With prices falling drastically since the start of the year, Idaho dairy producers are apprehensive entering February 2021, according to Rick Naerebout, chief executive officer of the Idaho Dairymen’s Association (IDA). Chief among concerns, processing capacity has reached its limit in the state, while there’s anticipation of increased environmental regulations surrounding climate policy and greenhouse gas emissions.
Like producers elsewhere, direct government payments and Farmers to Families Food Box program purchases that drove cheese prices higher helped improve overall financial situations for Idaho dairy producers in 2020.
“If you are looking at the averages, [it was] better than most,” Naerebout said. “Averages don’t tell the whole story, though. We have a wide variance from top to bottom on milk price in Idaho, and that is creating winners and losers based on who you are selling your milk to. We aren’t talking dimes and nickels but dollars per hundredweight. Overall, Idaho greatly benefited from the bump in cheese prices this past year, but that wasn’t shared by all dairy producers.”
The lack of processing capacity is serving as a catalyst for consolidation in Idaho, Naerebout said.
“Dairies that want to grow cannot build new facilities and just add milk supply,” he said. “There is no base to be had without buying out another producer. This is creating a premium for smaller dairies that are going out as the larger dairies buy them up for their base. The marketplace has created financial incentives for smaller dairies to sell to larger dairies.”
Idaho producers have added about 2 million pounds of milk per day over the past year – in an already oversupplied market, Naerebout said.
“Even with that growth, there is tremendous pent-up desire to expand dairy operations,” he said. “Idaho could fill a new 6- to 8-million-pound-per-day plant within a year and hardly break a sweat.”
Located in an unregulated market, Naerebout said he doesn’t believe the Federal Milk Marketing Order (FMMO) system is an answer. Comparing the USDA’s National Ag Statistics Services all-milk prices, Idaho’s prices have essentially aligned with those in California since that state put their FMMO in place, he said.
“Idaho is best off focusing on growing processing capacity so we create more demand for milk and let economics determine our competitive price, not involve ourselves in a contest of who can hire the best attorneys and economists to manipulate a government pricing system,” he said.
Naerebout said efforts toward environmental sustainability can be positive if approached correctly by policy-makers and if dairy producers keep an open mind to what is possible.
To assist its members with environmental regulations and manure management, IDA staff have been looking at technologies already installed at other dairies in the Pacific Northwest. One showing promise is a BioFiltro system on Royal Dairy, in Washington. The system, installed in 2017, transforms the dairy’s wastewater into irrigation-grade water and produces a profitable byproduct, high-quality worm castings, which can be used as organic fertilizer. The system helped Royal Dairy LLC win a U.S. Dairy Sustainability Award in 2018, presented by the Innovation Center for U.S. Dairy.
“The appeal for us is that it can be scaled to fit multiple dairy sizes, it would work for both open-lot and freestall dairies, it isn’t extremely technical so existing workers on a dairy can operate it, and it helps to provide some of the greenhouse gas emission offsets the industry is looking for,” Naerebout said.
Also read:
Northeast: Proceeding with caution
Southeast: More than a fluid situation
Postcard from North Carolina: Moving toward innovation
I-29 Dairy Corridor: Connectivity and caution
Postcard from Kansas: Optimism is more difficult
Postcard from Ohio: Plenty of uncertainty
Indiana: Updated strategy, leadership
The state of risk management: 2021 DMC enrollment jumps
Midwest: Pillars withstand quake of coronavirus
Southwest: Placing a tier on growth?
The state of food service: A tough climb ahead
The state of the dairy herd: More cows, fewer heifers
The state of exports: Record volumes
