Got milk? It brings Idaho money and jobs, but concerns persist

In less than a decade, milk has knocked the potato off its perch as Idaho´s leading agriculture product, but milk´s rise to the top hasn´t been without controversy.

Ken Dey
The Idaho Statesman

The small dairy farms are rapidly being replaced by sprawling and complex operations that now milk hundreds and in some instances thousands of cows. The larger and more efficient operations have brought “economies of scale” that economists say are a key reason the Idaho dairy industry has topped the potato and become the fifth largest dairy state in the United States.

The growth has meant new jobs and more money for Idaho´s economy, but it has also brought new conflicts.

“In the mid to late ´90s we had a huge rush of expansion,” said Wilson Gray, an extension economist with the University of Idaho. “It was kind of like driving down a country road one day and seeing a few typical dairy farms, and then next month driving down the road and seeing a milk factory with 5,000 cows.

“The concern level in many communities went extremely high, and there were some highly publicized problems with odors.”

The sometimes negative perception of the dairy industry is something that industry leaders don´t take lightly.

“We do have some environmental issues,” said Bob Naerebout, executive director of the United Dairymen of Idaho. “We want to address them and we want to be a good neighbor.”

Naerebout said the industry is making progress. He points to the Idaho Dairy Initiative that the industry reached with the Environmental Protection Agency, Idaho Department of Environmental Quality and the Idaho Department of Agriculture in 1995 and renewed for another five years in 2001.

The initiative has helped implement water quality standards and led to new state regulations like requirements that every dairy submit a plan on how they manage nutrients.

A state review of the program found that before the agreement, nearly 25 percent of Idaho dairies routinely discharged waste into ditches and streams, but in 2000 less than 1 percent of Idaho dairies weren´t in compliance with the regulations.

While the dairy industry has been working to become good neighbors, Naerebout said there has been little awareness about the positive economic impact of dairies in Idaho.

Growth equals dollars

The number of milk cows in the state has more than doubled since 1992, and in 2001 the product of nearly 400,000 Idaho dairy cows became a billion-dollar industry, easily surpassing Idaho´s famous potatoes.

Since its 2001 peak, the dairy industry has declined, but it still remains the No. 1 cash producer in Idaho. In 2002 the milk produced by Idaho dairy farmers brought in $923 million.

Potatoes, meanwhile, have stayed in the $500 and $600 million range for most of the decade, except last year when big price increases pushed total cash receipts to $885 million, up from $551 million in 2001, but still not enough to top the dairy industry.

In just 10 years the size of Idaho´s dairy industry has come close to tripling in size in terms of sales and the number of cows.

In the meantime the industry has also become a driving force in Idaho´s economy, providing nearly 8,000 jobs and indirectly supporting an additional 12,000 jobs.

“The dairy industry is very important — especially now when we´re saying the economy is in a downward trend,” Naerebout said “Dairy farmers have to milk cows for cash flow and although they´ve been struggling the last 15 months they haven´t laid off cows — and therefore they don´t lay off employees.

“It´s very stabilizing for the economy.”

Naerebout´s organization along with the Milk Producers of Idaho commissioned a recent Boise State University economic impact study of the dairy industry.

The study, prepared by BSU economics professors Don Holley, Michael Joyce and John Church, found that the dairy industry not only provides much needed employment, it also supports a wealth of related businesses.

In economic terms it´s called the multiplier effect. Holley estimates that for every dairy job, 2.45 indirect jobs are created. Those jobs are often in the businesses that support the dairy industry, such as feed dealers and veterinarians.

The Idaho dairy industry has also been a driving force in the state´s growing cheese industry. Most of Idaho´s milk doesn´t end up in cartons, but as blocks of cheese.

Of the nearly 8,000 jobs in the dairy industry, nearly 1,700 are jobs in the various cheese factories around the state.

The BSU study was the first time the college had looked at the dairy industry, and Holley said its size surprised him.

The industry is largest in central Idaho, in the Twin Falls/Magic Valley area. More than 5,000 people are employed in the region and with the multiplier effect, Holley said the dairy industry actually accounts for nearly 12,000 jobs there.

“If the dairy industry were to leave the Magic Valley, it would be comparable to the loss of Micron and Hewlett-Packard in the Treasure Valley,” Holley said.

Behind the numbers

Although the dairy industry may be the bright spot in terms of jobs, its luster has lessened in the last few years as the economy has taken its toll on milk and cheese consumption.

Milk prices are down 16 percent in the last year, and dairy farmers are starting to worry about what will happen if prices don´t turn around.

“The prices are so bad that no one can meet their obligations,” said Jim Stewart, who is still milking cows on the same Canyon County dairy farm that his father started in 1939. “We´re just living off our asset base, and you can only do that so long or you can´t pay it back.”

The U of I´s Gray said prices are dropping because supply is outstripping demand. Milk production rose by 3 percent last year but consumption only grew 1 percent.

“Until we reduce cow numbers nationally, or the economy improves and demand increases, or some combination of the both, it´s going to be tough sledding on prices,” he said. “Last fall I was saying that it would turn around the second half of this year, but at this point I´m not sure it´s going to happen. Maybe later this year or in 2004.”

In Idaho almost all of the milk goes to produce cheese and about half of that cheese is sold outside of grocery stores in restaurants. In a bad economy, with fewer people eating out, the demand for cheese has fallen, Gray said.

To survive low prices, dairy farmers will have to become larger and take advantage of what economists call the “economies of scale.”

And that´s what appears to be happening.

Today 70 percent of Idaho´s dairies milk 500 cows or more, unlike dairies back east that typically have dairies in the 100-cow range.

The larger dairies have meant fewer dairy farms in Idaho, but many more cows. In 1982 there were 4,199 dairy farms and 178,082 head of dairy cows in the state. In 2002 there were 950 dairy farms and 390,000 head of dairy cows.

And the growth of large dairies in Idaho doesn´t appear to be waning.

Just last month the Canyon County Commission denied a request for a proposed dairy farm that would have brought in 8,000 cows. The developer of that dairy hasn´t decided whether he´s going to appeal the decision.

Right behind that dairy is yet another 8,000-head dairy proposal for the county that´s scheduled to be heard by the county Planning and Zoning commission in May.

Gray said Idaho is an attractive place for dairies because land is available and still reasonably priced.

Even today´s low milk prices haven´t deterred the operators of these large dairies, who are counting on prices to improve, Gray said.

Like his colleagues, Stewart has also been forced to grow the business to capture the ever elusive “economies of scale.”

When Stewart´s father started the dairy farm, he had 15 cows and 80 acres, but today the farm is 600 acres and home to 800 milk cows and 800 replacement heifers.

It takes Stewart, his three sons and 16 employees to handle the operation. Stewart said he often wishes his dairy was smaller, but he knows that survival hinges on becoming bigger and more efficient. Even so, his dairy seems to be shrinking by comparison.

“I used to be a medium sized dairy, but I´m getting smaller every day,” Stewart said.

Changing with the times

To keep his farm going, Stewart has had to become as self-sufficient as possible. He not only runs a dairy farm, but also raises crops like alfalfa that are used to feed the cows.

Every barn and milking facility on the farm has been designed and built without outside help.

And Stewart has worked to make sure every part of his operation runs as smoothly as possible.

In the 1970s, Stewart turned to computers to help handle the growing accounting issues he was encountering with a growing dairy. Today a computer system monitors nearly every operation across the dairy. Every time the cow is milked, a worker scans an electronic chip in the cow´s ear tag, which sends information about the milking directly to Stewart´s computer.

With a few key strokes, Stewart can tell exactly when every cow is being milked and how much milk the animal is producing.

Stewart also knows how important it is to be a good neighbor. All too often it´s the odor from dairy farms and perceived environmental threats that receive the publicity.

Looking across the horizon at the new homes popping up near his property, Stewart knows that it only takes one bad dairy farmer to give the public the perception that dairy farms somehow damage the environment.

In February, Stewart received the Governor´s Award for Excellence in Agriculture for his environmental stewardship.

The award credited Stewart for doing things like installing holding lagoons and sediment ponds on his farm more than 20 years ago, long before the state regulations made them a requirement. He´s also been composting his waste for more than a decade.

Stewart said his three sons all went away for college and decided to return home to the family dairy and he´s hopeful the things he´s doing will keep the dairy thriving.

“To me it´s a father´s dream to have his family around him,” Stewart said. “And I don´t want my kids to lose their enthusiasm for it.”

To offer story ideas or comments, contact Ken Dey
[email protected] or 377-6428

http://www.idahostatesman.com/Business/story.asp?ID=35426