The phrase “room for improvement” often carries a negative connotation. But for the dairy industry in Nebraska, having room to improve means potential for expansion that could result in positive economic return for dairy producers.
“We’re on the precipice of significant growth,” said Kris Bousquet, executive director for the Nebraska State Dairy Association (NSDA).
Growth of the U.S. dairy industry is promising with multiple processing facilities planning for expansion in 2024. The International Dairy Foods Association (IDFA) reported that more than $7 billion worth of investments will be poured into new dairy processing capacity this year. South Dakota is adding 3 million pounds of processing capacity to the Valley Queen Cheese Factory in Milbank. Kansas broke ground for a new cheese processing plant in Dodge City. Other milk processing facilities in New York and Texas are also under construction.
Nebraska needs to increase its milk processing capacity, too, according to Bousquet. The state produces 3.8 to 4 million pounds of milk per day. However, much of this is shipped out of state because Nebraska’s milk processing capacity is only 1.6 million pounds.
Nebraska also ranks second lowest in the country for “mailbox milk price,” or the net price received by the dairy farmer. Freight charges for carrying milk to the processor is a large problem in this equation.
“We are trying to recruit local processing to bring down freight and increase profitability for our farmers,” said Bousquet.
Timing could not be better to expand milk production in Nebraska, he said. The Nebraska Department of Agriculture is offering financial assistance to all livestock producers in the form of tax credits and tax incentives to help modernize or expand their operations. Bousquet mentioned two programs, including the Livestock Modernization Act and the Nebraska Advantage Rural Development Act L1-L2.
Bousquet commended Nebraska for its “amazing system” in place right now to support dairy producers, saying, “I don’t think Nebraska as a state has ever been more unified than it is now on growing the dairy sector.”
The recent expansion of Milk Specialties Global (MSG) will change the narrative for the Nebraska dairy industry.
“Milk Specialties Global has injected about $60 to $65 million into their Norfolk, Nebraska facility, which has brought the plant from processing 400,000 pounds of milk per day to over 2.5 million,” Bousquet said.
Based in Minnesota, MSG has become one of the largest protein manufacturers in North America over its nearly 80-year history. It was an early pioneer in capturing whey and now supplies ingredients to major food production companies, said Ben Kroeplin, senior marketing manager for MSG.
The expansion at the Norfolk plant is dedicated to caseinate products, an ingredient commonly included in coffee creamer. Kroeplin explained that MSG uses fresh milk curds, which is considered “the ideal way to make caseinate.”
With the new local market option at MSG, Nebraska will be able to process 95% of the milk produced within its borders.
The Norfolk plant is not only changing the dairy industry in Nebraska but also making history.
“The first caseinate manufacturing plant in the U.S. is Norfolk, Nebraska,” Kroeplin said.
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No longer will the U.S. have to rely on imports from the Europe Union (EU), Australia or New Zealand for caseinate products.
“We are now able to supply the North American market with caseinates, and the benefits come back to the farmers,” said Kroeplin.
Opportunity for expansion of the dairy industry is further amplified by stifled milk production in the EU and New Zealand. Bousquet said these two areas, which have been large supporters of export volumes in the international market, are facing environmental extremism and government pressure that imposes certain regulations and barriers on their ability to operate.
“Knowing that they [EU and New Zealand] cannot hit those export volumes, Rabobank has projected there will be a 20 to 30 million metric ton shortage of dairy products within seven years, which is a really good opportunity for the U.S. to partner with people and capture that lost growth,” Bousquet said.
With plentiful resources of feed and water, Nebraska is at the forefront of the dairy expansion in America. Bousquet said that Nebraska is being considered as the location of new processing facilities for multiple companies. Bousquet could share the specifics because of confidentiality, but said there is “significant interest from processors to either expand or build new facilities” within Nebraska.
“This could mean monumental changes for the dairy industry,” Bousquet said.
The anticipation of additional processing capacity is great news for dairy producers in Nebraska, especially as farms continue to sell out. The number of licensed Grade A dairies in Nebraska dropped from 91 to 87 over the past year, Bousquet reported. The number of cows remains at 57,000 because the cows were shifted to other farms within the state.
To determine what obstacles may be preventing growth of dairies in Nebraska, a dairy barrier study is underway. The state ag department secured $125,000 through the American Rescue Plan Act (ARPA) to hire a third-party consultant to conduct the study.
“The study will give a blunt, realistic analysis of our state and the awesome opportunities it has for the dairy industry but also areas we can improve on to be more hospitable towards growth and development,” Bousquet said.
Growth is on the horizon. Bousquet shared during the interview that a couple of smaller dairies are opening this year, including a 120-cow robotic farm and a 50-cow dairy.
“We’re starting to see more interest in the state and more producers reinvesting in older facilities, bringing them back to life with this new processing capacity expansion,” said Bousquet.
Moreover, the expansion at MSG is already opening a new market for producers to get back into the industry or for existing producers to expand, said Bousquet. The first priority of NSDA is to support farmers in Nebraska who want to either join the dairy industry or expand existing operations.
“If those farmers don’t have the appetite to grow or we can’t meet demand, we’re going to have the opportunity to bring in dairies to Nebraska to supply these markets,” Bousquet said.
NSDA has been attending producer engagement events around the country, including the World Ag Expo in California, the International Dairy Foods Association Forum in Arizona, the Cheese Expo in Wisconsin, the American Dairy Products Institute in Chicago and the Central Plains Dairy Expo in South Dakota. Locally, NSDA is partnering with the Alliance for the Future of Agriculture in Nebraska (AFAN) to host tours with county officials from Nebraska so they have a better understanding of modern dairy production.
Bringing more dairies and processors to Nebraska will increase competition — which can benefit the producers. The dwindling number of dairy farms in Nebraska has limited options for milk markets, feed supplies, equipment and support services. Industry growth would provide farmers with more options.
“Competition significantly helps their bottom line when they are able to go to another company for a bid. Farmers get the best return for their value,” Bousquet said.
Reporter Kristen Sindelar has loved agriculture her entire life, coming from a diversified farm with three generations working side-by-side in northeastern Nebraska. Reach her at Kristen.Sindelar@midwestmessenger.com.