State of the Industry

Great Plains dairy industries hopeful for great expansion

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 — Nebraska, Kansas and Oklahoma.

By Rena Archwamety

MADISON, Wis. — In challenging times, sometimes being stuck in the middle isn’t so bad. As population centers, land prices and transportation costs increase from East to West, the Great Plains states of Nebraska, Kansas and Oklahoma are seeing increased interest from dairy businesses.

“I think as population begins to increase in Western states, and availability of water decreases, dairies will look at (the middle states),” says Jeff Keown, extension dairy specialist and professor of animal science, University of Nebraska-Lincoln. “Looking at fuel costs, being in the middle of the states and equidistant shipping to either coast is a positive.”

Space to expand is a major draw for dairies looking to relocate from other areas where dairies are being crowded or priced off their land. All three states have vast areas of land with low population density. According to the latest U.S. Census Bureau numbers, Oklahoma has an average of 50 people per square mile, Kansas an average of 33 people and Nebraska an average of 22. These numbers are well below averages in states like California and Pennsylvania that range between 200 and 300 people per square mile.

Dairies have found these states ideal for large-scale operations. The average size of dairy farms as well as milk produced per cow has been on the rise in all three states, according to USDA’s National Agricultural Statistics Service. The number of milk cows in Kansas rose from 81,000 in 1997 to 109,000 in 2007, while the state’s milk production nearly doubled over the last decade.

“There are a number of new facilities in the western part of the state,” says John Smith, dairy extension specialist and professor at Kansas State University. “Large-scale animal agriculture is already there in a big way, already pretty well accepted.”

Smith adds that two dairies with well over 1,000 cows have moved into Kansas during the past year. In Nebraska, Keown says 13 to 14 dairies have moved in from out of state within the last eight to 10 years.

Much of this new growth is assisted by industry organizations in the states that recruit outside dairies and help existing dairies to expand.

The Western Kansas Rural Economic Development Association, a partnership of counties devoted to economic development efforts, has helped many producers relocate to western Kansas and has been very involved in the recent influx of dairies in that part of the state, Smith says.

The Nebraska Dairy Industries Association (NDIA) was formed two years ago by dairy producers and other industries with dairy interests such as the Nebraska Corn Board, Nebraska Alfalfa Marketing Association and Nebraska Department of Agriculture. NDIA gives dairy producers who are building or expanding assistance such as helping them obtain permits and educating communities about modern dairy farming and its economic benefits.

Oklahoma’s dairy checkoff programs are divided into three regions, served by Dairy MAX, Midwest Dairy Association and Southwest Dairy Farmers.

“All three do a good job of supporting us,” says Noah Litherland, dairy extension specialist and professor of animal science, Oklahoma State University.

However, he says the state could benefit from a single dairy committee that would help recruit dairies into the state.

“In terms of recruiting dairies, there’s not really a strong group,” he says. “We sure could use one.”

Of the three states, Oklahoma’s dairy industry has seen the most decline in recent years, dropping from 92,000 dairy cows in 1997 to 69,000 in 2007, with its milk production declining as well.

“The future is really up in the air as far as I can see,” Litherland says. “Milk prices are high, but input prices are up, too. Dairy farmers here are getting pinched in the middle.”

However, Litherland says, the state offers several advantages.

“The land is very affordable and certainly decent land,” he says, adding that so far this year three dairies have moved from California to Oklahoma.

He also includes low population pressures, dry, mild winters, good groundwater for irrigation and a good labor supply as other advantages, while a shortage of infrastructure components, including dairy supply, dairy processors and ethanol plants, remains a disadvantage for dairies in Oklahoma.

Kansas doesn’t boast many processing plants either, and dairies in the state predominantly sell their milk to Dairy Farmers of America. Alma Creamery in Alma, Kansas, is the only major cheese producing company in the state.

Alma Creamery has been under various ownership since it opened in 1946, and after having closed in 2000, a former owner, Bernie Hansen, bought and reopened the business in 2004. The plant produces a line of Cheddars and Jacks, has a capacity of about 400,000 pounds a year and employs 10 people, including the company’s original cheesemaker Alvin Kahle, who turned 79 years old this year.

“We’ve been trying to keep the tradition going,” says Shon Hansen, plant manager at Alma Creamery, who adds that they are looking into expansion opportunities.

Nebraska is home to a number of cheese and dairy plants, including a Leprino Mozzarella and String plant in Ravenna, Neb.; Gilsa Dairy Products, a subsidiary of Mexico’s Grupo Lala, which purchased a Wells’ Dairy yogurt plant in Omaha, Neb., earlier this year; a Protient plant in Norfolk, Neb., that produces milk protein isolates and concentrates and lactose; and Blue Valley Foods in Hebron, Neb., which produces imitation, substitute and processed pizza cheeses.

Protient, owned by Associated British Foods, purchased the Norfolk plant from Leprino four years ago and is eyeing expansion options during the next few years.

“The plant has benefited from significant investment in the past few years and continues to review additional opportunities for business,” says Robin Muir, vice president of operations, Protient.

Blue Valley Foods has operated in Hebron since 1972 and was acquired in 2002 by Ohio-based Kantner Group. The central location works for the company, which ships its products to all parts of the United States.

“We didn’t choose to be in Nebraska, but seven years ago when we bought the plant, it worked for us,” says Erick Boutry, executive vice president, Kantner Group. “We go to the East Coast, West Coast, North, South, everywhere.”

Boutry adds that the location can be seen as either a disadvantage or an advantage for its national distribution.

“There are different ways to look at that. Either you say it’s in the center of the United States or you could say it’s far away from everything. It depends where you are.”

The Great Plains dairy industry is poised for expansion on all sides.

“Nebraska’s open for all dairy expansion, both production and processing,” Keown says, adding that many dairies are drawn to the state with expansion already in mind.

“Our electric rates are very reasonable compared to other states, as is the pricing of land and future opportunity for expanding,” Keown says. “Setting up infrastructure for their children to get into dairy is one thing that comes up quite often. A lot of them like the wide open spaces.”

Feed supply is another draw for those with long-term expansion in mind. Nebraska’s 22 ethanol plants produce 4.74 million tons of distillers grains each year that can be used for feed, according to the Nebraska Corn Board.

Oklahoma and Kansas also have advantages in feed supply.

“There’s a band down the center of (Oklahoma) that can produce as good alfalfa and corn silage as anywhere in the United States,” Litherland says, adding that he has observed the most successful dairies are the ones that grow their own silage and hay.

Smith says Kansas’ central location and climate help with growing crops for dairy.

“The ability to purchase and grow consistent, high-quality alfalfa is a big advantage,” he says. “The farther east we go, the more difficult it is. The decrease in high rainfall makes it harder to harvest in a consistent manner.”

Kansas was one of the early leaders in bringing in large feedlots in the 1970s before large-scale dairy became popular, Smith says. Though the state has been encouraging of these farms, he says the industry still must take care to leave a good impression.

“Every state has to be careful about the image of the dairy industry from the environmental and animal welfare standpoint,” he says.

Keown says it is important to help communities realize that dairy is an important part of Nebraska’s overall economic development.

“As in every other state, challenges always arise when working with people in communities that feel negative about animal agriculture expanding,” he says. “They’re in favor of ethanol plants, but have to realize they need animal agriculture to get rid of the by-product. The future of Nebraska agriculture — and it’s an agriculture state — is going to be in animal agriculture.”

Litherland says dairies can help revitalize rural communities in Oklahoma and across the country that are struggling for a variety of reasons.

“If I could advise the state to do one thing, it’s to be very friendly and open to agriculture coming in and being a part of the state,” he says. “A lot of times people think ‘A thousand cows, not in my backyard!’ But dairy people are excellent for the community and produce a quality product. They’re the kind of people we need around.”

CMN

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