Dairy Farmers Learn From California (JACOB ADELMAN, 7 December 2007)

LOS ANGELES (AP) — Frank Teunissen helped California became the nation's leading dairy state before he left his family's ranch outside Los Angeles and bought his own 600-acre spread in Idaho.

Now, he is part of a growing trend in which ranchers throughout the West are using those same methods to challenge California's dominance of the U.S. dairy market.

"Idaho and New Mexico are looking at California and saying we can do that, too," said Leslie Butler, an agricultural economist at the University of California at Davis.

U.S. Department of Agriculture figures show California produced 3.3 billion gallons of milk in 2006 — a 17 percent increase from five years earlier, but a growth rate that lags several competing states.

During that same period, Idaho increased production by 40 percent to 937.4 million gallons, while New Mexico posted a 37 percent jump to 653.6 million gallons.

Arizona pumped up output 28 percent to 344 million gallons, and Colorado saw a 29 percent jump to 215 million gallons.

"California is still the largest, but the question is, Are they going to be able to maintain growth?" Purdue University agricultural economist Joseph Balagtas said.

Ranchers in Idaho, New Mexico and other states are copying many of the same high-yield dairy methods that fueled rapid expansion in California in the mid-1990s.

The strategy, which Butler calls "the California model," includes taking cows off pastures — where they graze in thinly spread herds — and concentrating them together in massive dairies. Feed is shipped into operations and manure is hauled out, rather than relying on naturally occurring processes in pastures.

Teunissen said his bottom line in Idaho has also benefited from cheaper feed and from utilities that cost one-third as much as his family paid in California.

"It was a great opportunity for my wife and I," he said about his move.

Cheap land, lower taxes and less stringent regulations have also aided the production push in other states, said Gary Genske, a dairy industry consultant. In addition, dairy ranchers outside California don't face the state's strict air and water quality regulations.

California, the nation's leading agricultural state, has a lot riding on its dairy industry. Milk and cream were the state's top agricultural commodities in 2006, raking in $5.22 billion of the $32 billion in total sales generated by the industry, according to the state Food and Agriculture Department.

But since 2004, when California ranchers lost their exemptions to federal air quality regulations, they have had to make costly adjustments to curtail emissions.

Among other things, they must cover roads on their farms with asphalt to keep down dust and build structures to enclose waste lagoons, said Michael Marsh, chief executive of the Western United Dairymen trade group.

Many California ranchers also must turn to expensive consultants and lawyers to see them through the state's lengthy, complex permitting procedures.

Depending on the size of a ranch and its location, permit-related fees in California can reach up to $700,000, with the process taking as long as five years, Marsh said.

In Idaho, permit fees can cost as little as $15,000, with the process taking just 90 days, said Bob Naerebout, director of the group United Dairymen of Idaho.

Even though more milk is being produced throughout the West, the increased supply has yet to translate into lower prices for consumers.

Much of the milk and other products are being siphoned off by emerging industrial powers such as India and China, where consumers have more money to spend on healthy diets, Butler said.
Butler said it's only natural for milk production to migrate from California to states where it can be done more cheaply and efficiently.

New York and Wisconsin took their turns as the nation's dominant milk state before California, he noted.

"I have no doubt that other states that are expanding will continue to expand, and that simply becomes a competitive element that dairy producers have to face," Butler said.