2. Dairy Industry Trends and Opportunities John F. Smith Extension Dairy Specialist Kansas State University

3. Percent of U.S. Milk Production for Different Herd Sizes >200 cows = 57%

4. Percent of U.S. Inventory (cows) for Different Herd Sizes >200 = 51%

5. Number of Operations for Different Herd Sizes in the US >200 = 7990 herds (8.2%)<200 = 89,570 Herds

6. Percent of U.S. Milk Production from Dairies with > 200 Cows Source: USDA-NASS

7. Two Ways to Increase Milk Production Milk More Cows Increase Milk Production per Cow Operations over 200 cows are doing both

8. Pounds of Feed (DM Basis) Required* For Maintenance at Different Levels of Peak Milk Production 104 96 86 13 Pounds of Milk Pounds of Feed * Assumes a ration containing 0.78 Mcal/lb of dry matter * Assumes environmental factors are constant.

9. Total number of milk cows and milk production per cow on dairy farms in the United States Compiled from: USDA Statistical Bulletin 303, 430 USDA Statistical Bulletin Entitled Milk: Final Estimates for Various Issues. 80’s + 2432 lb/c/y 90’s + 2989 lb/c/y

10. Consolidation!!!

11. Opportunity!!!

12. Other Industry Trends Many producers are building new facilities –Upgrading existing facilities –New facilities Urban encroachment is encouraging producers to relocate creating new dairy pockets –ID,NM,TX,KS,IA,IN,MI –Tax implications

14. Total Milk Production by Region of the United States Adapted from: U.S. Dairy Industry Statistics 1900-99. Hoards West. April 25, 2000. Pg 50-51.

15. Other Industry Trends Significant Premiums for Shipping a Tanker of Milk –$0.10-1.80 cwt. Dilute Fixed Assets over as Many Cows as Possible –Milking parlor & Manure mgt. Manage Employees Partnerships & Business Structures –Combining Resources Increase in the Number of Multiple Unit Operations

16. Where will the Cows Go? Social Acceptance Environmental Pressure –Large Tracts of Land Quality of Life Climate –Both Cold & Hot Economic Incentives –Milk Market –Local Incentives

17. Potential Locations for New Dairies Big 3-CA, ID, NM High Plains-SD, NE, KS Eastern Oregon Panhandle of TX & OK I-29 Corridor-SD, MN, IA, NE, KS, MO Tri-State Area-IL, IN, OH Upper Midwest Western New York Utah, Nevada, Montana & Wyoming

18. Who’s Building These New Dairies? Expansion of Existing Operations Relocations –CA –Other States –Immigrants Unknown Entities or Investor Groups –Business Structure Changes

19. Limitations to Expansion or Relocation Capable Managers Ability to Obtain Permits –Clear Definition of Requirements –Permits Held Up in Court Social Acceptance Technical Support –Engineers, Contractors, Technicians, Management Specialist

20. Effect of Herd Size on Annual Ownership Costs Per Cow for a Double-8 Herringbone Source: Craig Thomas, Michigan State University

21. Investment in Facilities and Livestock Number of Lactating Cows Housing TypeInvestment per Lactating Cow 100Freestalls$6,582 600Freestalls$5,105 2400Freestalls$4,751 2400Dry-lot$3,932 KSU: Dairy enterprise budgets, 2001

22. Summary The dairy industry at the farm level is consolidating very rapidly. –8.2% of the herds produce 57% of the milk 51% of the cows New dairy pockets are developing rapidly –Relocating dairies –Expansion of existing dairies

23. Summary Business structures are changing Dilute the cost of facilities over as many cows as possible Shortage of people with the management skills needed to run a large dairy Limited number of places where large dairies can be built Volume and quality premiums

24. Thank You!