iowa-based Swiss Valley this year is celebrating its 50th anniversary, and it has processing plants in Dubuque, Luana and St. Olaf, Iowa, as well as others in Minnesota and Wisconsin.

“Our plants are located very close to our members, who are very committed, very loyal dairy farmers here in the upper Midwest,” says Donald Boelens, CEO, Swiss Valley. “That’s an advantage of being located where we are. There still are a lot of family farms in the Midwest ... not that corporate farms are bad, there’s just a little more pride and joy associated with the family farm.”

Of the 1.4 billion pounds of milk Swiss Valley annually procures, 40-50 percent comes from Iowa farmers, with the rest coming from Wisconsin, Minnesota and Illinois.

Swiss Valley’s cultured cheese plant in Cedar Rapids, Iowa, was forced to close earlier this year due to damages caused by this spring’s floods. (See “Farmers look to begin long road to recovery from floods,” June 20, 2008, www.cheesemarketnews.com.) Boelens says Swiss Valley still is able to manufacture and distribute its cultured products from other facilities, but 47 jobs were lost through the closing.

“It was a devastating thing,” he says. “We had to close the facility. We lost a fair amount of money through the closing, and a fair number of employees lost their jobs. We also lost some customers.”

Some producers also were hit hard by the spring storms.

“There were plenty of people all over the state affected,” Vagts says. “Producers were affected by the tornado, then people were hit by floods and power outages. But Iowans really came together to help each other out.”

While the state has many advantages that have attracted new producers and processors, one challenge to growth is the need for more labor, particularly in northwest Iowa.

“Labor challenges, it’s an ongoing battle,” Kilmer says. “In northwest Sioux County, the unemployment rate is about half a percent. That’s about as full as a county can expect to get.”

Czmowski says Green Meadows, however, has not had any trouble finding qualified employees.

“Even though the unemployment is lower in this region, we’ve had good success, adequate applicants, and have been able to find good quality people,” he says. “We have had 800 applications filed for the current 85 people we need.”

Green Meadows anticipates that many more jobs will be created in the region once the facility reaches its second phase. Citing an economic impact study from Iowa State’s extension services, Czmowski says the new plant eventually will result in an additional 1,500 jobs being needed in the region as well as 40,000 more cows. He also says he has heard of some dairy expansions being planned in the region that will help assist in Green Meadows’ growth.

“We plan to grow, and we see demand for cheese continuing to grow,” Czmowski says. “With that, milk balancing will be important.”

Boelens says Swiss Valley also has seen much opportunity in Iowa’s dairy future.

“I think, depending on what happens in the global market and the economy, certainly a lot of areas of the world need dairy products. I don’t see why they can’t come from Iowa,” Boelens says. “There are a lot of opportunities for folks in Iowa and other Upper Midwest states to increase production. We can supply not only the United States but also the globe with quality dairy products.”

Dairies have expanded and economic development teams have actively been recruiting dairies to grow Iowa’s industry, but Vagts says in addition to economic opportunity, people are drawn to Iowa for its welcoming environment and as a great place to live and bring up families.

“We continue to see producers continuing to expand and see people coming into the state,” Vagts says. “It doesn’t seem like we’ll be slowing down any time soon.”

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