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South Dakota governor looks to round up California dairies

POSTED February 29, 2012 11:34 a.m.

South Dakota Governor Dennis Daugaard isn’t afraid to admit that he was in Tulare during the World Ag Expo on a dairy recruiting trip to lure dairies away from other states — including California.

 “We’re on a cattle roundup,” said Daugaard. “So, if you’re out there in the world of dairying and you’re looking for a place to plant your dairy, South Dakota is open for business.”

In California, there used to be 2,200 dairies in 2001, and about 500 have left the state since — a 25 percent loss. According to Stanislaus County Farm Bureau Governmental Affairs Director Tom Orvis, it is not unusual for other states to aggressively pursue California and even Stanislaus County dairies at the expo.

“States like Texas, Iowa, New Mexico, Idaho, Kansas, Nebraska, Illinois and the Dakotas have lined up to recruit California dairies over the years,” he said. “Dairies will keep leaving because other states are friendlier to business and have less restrictive environmental regulations. California is not business friendly and one of these days they are going to figure it out.”

In 2007 Hilmar Cheese expanded its operations by opening a new cheese and whey processing plant in Dalhart, Texas.

“They expanded their business and they didn’t expand in California,” said Orvis.

Bel Brands USA (known for Blue Bell Ice Cream) recently announced that it would build a $100 million cheese plant near Brookings, S.D.  that will employ 400 people.

Daugaard, who was raised on a dairy farm, said South Dakota is an attractive place because it has a number of cheese plants along a heavily-used highway corridor and feed costs in South Dakota are lower because dairies are closer to the grain source for feed. South Dakota has 90,000 cows, which can produce about 1.8 billion pounds of milk last year.

While states are recruiting dairies Milk Producers Council Director of Regulatory Affairs Kevin Abernathy said he doesn’t agree that many dairies are really leaving — but instead going bankrupt.

“I really don’t know if that is the case, a lot of dairies left but a lot of them went out of business or went bankrupt because milk prices. We are basically paying to produce milk still, even though things are quite as bad as the bloodbath of 2009,” he said.

While many states have been able to recover, Abernathy said California dairies have struggled to exist.

MPC General Manager Rob Vandenheuvel said “we have a structure that cheats the state’s dairy farmers out of hundreds of millions of dollars.”

One of the main reasons dairies are leaving California or going bankrupt, according the MPC, is milk reimbursements to California producers are much lower than other states or federal areas.

According to state agricultural code, the California secretary of agriculture has discretion in determining milk reimbursements in the state. (For milk that will produce cheese products) the difference in California milk and federal milk “represents a ‘California discount’ of more than $20 million per month, or $240 million per year,” said Vandenheuvel.      

While California cheese processors cash in on the lower price for milk, dairy producers are left holding the utter.

“Every gallon of milk we sell is at a loss — the dairy industry is dealing with that challenge every day now,” said Vandenheuvel. “There appears to be no urgency on the part of the ag secretary to rectify this.”

“We used to be the low-cost production leader. When it comes to milk pricing other states receive better prices for their milk. It is the fleecing of the California dairymen, that is why they are leaving if they have any money to leave,” said Abernathy.

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