K-State Research and Extension News
October 30, 2013
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K-State Looks at the Future of the Dairy Industry in Kansas


A symposium brought together dairy industry experts and Kansas’ dairy producers to examine potential growth opportunities to benefit the state’s economy.

MANHATTAN, Kan. – While walking through their local grocery stores, consumers might rarely think about all of the varieties and brands of products available to them, let alone where those products originated. In Kansas, consumers who favor national brands of yogurt or cheese in the dairy aisle could be taking home a product with a story that began closer to them than they could have imagined.

According to the Kansas Department of Agriculture (KDA), Kansas currently has about 300 dairy farms across the state, most of them in eastern Kansas but the larger ones in western Kansas where the areas are less populated and more land is available. Statewide, Kansas has about 132,000 dairy cows and produces roughly 2.7 billion pounds of milk worth about $519 million of farm gate receipts annually. Much of the milk produced in Kansas ends up as bottled milk, while some of the milk and cream is further processed into products bearing labels of well-known U.S. dairy brands.

Kansas State University hosted a dairy symposium on Oct. 23 in Manhattan, Kan., which posed the question, “Is Kansas positioned to grow its dairy industry?” and allowed dairy industry experts and Kansas’ dairy producers to gather and talk about the issues surrounding potential growth.

KDA has a program called the Kansas Dairy Initiative in place to help maintain current dairies in Kansas and look at dairy expansion opportunities. Potential areas of growth include number of cows and farms, processing capacity and the creation of more artisan dairy products, such as specialty cheeses, said Billy Brown, KDA agribusiness development coordinator and symposium speaker.

Kansas is a good location to increase dairy production not only because of the availability of land and wide-open spaces, Brown said. The state also has an adequate feed supply to support more dairy production. The dry climate with minimal instances of prolonged hot and cold spells is favorable to raising dairy cattle.

Kansas is a friendly state for animal agriculture, Brown said, and has relatively lenient environmental regulations to allow for animal agriculture expansion compared to several other states. Kansas Gov. Sam Brownback is also an advocate of increased animal agriculture production in Kansas.


Importance of location

Dairies are businesses, and like all businesses, location is very important, said Normand St-Pierre, professor from The Ohio State University and another speaker at the K-State dairy symposium. Businesses must be located where there is a demand for the product or service provided and availability of adequate resources to function.

St-Pierre and some of his colleagues recently completed a study that looked at the most important factors for determining the best location for dairies to re-locate or consider for expansion. The researchers surveyed dairy producers and agricultural business professionals in the United States’ top 35 dairy-producing states.

The survey showed that cash flow ranked first among respondents, followed by capital expenditures, tax structure and incentives, waste management, utilities, natural resources such as land and water, the regulatory environment and transportation.

These were followed by other factors that were somewhat important to dairy producers and agricultural business leaders for determining location. These included labor, markets and community attributes such as public perception, access to schools, health care, cost of living, housing, population and access to domestic goods, in grocery and hardware stores, for example.

“Some factors were universal, while some were specific to things such as region and herd size,” St-Pierre said. “There is no such thing as a perfect location. There are trade-offs between many possible areas of production.”

Kansas, in addition to other centrally located U.S. states, has several of the important attributes to be a good location for dairy industry expansion, St-Pierre said.

“There are a few exceptions to this, but the major areas of dairy expansion will be occurring in the central part of the United States,” St-Pierre said. “Those places that will accommodate issues beyond the obvious natural resources needed will be the successful ones.”


Concern about water

The availability of water, and relatively good quality water specifically, is important to dairies everywhere. Posing the opportunity to grow the dairy industry, particularly in western Kansas, has led to discussions about water—and if there is enough water to support more dairy operations.

The Ogallala Aquifer is an important water resource for agricultural production, for both crops and livestock, in western Kansas. A recent study out of Kansas State, led by professor of civil engineering David Steward, examined the future of the Ogallala Aquifer and found that if current usage of the aquifer continues, as much as 69 percent of the aquifer would be depleted by 2060. Usage is exceeding the recharge of the aquifer, which has led to its depletion.

Texas A&M AgriLife Extension recently released a report that looked at the impact of the dairy industry in the southern Ogallala region. It found that dairies in this region—from western Kansas down through New Mexico and the panhandle of Texas—use nearly 1.6 million acre-feet of water and generate $93,437 per acre-foot of direct water or $1,632 per acre-foot of overall water use.

Direct water use includes water for drinking and facility maintenance, while indirect water is accounted for in feed production for the cows. Indirect water is important, because without feed, dairies would not be able to operate.

The study found that most of the indirect water use comes from outside of the region, however, in the form of imported grain and not from the Ogallala Aquifer. The data suggests that the dairy industry in the southern Ogallala region has little impact on the water resources while increasing economic activity and employment opportunities.

St-Pierre said when it comes to conserving water, something to think about is using dairy cattle as a middle point between groundwater extraction and application to irrigated crops. This puts the water to more than one use.

“When we look at water in dairy, the use of water for consumption is not like a gallon of diesel or gallon of gasoline, where if I burn it, it’s gone,” St-Pierre said. “If I run a gallon of water through a cow, most of it actually comes back out of the cow. The cow can be put between the groundwater that you pump and the irrigation field. If you’re running the water through animals first, you get some nutrients out, basically natural fertilizer.”

He said only about 25 percent of direct water use in dairies is lost in the form of milk and evaporation.

“If you’re trying to figure out how much ag output you can get out of a gallon of water, dairy production ranks very high in dollars produced per gallon,” St-Pierre said.


Potential outcomes from growth

The growth of the dairy industry could lead to economic growth for local Kansas communities and the state as a whole. It might also lead to more export opportunities, where the impact could be noticed nationally and globally.

Brown said small Kansas communities can be positively impacted from a dairy moving in nearby or by a current local dairy expanding. For starters, dairies could provide more local jobs. According to the southern Ogallala impact study, a typical 3,000 head dairy requires 30 to 37 employees. Dairies also could bring more children into local schools and provide property taxes to help the local area.

For each dollar received by a dairy operation, St-Pierre said, the regional economic impact of that dollar is, on average, between two- and three-to-one.

“If a cow accounts for $5,000 in gross revenue per year, it means the local economy is going to see a net annual flux of about $15,000 per additional cow coming in,” St-Pierre said. “Then if you add the processing of (the milk) you at least double again this number, up to seven times, a far greater economic impact than crop production, especially if the crops are sold out of the state.”

St-Pierre said there is a deficit of milk in many states east of Kansas, which puts Kansas in a good location for domestic trade.

“When you look at the United States, you end up having two large regions—the region from the border of Missouri and Kansas to the west is in excess of milk, while everything east of there is in deficit of milk except the northeast with New York and Pennsylvania, which is all used up in that area,” St-Pierre said.


More information

K-State Research and Extension offers information about Kansas dairies and dairy research online. For more information about the Kansas Dairy Initiative, log on to Dairy in Kansas

 


 

Sidebar 1:

Producer Profile: Vertically Integrating the Dairy Business

JUNCTION CITY, Kan. – While Kansas looks to potentially expand its dairy industry by increasing the number of cows and farms and its processing capacity, it also looks to produce more artisan, or specialty dairy products.

While some large-scale dairies in western Kansas have thousands of dairy cows, Hildebrand Farms Dairy, located west of Junction City, Kan., is a smaller operation with about 150 cows in milk. The farm’s location, closer to major cities than those larger operations, allow it to be a unique family operation that is vertically integrated—the milking, pasteurizing, processing, bottling and transporting of Hildebrand products to more than 80 grocery stores around Kansas is all managed by members of the Hildebrand family.

Melissa Reed of Hildebrand Farms Dairy was a panelist at the Kansas State University dairy symposium on Oct. 23 in Manhattan, Kan. The panel included dairy producers from across Kansas who answered questions about their specific dairy operations and how they see potential growth in Kansas’ dairy industry.

Reed spoke on the importance of vertical integration for her family’s dairy and segmenting various aspects of the dairy to allow family members to be involved in different ways.

“You have to be segmented in your family business to get it to work,” she said.

Reed said she has noticed a growth in the number of consumers who want unique, artisan dairy products. This is why Hildebrand, she said, is looking for opportunities to make new dairy products that would add to the line of milk varieties and flavors—chocolate, strawberry and even root beer—and cream that is already available for consumers to purchase.

In addition to finding many Hildebrand products in stores throughout Kansas, Hildebrand Farms Dairy has its own store at the farm in Junction City and offers tours to engage and connect with its customers. To learn more, visit the Hildebrand Farms Dairy website.

 



Sidebar 2:

Dairy Cows in the Southern Ogallala Region

COLLEGE STATION, Texas – More stringent environmental regulations, rising land prices and increased populations have required many dairy operations to consider relocation, according to a recent Texas A&M AgriLife Extension report that examined the impact of the dairy industry in the southern Ogallala region—that is, where the Ogallala Aquifer lies beneath western Kansas down through New Mexico and the panhandle of Texas.

The report showed that the number of dairy cows increased in the southern Ogallala region from 41,500 head in 1990 to 466,000 head in 2009. The region’s dairy industry not only showed growth in the number of cows, but also in the number of dairy processing facilities. Although there was a slight decline in cow numbers in 2009 due to low milk prices and profitability, the southern Ogallala region still reported about 453,200 dairy cows in 2010.

In the southern Ogallala region, western Kansas falls just behind Texas and New Mexico in milk production and processing value. In 2010, Texas had a $1.5 billion value in milk production and processing, while New Mexico valued at $1.2 billion. Western Kansas was valued at $320 million—$307 million in milk production and $13 million in milk processing.

Milk producers and processors in the region contribute $4.3 billion in annual economic output and 13,400 jobs, according to the report. For more information, download the report here.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by: Katie Allen
katielynn@ksu.edu
K-State Research & Extension News

Mike Brouk, associate professor and extension dairy specialist, K-State Research and Extension – mbrouk@ksu.edu or 785-532-1207