South Dakota emerging as a Major Player in the Dairy Industry
South Dakota dairy producers have undergone a rapid expansion over the past few years to meet the milk needs of the state’s growing cheesemaking industry, bringing a burst of economic prosperity to farm families and farming communities throughout the eastern half of the state.
Milk production in South Dakota rose by 12% from December 2019 to December 2020, and farmers added about 14,000 new dairy cows during that one-year period, according to the USDA National Agricultural Statistic Service. The recent jump in dairy cows and milk production continues a trend of expansion that has evolved over the past decade.
The dairy industry expansion has come in response to South Dakota’s emergence as a major player in the burgeoning American cheesemaking industry, which has seen new plants come online and major expansions of existing plants in the state.
Industry experts say the increase in milking cows has come from expansion of longstanding dairies, the launch of milking operations at existing farms that have diversified, and also from the relocation of dairy operations to South Dakota from states such as California.
South Dakota officials have sought for years to strengthen the state’s presence in the American dairy industry, and those efforts have dovetailed with the recent expansion of milk-processing capacity at cheese plants and a welcoming regulatory environment to spur the ongoing rise in milk cows in the state.
“We’ve got a tremendous amount of interest in dairy in South Dakota right now and we’re growing to meet the need,” said Marv Post, a Volga dairy operator who is chairman of the South Dakota Dairy Producers Association.
Post said recent expansions have occurred throughout East River South Dakota, including at farms near Bryant, north of DeSmet and in Lake and Brookings counties. The overall economic impact of the dairy industry in South Dakota is difficult to pinpoint, but it remains a relatively small portion of the state’s overall $32.5 billion annual agricultural industry.
An analysis by a professor at South Dakota State University using 2012 data pegged the direct revenue generation of the state dairy industry at $427 million a year, with about 2,000 full-time jobs, and estimated the total direct and indirect economic impact at about $650 million a year. Most dairy operators employ a mix of local residents and immigrant workers on visas.
That report put the value of each dairy cow in the state at about $7,100 a year, though other reports have estimated the overall economic impact of each dairy cow in South Dakota as high as $26,000 a year. The industry has grown by nearly a third since the SDSU figures were released.
Even as the number of dairy cows continues to rise in the state, the number of dairy farms is on a steady decline. As in other agricultural industries, dairy farmers are increasingly using genetics, data monitoring, technology and robotics to boost the production of each individual animal while implementing an economies-of-scale approach to the size of their farms, raising the efficiency and profitability of their operations.
In 2013, South Dakota had 272 milking operations with about 92,000 cows, compared with 171 farms with 127,000 cows in 2020, representing a 37% reduction in farms and a 38% increase in number of animals. The amount of milk produced rose from 2.0 billion pounds in 2013 to 3.1 billion in 2020, a jump of 55% during that eight-year period.
The amount of milk produced by each dairy cow in the U.S. has risen by 11% over the past decade to almost 24,000 pounds per year, an increase attributed to improvements in breeding, milking technology and animal treatment.
Three major cheese producers in eastern South Dakota have created much of the capacity for the expansion of the dairy industry. The launch of Bel Brands in Brookings in 2014 and major expansions completed in 2019 at the Agropur cheese plant in Lake Norden and at the Valley Queen Cheese plant in Milbank created the need for roughly 115,000 more milking cows to meet the expanded production-capacity needs.
Some farms have sought new or expanded state waste-control permits that allow them to house and milk more animals. The KC Dairies farm operated by Edward Kavanaugh in Elkton, for example, has a concentrated animal-feeding operation expansion permit pending with the state to raise the farm’s animal limit to a maximum of 2,250 milking cows and 800 head of dairy calves.
The dairy industry supported a bill this legislative session to double the time period for renewal of concentrated animal-feeding permits from five to 10 years; the bill passed and was signed into law in February.
The dairy industry’s efficient response to the expansion of cheesemaking operations is close to fully satisfying the current milk-processing capacity at the state’s largest cheese plants. But the ability of dairy operators to provide increasing levels of milk presents even greater opportunities for future expansion or diversification of cheese plants that are seeing no slowdown in the demand for cheese and other dairy products among consumers in America and in other countries around the world.
“The milk growth has certainly got our attention, and I can tell you that we’re not done growing yet,” said Doug Wilke, CEO of Valley Queen Cheese.