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Milk oversupply pushes dairy farmers to innovate

Dairy cows. Milk prices are sitting at the levels seen in the 1980s and 1990s because of milk production increases. File photo.

Milk prices at the store – and for farmers selling onto the market – sit at 1980s and 1990s levels, forcing dairy farmers to find more efficient ways to produce milk, an industry representative said.

At least six Idaho dairy farms have closed in the past few months, with 10,000 dairy cows sold and dairy farmland lost to other uses, said Rick Naerebout, CEO of the Idaho Dairymen’s Association in Twin Falls.

Idaho has 470 dairy farms, all family owned, with about 580,000 dairy cows. Naerebout said milk accounts for one-third of Idaho’s agricultural receipts.

Local and global dynamics have combined to force the Idaho dairy industry into seeking more efficient ways to produce milk. Idaho dairy farmers have increased milk production about 2 percent a year for the past eight years.

Rick Naerebout

But “everything it takes to produce milk costs more,” Naerebout said.

The 2 percent increase translates into 800,000 pounds a day more milk on the market, based on the 40 million pounds of milk produced a day, Naerebout said.

“Chobani uses 2.5 million pounds of milk a day. We need a new Chobani plant every three years to keep up.”

More dairy processors haven’t followed Chobani to the Magic Valley as the industry got skittish when Chobani initially said it would use 9 million pounds of milk. Idaho has about 20 dairy processors, Naerebout said.

As a result, as much as 2 million pounds of milk a day in summer is shipped out of state for processing, with transportation costs passed to the Idaho farmers.  Naerebout noted nearly all Idaho milk was processed in-state in 2014.

Technology keeps dairy farmers afloat

Box Canyon Dairy’s 80-cow rotary milking system. Photo courtesy of Box Canyon Dairy.

Box Canyon Dairy in Wendell used to sell its milk to processors, but a few years ago found better prices selling to co-ops. Owners committed production of three barns to co-ops but last year the co-ops wanted only one barn.

“Last year was a big eye opener,” said Jeannie Onaindia, who owns Box Canyon with her father Tom Heida and brother-in-law Jerimy Craig. “In terms of overproduction of milk, it took everybody by surprise. It used to be several processors always wanted more milk.”

Onaindia noted the dairy industry has faced challenges since 2009.

“Our industry is evolving constantly,” she said.

In 2016, Box Canyon outfitted one barn with an 80-cow rotary milking system with pre-dip and post-dip robots that clean the teats before milking and spray the udders after milking. This milking carousel drastically increased efficiency.

“We were able to close four (of Box Canyon’s eight) facilities,” Onaindia said. “We would love to do another rotary barn and build an enclosed feed facility.”

Efficiency and genetics

In the bigger milk world, European dairy farmers have substantially increased milk production since 2015 as has New Zealand. Meanwhile, Russia stopped purchasing western dairy products, Naerebout said.

“That forces our dairies to become more and more efficient,” he said. “The best way to do that is to increase in size. We have to get bigger to survive. They find ways to get it done. They find ways to increase production.”

Just like baseball strategy sometimes is driven entirely by statistics, dairy farming increasingly is tapping into genetic breed improvements.

“Technology is rapidly changing,” Naerebout said. “It’s so much superior than just two years ago. At a very young age, you can determine through genetic testing ‘do I want to feed her to be a milk cow or sell her.’ It has really changed how we manage our dairies.”

Only 3 percent of Idaho milk gets to the market as liquid milk. The rest is processed, much of it as cheese at places like Jerome Cheese or Glanbia, and milk protein concentrates that end up in energy bars and protein bars.

“We’re an ingredient state,” he said. “A lot of what we do is business to business.”

Encouraging more dairy consumption by the public is a focus of Dairy West, formerly known as United Dairymen of Idaho, a marketing and promotion organization for dairy industry in Idaho and Utah.

“Dairy farmers are going through a little bit of a rough time,” said Cindy Miller, Dairy West’s vice president of integrated communications.” From our standpoint, being able to connect people with farmers is really important. We believe in doing so will build trust, which will create more demand (for milk).”

About Teya Vitu

Teya Vitu is an Idaho Business Review reporter, covering commercial real estate, construction, transportation and whatever else may intrigue him in the moment. Join me on Twitter at @IBR_TeyaVitu.