MADISON, Wis. — For many years, states like South Dakota used the World Dairy Expo as a venue to recruit new dairy operations from places like California and countries overseas.
By: Michelle Rook
Those efforts have been so successful in growing the dairy industry that they and surrounding states have a new problem: a milk surplus.
As a result, state officials and dairy producers used this year’s World Dairy Expo to assist in expanding the dairy processing infrastructure.
South Dakota, like many Midwestern dairy states, is facing a milk processing deficit.
“We’ve added enough cows in the state of South Dakota that we’ve filled our processing plants to date. Currently, there’s milk leaving the state of South Dakota going into other states to be processed,” says David Skaggs with the South Dakota Department of Agriculture.
Skaggs wants that milk processed in state.
“I’d like to see at least two plants that would be in that 4 to 7 million pound a day,” he says.
So, Skaggs says they used the World Dairy Expo as a recruitment trip.
“What we’re trying to do now is find alternative methods of processors coming into the state of South Dakota,” he explains.
They visited directly with processing companies that are looking at new products, plus supporting businesses.
“Yes, we are out there we’re talking, visiting with a couple of engineering firms that also designed, built plants around the country in the dairy and food processing world,” he says.
Meanwhile, neighboring Nebraska is facing an even bigger milk surplus.
“We’re in a situation where right now we have about two-thirds of the milk that is produced in Nebraska actually leaving the state for processing other places,” says Rod Johnson with Nebraska State Dairy Association.
They recently formed the Grow Nebraska Coalition in the state and were also at the Expo promoting economic incentive packages and willing sites in the I-80 Corridor.
“We have a lot of good, productive land along Interstate 80 and a lot of good areas for dairies to grow and to develop, so that’s primarily where the communities that got involved with us are located,” Johnson says.
One of the challenges, beyond finding the right site for a new dairy processing plant, is simply the high cost to build a new facility.
“It is very expensive,” says Allen Merrill, a Parker, S.D., dairy producer and chair of the Midwest Dairy Association Board. “When you’re talking $200 million for a plant or higher, it takes time.”
In the meantime, there are existing processors that are expanding within the region.
“We’re finally in the process of growing our plant in Sanborn, Iowa, and more than doubling the capacity there to make room for more milk,” says Steve Schlangen, AMPI Board Chair and Albany, Minn., dairy producer. “As our members grow, we want to be able to process their milk, and we want to allow them to grow so that they can be more efficient.”
He says that is a far less costly alternative than building new.
“Building a new plant is almost impossible. It’s really expensive,” Schlangen says. “In an existing plant, it might be one-tenth of the cost per million pounds per day or whatever, where we can maybe expand Sanborn for $20 million or maybe less, and that’s adding a million and a half pounds a day. So that’s a really pretty efficient way to expand.”
In South Dakota and the I-29 Corridor, Skaggs says Valley Queen Cheese of Milbank made an announcement this spring to add a $50 million investment to their plant, and Agropur is also exploring an expansion.
“We’ve been working with Agropur to make an announcement of a possibility of doubling the size there at Lake Norden,” he says.
Producers admit processing expansion can be a bit of a chicken-and-egg proposition.
“The plants need the milk, and they need to be able to market the finished product. So, there’s a lot of moving pieces to bringing processing in,” Merrill says.
However, he says it’s necessary for the future of the dairy industry.
The governors of both South Dakota and Nebraska have been very supportive of the recruitment efforts. Skaggs says in South Dakota, Gov. Dennis Daugaard has made trips to Fair Oaks Farms in Fair Oaks, Ind., and the Fairlife Plant in Coopersville, Mich. He says Daugaard sees the potential economic development a new plant can bring to a community and the entire state.
“Anytime we’re talking processing, we’re talking upwards of 75 to 100 new jobs or more, and they’re all very good paying jobs,” Skaggs says.
Plus, dairy expansion increases feed demand and improves grain prices for producers.