Indiana Seeks More Dairy Processing
Published: Friday, February 5, 2021
Still reeling from five years of economic losses, the Indiana dairy industry last week launched an updated growth strategy aimed at exploring new business opportunities within the dairy sector.
A committee of government and industry representatives presented the report, known as the Indiana Dairy Strategy 2.0, last Wednesday at a press conference in Indianapolis. The state adopted its first dairy strategy in 2015.
One key to the updated strategy is increasing processing capacity to handle the surplus volume of milk produced by Indiana's approximately 176,000 dairy cows. According to the report, the state has a daily net surplus of 3.5 million pounds of milk—enough to supply product to a new or expanded processing plant.
As part of the strategy, industry leaders plan an educational push to let processors know that "Indiana is open for dairy business."
The Hoosier state already enjoys considerable brand recognition. In one of the most popular traditions in the sports world, Indiana dairy farmers annually present a cold bottle of milk to the winning driver of the Indianapolis 500. As dairy leaders reach out to potential processors, they plan to promote Indiana as a place where "Winners Drink Milk," and as a "preferred location for sustainable milk production."
According to Jenni Browning, CEO of the American Dairy Assn., the dairy sector is being driven by sustainability improvement goals. By 2050, the industry wants to achieve what's known as carbon neutrality, or zero carbon emissions, by adding technology that converts manure into energy or pelletized fertilizer. These innovations would reduce the carbon footprint of farms and also provide a source of revenue for farmers.
The strategy points out that sustainability goals are "an overriding issue for producer cooperatives and processors, and will set the parameters of dairy expansion in coming years."
Browning said farmers are committed to this goal.
"Right now, the carbon footprint of a glass of milk is two-thirds less than it was 70 years ago," Browning said. "Yet it still has the same nine essential nutrients, including protein and a great taste."
Consumption of dairy products has reached an all-time high in the U.S., but the strategy points out that most of the growth is occurring in product categories like butter and cheese. While Indiana has two cheese plants, in Middlebury and Warren, the majority of milk from the state's roughly 800 dairy farms is processed into fluid milk or ice cream—segments with flat or declining sales.
If the state were to expand its processing capacity for cheese and butter, for example, Indiana would be able to sell into a growing market. In addition, it would make Indiana dairy products more competitive on the export market. Currently, four products—cheese, powder, whey and lactose—account for three-fourths of the total volume of U.S. dairy exports. The dairy strategy says that Indiana is "not as competitively positioned in those products."
Industry leaders believe Indiana is a good place for dairy expansion due to its farmers' embrace of sustainability practices and a commitment "to reduce their ecological impact," the report states. Other reasons cited in the report include Indiana's positive regulatory and tax environment and its critical infrastructure, such as interstate highways.
The report contains several important rankings for Indiana's climate for business. These rankings come from various media and economic development groups. Indiana is rated as the No. 1 state for infrastructure, the No. 1 state for the number of pass-through highways, the No. 2 state for long-term fiscal stability, and a top-five state for business.
Two-thirds of the state's milk production comes from the northern tier of counties. But Victoria Herring, business development director for the Indiana State Department of Agriculture, and Doug Leman, executive director of Indiana Dairy Producers, said expansion could occur anywhere in the state—due to the state's vast highway system that allows milk to be transported hundreds of miles within hours.
Since the first report was released in 2015, the Hoosier state has lost almost 200 dairy farms and slipped one spot on the list of top dairy states. Six years ago, Indiana was the 14th largest milk producing state and is now 15th.
The report blames the downturn on milk production increases that outpaced demand, resulting in a bearish price scenario for farmers.
The report also points out that "milk production efficiency and economic pressures have led to increased dairy farm concentration" since 2015. In a comparison from 2018 to 2019, Indiana lost 19 percent of its dairy farms but only 6 percent of its cattle.
This consolidation means that Indiana's dairies are getting larger.
While 70 percent of the state's dairy farms are classified as small (less than 50 cows), they produce only 17 percent of the total volume. On the other hand, "very large farms" with 1,000 or more cows account for 57 percent of the state's milk output.
Currently, the top five counties for milk cows in Indiana are: Jasper, 24,000; Elkhart, 18,400; LaGrange, 12,400; Adams, 8,400; and Marshall, 7,000.
On the positive side, the report notes that Indiana dairy farms generate nearly $700 million annually in direct farm income.
"Dairy production has a major economic impact in the state in terms of feed demand, job creation and tax revenue," the strategy states. "This study estimates that Indiana dairies use approximately 26.14 million bushels of corn, 450,000 tons of alfalfa hay and 201,600 tons of soybean meal. This is a total feed value of $238.91 million based on the five-year average prices of those feedstuffs."
It was noted that the first dairy strategy succeeded in attracting several processors or expansions to the state. Among them were:
• 2015—Dairy Farmers of America expanded operations in Goshen;
• 2018—Walmart opened a new milk processing plant in Fort Wayne;
• 2019—Golfo di Napoli opened an Italian cheese plant in Huntington County; and
• 2020—Dreyer's announced an expansion of an additional ice cream production line at its Fort Wayne plant.
Also, a new cheese plant in St. Johns, Mich. opened last year and utilizes Indiana milk.
According to one analysis, there is an estimated 2.75 billion pounds of annual milk processing capacity located within Indiana.
"Producers in the state market just slightly more than 4 billion pounds of milk per year," the report states. "Based on that, it can be estimated that there is a net supply of about 3.5 million pounds of milk per day (or 1.25 billion per year) in the state which new or expanded processing capacity could draw on.
"Note that new or expanded plants would have to compete for this milk, but basis would be in favor of a local Indiana plant as opposed to the net price of shipping fluid milk to Georgia, Florida, New York and elsewhere," the report states.
While increasing processing capacity is one goal, industry leaders also have their eye on promoting Indiana as a place for innovation. Industry leaders want "to move beyond the commodity aspect of white milk to consider a value-added" approach. The report calls for new uses for fluid milk, powder, cheese and yogurt.
The strategy calls for research efforts involving Purdue University and initiating a dairy-specific project with AgriNovus.
"Purdue is a well-respected university not only in agriculture, but in engineering, which has implications for processing plants," the report states. "There is a role for dairy Extension work with producers, general research and one-on-one work with processors to test and validate corporate research."
For farmers, the report recommends action to help them meet sustainability goals. One example is exploring new feed additives that lower greenhouse gas emissions. The report also sees potential in using cover crops, processing manure into pelletized fertilizer, and converting manure into biogas for energy.
"A dominant trend and goal in the industry is sustainability," the report states. "Indiana should be positioned as the preferred location for sustainable milk production to benefit from this trend. The second largest dairy state, Wisconsin, has adopted this approach."
Indiana Dairy Strategy: https://www.in.gov/isda/files/Indiana-Dairy-Strategy-2.0.pdf
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