Large Dairy Development in the Midwest Vreba-Hoff Dairy Development, LLC Cecilia C.M. Conway 2006 National Association of County Agricultural Agents Annual Meeting & Professional Improvement Conference July 24, 2006

Agenda Introduction to the Vreba-Hoff Companies Market Trends – European & US Dairy Industries The Vreba-Hoff Project Model Siting\Permitting\Licensing Requirements Farm Innovations Dairy Development Positives & Challenges Working with State Extension Agencies Questions

Introduction Vreba-Hoff Dairies In 1997, the Van Bakel and Vander Hoff families partnered to build a 3,000 cow dairy facility in Hudson, Michigan In 2000 the second 3,000 cow facility began operation Interest from Uncle opened development opportunities for other farm families

Introduction Vreba-Hoff Dairy Development LLC Established in 1998 Private, family-owned Firm Located in Wauseon, Ohio Assist European & American families relocate or expand their dairy businesses

Introduction Vreba-Hoff Dairy Development assists with: Sale of Real Estate Overseas (through sister company) Identification of Possible Project Sites Recruitment of Project Financing Application of Necessary Permits Coordination of Project Construction Coordination of Family Re-settlement

Introduction Since 1998 Vreba-Hoff has developed: 2 Vreba-Hoff Owned facilities in Michigan 7 Other facilities in Michigan 12 facilities in Indiana 25 facilities in Ohio 23 facilities under construction or development Total 62 new dairy projects Equals over 70,000 cows

Michigan One New Project Under Development in Thumb Area

Indiana Blue = 13 Dairies Under Development Green = 12 Dairies Operating

Ohio Blue = 9 Dairies Under Development Green = 25 Dairies Operating

DFA re-opens Adrian, Mich. dairy processing plant Introduction Why Focus on the Midwest Temperate Climate Large grain production provides a consistent supply of forages and opportunities to partner with growers Good Infrastructure to move crops and milk DFA re-opens Adrian, Mich. dairy processing plant March 2006

Introduction Why Focus on the Midwest Good access to medical, educational and social centers for the dairy producers and their families Over 70% of population within 24 hours transport; providing a strong and accessible market for milk sales

Market Trends - European Dairy Industry Why Are Dutch/ European Farmers Desiring to Relocate their Dairy Businesses?

Dairy Farming in The Netherlands Country Small Land Area Ohio is 2.5 times larger than NL High Population Population is 16 million Ohio’s population is approximately 70% of NL

Dairy Farming in The Netherlands Market Conditions Constant pressure to take agricultural land out of production for housing or industry Price of Land in 2004 was $16,000/acre Milk Production Limited by Quota System Value of Milk Production Rights continues to increase Current Milk Quota cost is $25,527 per cow

Dairy Farming in The Netherlands Future Outlook Expansion is cost prohibitive The cost to add one cow to an operation is about $41,000 Number of Farms to Decline Currently there remain 22,000 dairies left with about 4,500 evaluating the relocation of their business

Market Trends -United States Dairy Industry

There are 66,830 U.S. dairy farms. -Hoard’s March 2005

- 90% of farms are less than 200 cows Average age of a farmer is approx. 58 years old No successor available

The only dairy farm size growing is 500 cows+ 60% of the cows are on farms with 200+ cows

Dairy Industry Trends Dairy Expansion Areas (source: Monsanto)

Market Trends Livestock Population by County – Milk Cows, Heifers & Cattle Source: Ohio Dept. of Agriculture New Dairies are bringing cattle back to areas which previously held much larger livestock numbers

Market Trends - Ohio Market Conditions - Ohio Milk deficit state and imports milk from other states Significant decrease in Ohio cows numbers: 892,000 cows in 1956 266,000 cows in 2005 Dairy receipts represents 1/3 of the total value of animal agriculture in Ohio Ohio boasts 94 processing and receiving plants

Market Trends - Indiana Market Conditions Significant decrease in Indiana cows numbers: 140,488 cows in 1978 136,000 cows in 1999 150,000 cows in 2004 State Dairy receipts equal $230 million dollars Indiana Ranks 2nd nationally in ice cream production

Market Trends – United States Dairy Industry Market Conditions Overall number of dairies decreasing Trend toward larger dairies provide owner more labor flexibility and economies of scale Increasing milk production per cow due to breeding methods such as artificial insemination and improved feed rations

Market Trends Market Conditions Production in volume helps maintain profitability during peaks and valleys of milk market price

The Vreba-Hoff Model

The Vreba-Hoff Model Farm Designed to Promote Milk Production & Cow Comfort Focus: Farm Management Minimize Real Estate Investment Partner with Local Crop Growers

Farm Design

Farm Design – the complex Parlor and Freestalls in “H” design to move cows efficiently Side Settling Basins to collect Sand Concrete or earthen Lagoon structures to hold 12 months storage Bunker area arranged to efficiently handle feed storage

Farm Design – Milk Production Parlor Designed for Efficiency Natural lighting benefits staff and animal herd State of the art technology for monitoring dairy herd production Each cow is milked 3 times per day

Farm Design -Freestall Barn Barn Design promotes cow comfort Feed can be accessed at all times Adjustable side curtains to promote ventilation Fans are utilized to cool in summer Sand bedding keeps cows cleaner & drier Easy monitoring of cattle

Farm Management - Focus on herd health, cow comfort resulting in improved production - Cost management advantages through economies of scale - Increased attention placed on environmental management - Good Cow Management directly correlates to a successful dairy operation

Minimize Purchase of Real Estate Real Estate is minimized to reserve capital for herd investment and cow friendly facilities Approximately 80 acres is required to construct a 2200 cow dairy facility

Partnership with Local Farmers Dairy Farmers partner with local crop farmers to produce quality feed for cattle

Partnership with Local Farmers Manure is a natural fertilizer Local Crop Growers reduce reliance on commercial fertilizers by using dairy manure

Partnership with Local Farmers Reduction in Costs for Crop Farmers Growers can sell directly to their local end user; keep more marketing dollars in their pocket; Growers can eliminate costs for drying, shelling and transporting crops; Growers can gain $120 - $160 per acre growing corn silage Growers can reduce costs of chemical Fertilizer use and gain organic fertilizer

Funding of Dairies Typical Investment Amount for 2,200-cow Dairy Equipment $ 440,000.00 Cows @ $2,250/cow $4,950,000.00 Dairy Bldg. & Land $9,000,000.00 Operating Capital $1,100,000.00 Total Investment $15,490,000.00 Investment per cow $ 7,040.00

New Project Siting & Permitting

New Project Siting Criteria 80 acres relatively flat land Well production of 35+ gallons/minute quality water Proximity to residences Proximity to Three-Phase Power Proximity to class A roads Land for crop production and manure disposal adjacent/close proximity to proposed dairy site Contracts established with local crop growers Setback required from Neighboring homes Clay soils for Lagoon construction

Siting Criteria Sample 1500 Cow Dairy – Feed Production & Manure Disposal Land Requirements Manure Production, Waste Water, and bedding 30 gallons/cow/ day 1.0 – 2.0 acres/cow 1500 – 3000 acres required Forage Requirements (Corn Silage & Alfalfa)

Site Evaluation Once possible site is identified Professional Engineering Firms evaluate integrity of Site Identify if Adequate Resources and isolation is available Initial ground water and geological testing is initiated

Dairy Farm Permitting State Permits Cow number triggers requirement for permit Permit Application Includes Engineered Plans by a Professional Engineer Verification of manure disposal fields (Nutrient Management Plans) Emergency Spill Response Plan Notification to adjoining landowners & local officials of application submittal

Dairy Farm Permitting State Permits (Ohio) Siting Setback Requirements 1000 ft. from residence to manure storage 300 ft. from well to manure storage 100 ft. from property lines to manure storage 15 feet of low permeable soils from bottom of lagoon to aquifer

Dairy Farm Permitting State Permits Dairy Farm Siting requires special requirements in areas of Public Water Source Wellhead protection area Floodplains & Floodways Wetlands Cold water Habitats Underground mines

Dairy Farm Permitting State Permits Licensing Require regular inspections Operator must maintain operational records and inspection logs State permitting entity inspects adherence to permit requirements Licensing Farms are required to be state licensed to ship Grade A Milk State Licensing entity inspects farm to monitor on-farm practices

Dairy Farm Regulation Federal Law US Clean Water Act Containment of contaminated Storm Water Containment of Silage Leachate Containment of Processed Water Required Operational Storm Water Pollution Prevention Plan Required Farm Inspections and Record Keeping

Dairy Farm Regulation Local Permitting Indiana allows zoning of agriculture at a local level Ohio and Michigan have right-to-farm legislation (Ohio law is currently being challenged)

Farm Design Innovation

Farm Innovation Current Design Standard = Sufficient Containment 12 month Manure storage capacity (including 100 year storm event) Silage Leachate containment Contaminated Storm Water Containment Operational Storm Water Pollution Prevention Plan Clean storm water retention and discharge planning Comprehensive Nutrient Management Plans

Farm Innovation Complex Efficiency Move toward Carousel Parlor for Higher number of cows Arrange Freestalls in “T” design to Parlor to minimize cow travel

Farm Innovation Improved Manure Management Attempts to reduce volumes Trend Towards Manure Treatment Multiple Lagoons Solids-Liquids Separation Encourage recycling of bedding material Composting/Drying

Farm Innovation Reduce Manure Volume Cousin’s firm developed improved manure vacuum Turns on its own axles Allows more flexibility in farm Design/lagoon placement

Farm Innovation Getting the manure out of the barns efficiently and economically.

Farm Innovation Reduce Manure Volumes The Ohio State University Extension supported dairy water use study: Water meters were installed throughout dairy facility Determined average cow water use was 31.9 gallons per day (includes wash water) Leading to better evaluation of facility wide water usage Trend toward Direct Loading of Milk

Farm Innovation Manure Treatment Recycling Bedding Components Sand Mechanical Non Mechanical Sand Recycling Lane

Farm Innovation Separation of Manure Solids Vreba-Hoff implemented system in early 06’ Rotary Drum Thickener 16 inch screw press Alum & Polymers added flocculate suspended solids Liquid run through Air flotation tank Compost solids for bedding Irrigate liquids at high speed on growing crops

Farm Innovation Manure Treatment Earthmentor System –(patent pending system developed by Ag Consultant Tom Menke) Mechanical Solid Separation (sand & manure) Multi-lagoon system for waste treatment

Earthmentor® System Example Layout

Earthmentor® System Summary – Advantage to Dairy 2.5  reduction in annual application acres Positive economics: manure handling costs reduced by >50% All manure is treated and precisely applied Minimizes environmental risks and farm nuisance potential Window of application opportunity for manure applications extended

Farm Innovation Manure Treatment Methane Digesters Cost of systems still significant Does not eliminate by-product to haul Energy suppliers not reimbursing fair rate for energy (dependent on state)

Farm Innovation Manure Treatment – What We Know Complete Treatment is too expensive Partial Treatment stabilizes manure to reduce odor, solids and nutrient content Most systems are high in management, labor, and cost with little economic return

Farm Innovation Manure Treatment – What We Need to Keep Researching How to economically remove and concentrate nutrients from manure for use as soil amendments

Dairy Development Positives & Challenges

Dairy Development Positives Farm Land Preservation New Farm development keeps local land in crop production 2000 cow dairy keeps 2000 acres of land as green space

Positives of Partnering with Livestock Economic Benefits Dairy Farms create demand for local production crops which yields higher profits per acre locally Each 600 cow farm contributes approximately 3 million dollars annually to the local economy Each job created at the dairy creates 2.25 jobs in other sectors of the industry A dollar increase in livestock and poultry production creates $1.32 to $1.64 in economic activity One farm supports approximately 100 Ohio businesses (Source: The Ohio State University Extension & Ohio Livestock Coalition)

Dairy Development Positives New Business Opportunities Heifer Raising Feed Production Calf Raising Custom Manure Applicators New Career Opportunities Farm middle management

Dairy Development Positives Addition of new dairy producers helps maintain infrastructure for dairy producers of all sizes Dairy Processors Veterinarians Milk Equipment Suppliers Ag Equipment Dealers

Dairy Development Challenges Farmers vs. Residential Growth Family Farms versus “Factory Farms” Media attention is unbalanced More housing in agricultural areas Increased Environmental Regulation Air Emissions Need for Public Education Length of Permit Issuance

Working With OSU County Extension Agents Earlier and more contact with local Extension Offices by VH and new farmer We welcome any comment and suggestions Site Selection – we welcome assistance/suggestions Encourage questions or voicing concerns

Questions?

Thank you for the opportunity to speak with you.