Published: May 30, 2008 05:06 pm            

Is Minnesota's dairy industry on the rebound?

Originally published in the May 30, 2008, print edition.

With 10,000 more cows in the milking lineup than a year ago, most observers say the Minnesota dairy industry is definitely on the rebound. Current numbers are about 463,000 dairy cows versus about 450,000 in January 2007. Stearns County with 803 dairy farms and 65,000 cows continues to be the state’s No. 1 dairy production center.

However, there remains a gradual reduction in Minnesota dairy farms. On Jan. 1, 2007, there were 5,187 dairy farms licensed to sell milk according to the 2007 Minnesota Agricultural Statistics yearbook. This compares with 5,384 dairy farms in 2006 and 5,638 dairy farms in 2005. Today, observers say the number is less than 5,000 and the average Minnesota dairy farm has 90 cows.

So are the 2,000 cows and bigger “mega dairies” primarily responsible for the jump in cow numbers? Only partially, said Bob Lefebvre, executive director of the Minnesota Milk Producers Association. A much bigger factor are the many family dairy farm operations that are updating with technology and better equipment to more conveniently handle more cows without the added cost of more labor.

He suggested that if Minnesota is losing about 100 dairy farms per year that would reflect about a 9,000 drop in dairy cow numbers. Instead cow numbers are up over 10,000 and he doubts new mega dairies are the key driver.

“What I am seeing is more dairy farmers looking at their future. They have older facilities that are hard on the cows, hard on the people milking the cows and some have younger family members wanting to get into dairying so they are reinvesting. They are updating with technology and better equipment to more conveniently handle more cows. That’s where I see the most expansion in the Minnesota dairy industry today.”

In 2002 only about 10 percent of Minnesota’s dairy herds numbered 500 head or larger. Today that figure is nearly 20 percent and increasing rather quickly. “Family dairy farm expansions of 50-, 80-, 100-cow increases is what I see happening mostly and this is what will really strengthen the Minnesota dairy industry long term,” Lefebvre said.

“If you consider the lower milk prices the past couple months plus feed costs considerably higher than last year, that quick snapshot is not so good. But projecting the rest of 2008 cheese prices and Class III milk prices ($20 per hundredweight) against current feed costs, dairy producers should eke out some profits,” Lefebvre said.

The wild card is the unknown, both in terms of milk and cheese prices and the bigger factor of feed costs, especially corn and corn silage. “We’re hopeful that it should remain a good year for the Minnesota dairy farmer, and it will if milk prices stay where they are right now and feed costs don’t suddenly start surging due to some unpredictable weather happenings,” he said.

This long-time observer of the dairy industry questions the acclaim that distillers dried grains are getting as a major new component to help offset the higher costs of grain corn. “Distillers dried grains are overblown as an excellent feed source for dairy cattle,” is his blunt assessment noting that those dairy producers who are using DDGs are using it only as a small percentage of the total diet like less than 5 pounds per cow per day. He acknowledged that DDGs are now widely available but said there are better alternatives providing more nutrition at less cost.

Are higher milk prices likely to reduce consumer consumption? Decreasing per capita fluid milk consumption has been ongoing for quite some time.

“Retailers’ marketing tactics are causing some confusion in the market place. Having milk labeled as rBST-free gives a better margin to the retailer but all milk is wholesome. There is absolutely no difference in nutritive value yet we have food stores promoting hormone- and antibiotic-free milk selling as much as $1.20 per gallon higher. That to me is grossly unfair both to the consumer, and the dairy producer,” Lefebvre said. That equates to $16 to $18 more value per hundredweight to the producer. Today producers get a slight 18- to 20-cent premium when producing milk that they certify is rBST-free.

Are robotic systems also driving expansion? Will the advent of robotic milking systems further strength the family dairy industry?

“Very definitely,” said Tom Anderson, Southeast Minnesota Farm Business Management Association, Riverland Community College. He’s aware of 13 new robotic systems being installed on dairy farms in southeast Minnesota. Currently there are only two robotic systems in the state.

“This technology already has eight years experience with European dairy farmers. Canadian dairy farmers moved into robotics three to four years ago. Based on current data involving equipment costs, feed costs, milk prices, labor costs, etc., we project a seven-year payback on a system which costs about $170,000 installed,” he said.

Minnesota Milk Producers is conducting a June 17-18 bus tour into western Wisconsin to visit dairy operations with two of them being robotic systems. “We’re definitely hearing more about robotics as the next step in rejuvenating the dairy industry, and providing opportunity for younger people already with a comfortable technology background, to get into the dairy business. This will be, I think, an exciting new era for Minnesota milk production,” Lefebvre said.

“I’m cautiously optimistic. Anytime there is a new opportunity for dairy producers we encourage them to take a look at all their options and see what might work best for them. Every dairy farm is different, so you can’t make blanket statements new systems working for everyone.”

He also approved of legislation passed by this year’s state legislature relating to low-interest loans for livestock producers. “Yes, without question this will be helpful, especially to our dairy industry. It still remains to be seen what resources will be made available through that program and how widely will they be distributed.

“Our hope is that state leaders of this new program will see that dairy is the livestock industry to focus on since there is more total economic development from the dairy cow than any other unit of livestock.”

Lefebvre said — with no offense intended to emus, ostrich, llamas, goats and buffalo that also got included in the legislation — one dairy cow generates over $15,000 of economic activity per year. That dairy cow is also the center of improving economic environment because alfalfa in a crop rotation improves soil fertility, greatly reduces soil erosion, and also builds soil carbon content, which may soon become a valued trading element. Plus dairy manure has great fertility value and enriches the soil profile structure.

Organic production is growing too. Is organic milk production also part of the recharging of the Minnesota milk industry?

“We’re supportive of those producers who go the three-year route of getting their farms certified to be organic dairy farms and get more for their milk because the successful growth of the dairy industry needs both types,” Lefebvre said, addding that consumers have the right to choose but nutritionally there isn’t any difference.

“If organic milk production continues to grow we’re fine with that, but when the product is touted as being nutritionally superior then we think the consumer is getting some wool pulled over their eyes,” he said. The key is consumer understanding.

He doubts that organic milk will become the major product in the fluid milk business simply because the dairy industry has to stay focused on the role of providing good nutrition to all walks of life. “It’s in the soul of every dairy producer that he is in business for profit but also to feed people.

The higher priced organic dairy products fit some consumers but with our weaker dollar relative to much of the world, dairy exports have been phenomenal in recent months. “A bigger challenge may be when our dollar strengthens that we maintain those markets.”

Probably the best perspective on the current dairy situation comes from Lewiston producer Bill Rowekamp, “Granted it’s better today than it has been the past two to three years. We do have some pretty good milk prices right now but with much higher fuel costs and feed costs it’s a good thing we’ve got these better prices. Frankly, I’m not that much more profitable than two to three years back. I’m simply handling more money, both going out for expenses and coming in from better milk prices.”

Rowekamp agrees that the Minnesota dairy industry is stronger financially today and is growing because of new technology, new equipment and new systems that better handle more cows with less labor.

He’s adding an 84-cow, sand-bedded free-stall barn that will bring his milking lineup to about 300 cows. He’s at 220 right now and uses a 30-year-old double-six parlor, which will also be accommodating the additional cows. Robotic systems may be in his future.

“For now I likely will see how the robotic units fit with existing facilities and how much retrofitting is needed before we make any decisions,” Rowekamp said, adding that this new barn is being positioned so robotic systems can be added in the future.

He, too, thinks the advent of robotic systems will energize the Minnesota dairy industry down the road. “We’re talking better lifestyle for the dairy producers, apparently more production and longer cow life, plus the obvious of less labor.”

Rowekamp mentioned an even bigger potential value — resale of your farm. “I think a dairy farm equipped with robotic systems opens that farm to potential buyers who wouldn’t be in the market if it was a conventional dairy farm. It should make your dairy farm more attractive to the next generation, wherever they may come from.”

Rowekamp is keenly aware of changing attitudes toward dairying. Five years back he was a partner in Ripley Dairy, a 2,000-cow, $10 million dairy project just outside Claremont that had all the needed permits but was eventually shot down by township officers. “That process did bring to light the many economic benefits that a dairy operation brings into a community. We did lots of research, had lots of meetings, and though the project didn’t get the OK, I think there was a tremendous amount of new thinking about the positive values of a strong dairy economy.”

That particular project would have processed the manure through an anaerobic digester hitched to a diesel-powered generator that would have generated electricity for about 400 homes.

“Maybe today with $120 crude oil and much more awareness of energy issues, the township would be more understanding of the importance of such a project to the local community,” said Rowekamp, who was reached via cell phone as he was planting corn May 20.

Contact the Minnesota Milk Producers Association at (877) 577-0741 for information on the upcoming tour.

        

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