Ooops, forgot the link:
www.agweekly.com/news/agnews/index.asp?StoryID=1387Prices, demand fuel dairy growth
By Lorraine Cavener
Ag Weekly correspondent
(Look near the bottom: DB:-)
RUPERT, Idaho -- Fueled by high milk prices and demand for cheese, the Magic Valley dairy industry is growing by leaps and bounds. A look at area building permits over the past four months shows a prevalence of dairy-related projects.
The answer to what is driving dairy growth is simple, said Bob Naerebout, executive director of Idaho Dairymen's Association.
"Basic economics," he said.
For the last 10 months, milk has been in demand and price has been excellent.
That's no surprise to those who have been predicting a bright future for the Magic Valley dairy industry. Two years ago, during a workshop on the feasibility of dairies in Mini-Cassia, Naerebout told attendees markets such as Dairy Farmers of America, WestFarm Foods, Jerome Cheese Co. Inc., Glanbia Foods Inc., Kraft Inc. and High Desert Co-op were demanding milk.
"There is a lot of competition for milk in the markets," he said at the workshop.
In 2002, the state experienced a 4.75 percent rise in production, and 2004 has seen about 3 percent growth so far, he said.
"Last year total production increased by 7.4 percent," Naerebout said.
With growth, comes economic impact.
A report, presented by Terry R. Smith of Dairy Strategies during the 2002 feasibility workshop, spoke of a $243 million investment in 20 dairies that would each have 35 workers with annual salaries of about $22,000 -- 700 workers with an annual payroll of $15.5 million.
While the dairy industry has not yet grown as much as the scenario presented in the hypothetical report, the impact is obvious.
Dave Thomas, president and CEO of Glanbia Foods Inc., said a shift from east to the west is occurring in dairy production because the western climate is more conducive to large-scale, more efficient dairies.
Milk production can be done at a good economic level with a good feed source on hand, he said. A lot of cheese is still produced in Wisconsin and other upper Midwest states, but the cost of production in those states is higher, Thomas added.
Significant growth in foodservice areas such as pizza and sandwiches, where cheese is used, is fueling demand, he said. The Atkins Diet and other low-carb diets have also added to the demand for dairy products, he said.
"Per capita consumption of cheese is going up," Thomas said.
Another factor in Idaho's dairy growth is the decline of growth in the potato industry, Naerebout said. "With Simplot leaving, those farmers are looking for a way to sell their crops," he said.
Randee Martin quit growing potatoes and, with his father, has become more involved in the Martin Livestock business, which custom feeds dairy heifers. He rented out his potato ground, and Martin Livestock bought a lot more cows.
"With potatoes there was too much uncertainty. It was a one-way contract," he said.
But with dairy, the demand is there.
"You don't have the fluctuation. (Dairymen) need the replacement heifers," Martin said.
Growth of the dairy industry has allowed Martin Livestock to reinvest in younger animals. The volume of heifers being brought to the business to feed has increased, he said.
While a lot of dairy growth has been seen in the past few months, many of the projects have been pending for a couple years, said Steve Whitesides, one of the owners of Whitesides Dairy.
"Some of it is catch-up growth," he said. "It was postponed until they (dairymen) could see a light at the end of the tunnel."
As a whole, the dairy industry has not been profitable for the past two years, he said.
"If you were in a negative position last year or the year before, you are still catching up," he said. "If milk would have been strong over the last two years you'd see more (growth)."
Whitesides Dairy has been in business northeast of Rupert for 27 years, and growth has been incremental, he said. The dairy now milks more than 2,000 cows and ships 30,000 pounds of milk per day.
"Growth can take place through planned management," he said. "You have to be watching out for the future and make the best educated decision."
With an eye to the future, Whitesides Dairy installed the first anaerobic digester in Magic Valley, which is nearly ready to use.
"We hope to be putting manure through it in 30 days or so," Whitesides said.
The privately funded system, which is owned by Intrepid Technology of Idaho Falls, has great potential for solids reduction and gas production, he said.
"The way we're looking at it -- it's something of the future," he said. "It's the future of the dairy industry."
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