Back to the Heartland

The nation’s midsection is a new dairy mecca

In 2003, as burdensome European regulations and limited expansion opportunities were squeezing the viability out of his small dairy in northern Ireland, Rodney Elliott read in his local newspaper of an agricultural investment tour of South Dakota.

The Irishman, then 39, decided to see firsthand what American farming offered. In April 2004, he flew to the U.S., toured several South Dakota farms and dairies, and liked what he saw. Four months later, Elliott brought his wife, Dorothy, and their three children to South Dakota for a family vacation. They returned in January 2005 to experience a Great Plains winter.

Within a year, the Elliotts had sold their 150-cow dairy in Ireland and were building a new 1,400-cow operation in Lake Norden, S.D., west of Interstate 29. Today, they have a new life in a new land—and no regrets about their dairy relocation to the American Midwest.

“Legislation here is sensible compared to Europe, which is total bureaucracy,” Elliott says. “This is an agriculture-oriented community. There’s more opportunity for growth.”

The Elliotts are part of a new wave of dairy producers who are relocating to America’s heartland. Although USDA numbers show the biggest growth in dairy cow numbers over the past three years occurred in Western states like California, Idaho and Arizona, new development is surging in the nation’s midsection.

South Dakota, Iowa, Illinois, North Dakota, Nebraska and Texas are actively recruiting dairies. They’re touting their feed and water availability, easy dairy permitting process, ag-friendly communities, affordable farmland, open spaces and rural quality of life. They’re also promoting the region’s abundant milk processing capacity, as well as dozens of ethanol plants that supply distillers’ grains for dairy feed.

Eager to pump new life into their lagging rural economies, many central states have identified dairying as one of the best industries to attract to their communities. And, so far, their efforts have worked.

• South Dakota has built 34 new dairies since 2005, with another six under construction in 2007, says David Skaggs, dairy development specialist for the state’s department of agriculture.

“Eight more dairies are scheduled for construction in 2008, with the potential for six more,” Skaggs says. So far, another four new dairies look possible for 2009.

Since 2006, South Dakota has added 5,000 cows, bringing its total to 86,000.

Along with low feed costs and numerous dairy markets, South Dakota offers a streamlined permitting process that averages 60 to 90 days in most counties, Skaggs says. This year, Davisco Foods, a major supplier to Kraft Foods, expanded its cheese plant near Lake Norden. Also, the state has no corporate or personal income tax, no personal property tax, and no inheritance and business inventory tax.

• In Iowa, cow numbers have risen 13% to 215,000 in the past three years, says Chris Mondak, Extension dairy field specialist at Iowa State University. Northwest Iowa alone has gained 16,800 dairy cows in the past two years.

“One of the top reasons I hear why dairies are moving here is that people like the communities,” Mondak says. “They like the schools, the churches, the quality of life for raising families. That surprises me. I would have thought it would have been because of feed or water availability.”

Interest is high state-wide for promoting dairying of all sizes and styles, she says.

“There is a strong dairy community here of positive-minded dairy producers, a good supporting infrastructure and a population generally positive toward agriculture,” Mondak adds.

In northwest Iowa, where farmland prices range from $4,000 to $6,000 per acre, “there’s a 90-day turnaround for dairy permitting,” says Mike Meissen, vice president of Iowa Area Development Group.

Meissen’s group helps dairy producers with site location, a financial package and permitting assistance. “We take the worry out of their hands,” he says.

• Nebraska has not only stopped the decline in its cow numbers but steadily boosted its dairy herd since 2005, says Terry Landes II, communications director with Nebraska Dairy Industries Association. Two years ago, the state counted 60,000 dairy cows. Since then, it has added 1,000 cows. Operations bringing an additional 7,000 cows are either in expansion or construction. “Three more operations are in the planning stages, which should bring an additional 12,000 dairy cows by 2009,” he says.

In addition to Nebraska’s vast land and limited urban encroachment, Landes says the state’s updated LB 990 legislation offers financial incentives for dairies.

• Texas dairy cow numbers have jumped sharply in the last five years thanks to the boom in the Panhandle. An estimated 45,000 milking cows live in the four counties surrounding Dalhart, five times more than in 2003, says David Moore, executive director of the High Plains Dairy Council. Another 14,000 heifers also call the area home. In the last three years, 11 dairies have emerged in a 30-mile radius of Dalhart, site of the new Hilmar Cheese plant.

Other states are hoping to ramp up their dairy industries, too. North Dakota “has all the ingredients for dairies,” says Gary Hoffman with the North Dakota Dairy Coalition. He would like to push the state’s dairy herd, now at 33,000 cows, to 100,000.

“We have had producers from Pennsylvania, Wisconsin and California move to North Dakota in the last 18 months,” Hoffman says. “The cost of dairy-quality alfalfa in North Dakota is 50% of what it is in California. Land is $1,000 per acre or less, and North Dakota has numerous incentives to help dairy producers.”

In Kansas, Mike McCarty and his brothers are building the second of two dairies. In 1999, they left Pennsylvania, where the family had farmed for a century, to build a 1,500-cow dairy in Rexford, Kan.

Like many other dairies, their 200-cow operation in Pennsylvania had begun to feel urban encroachment pressures. That’s not a problem on the rural plains of northwest Kansas. Feed is readily available, and land is affordable at $1,750 to $2,500/acre. In fact, McCarty pegs his costs at $2/cwt. to $3/cwt. less than when he was in the Northeast.

Pleased with their initial Kansas dairy, the McCartys started construction on an 1,800-cow dairy 70 miles away in Bird City, Kan., in September 2007. “We hope to build more dairies in Kansas,” McCarty says. EP

Midwest mecca

• Eager to pump new life into lagging rural economies, heartland states are actively recruiting dairies.
• South Dakota has built 34 new dairies since 2005, with another six under construction for 2007 and eight scheduled for 2008.
• In Iowa, cow numbers have risen 13% to 215,000 cows in the past three years.

Irish roots

South Dakota winters can be harsh, dairy producer Rodney Elliott says. And living 35 to 40 minutes from major shopping isn’t ideal. But with abundant feed and water, and good cropland affordable at $2,500 to $3,000 an acre, Rodney says it makes economic sense to dairy in the Great Plains state.

The Irish transplant built his South Dakota dairy for $4 million in 2006. It sits on Highway 81 about 30 miles northwest of Brookings, and some 20 miles from the much-touted Interstate 29. Elliott and his wife, Dorothy, named their new facility Drumgoon Dairy after their old operation in Ireland.

Unlike many immigrants, the Elliotts didn’t have to worry about obtaining a green card to live and work in the U.S. Dorothy holds U.S. citizenship; she was born here and moved to Ireland as a child.

The permitting process took four months for their new dairy. Designed to milk 1,400 cows, it has the ability to expand to 2,000 cows. “We’re thinking of expanding sooner rather than later,” Rodney says.

One South Dakota benefit is the proximity and availability of feed. “All feed back home had to be shipped in,” he says.

The new dairy’s feed cost stands at about $5/cwt., even with higher corn prices. Moreover, two nearby cheese plants, Valley Queen and Davisco Cheese, provide markets. “They have picked up a lot of new dairies recently,” he says.

The infrastructure is growing, adds Rodney, as economic development efforts bring in more dairies. The relocation has worked for his family, too.

“We’ve been made to feel extremely welcome by the people in this area,” Dorothy says. “Despite the harsh winter climate, it’s a beautiful place to live—good for kids, with strong family values, where people are trustworthy and honorable.”

“I think South Dakota will grow as a dairy state,” Rodney adds. “I want to see other dairies here. They will only benefit the area over the next 30 years.”

Relocation online

For more information on dairy relocation, visit:

Central Plains
www.centralplainsdairy.com
South Dakota
www.dairy.doa.sd.gov
North Dakota
www.nddairy.com
Nebraska
www.nebraskadairy.unl.edu
www.growNebraskadairy.org
Iowa
www.iadg.com
www.westerniowadairy.org
www.midiowagrowth.com
Illinois
www.illinoislivestock.org
Kansas
www.wkreda.com
Texas High Plains
www.highplainsdairycouncil.com

Not so fast

Not everyone agrees the Central Plains or Texas Panhandle are the best place to relocate.

Jim and Jan Jenks left their Idaho dairy in September to relocate to Wisconsin after considering moves to the Texas Panhandle, South Dakota, Minnesota and California.

Although they love Idaho, it was too hard to turn a profit on their Jersey dairy there, Jim says. He blames his struggle on his inability to manage at a high enough level and a lack of equity. “We lost a quarter of a million dollars last year,” he says. “We couldn’t afford to do that again.”

Jenks believes he will see a minimum of 70¢/cow in feed savings in Wisconsin. The combination of Wisconsin’s higher price and lower costs could have yielded him an additional $45,000 in August 2007 over his Idaho dairy income, he says.

The Jenks purchased a 420-milker freestall operation near Marathon City, Wis. “We received no financial assistance to relocate, but we found a very willing lender,” he says.

Gary Genske, whose California accounting firm represents dairy producers in 27 states, believes the heartland lies too far from key population centers. And he says living in remote rural areas, as many dairy families do in the Great Plains and Texas, isn’t an attraction for most people.

Some 18 months ago, Genske says, probably 100 dairy producers were considering relocation to the Texas Panhandle. “But since the tough 2006 year, I doubt if 10 or 15 dairies will get put there,” he says.

The reason? “People have discovered problems, and they’ve changed their minds,” Genske says.

Among those drawbacks, he says:

• Lack of labor and dairy services. “The area has never had dairies before,” Genske says. Most of the workforce has labored in the oil fields.
• The water table has dropped considerably, casting doubts on water availability.
• The feed supply hasn’t grown, straining locally grown supplies. Strong demand also has heightened local feed prices.
• Distant markets. “Milk tanker loads are hauled thousands of miles,” increasing hauling costs, he says. Long hauls commonly occur in the Texas Panhandle, eastern New Mexico, the Interstate 29 corridor of eastern South Dakota and northwest Iowa.
• Low prices. “Texas Panhandle dairy prices are among the lowest in the country,” Genske says. That’s partly because most area milk will end up in manufactured products that yield a much lower return.

Genske understands the dilemma producers face. “It’s so difficult to find a location to build in anymore,” he says. “Producers are having to go farther and farther away from populations. It’s becoming such a problem that people ignore the ills of a place like the Texas Panhandle and decide to go there anyway.”

Genske is a partner in two New Mexico dairies that milk 4,500 cows. But the effects of 2006 have led him to consider selling one dairy. He’s negotiating to buy another, this one located 60 miles west of Washington, D.C. His new dairy, if approved, will be a 2,000-cow operation “in a 100% Class I area,” he says. “I’m going where the market is and where there is a deficit of milk.”