Midwest beckons with lower costs, fewer regulations


For the Capital Press

Fresno farmer Jamie Bledsoe is one of many dairymen in California stuck between high input costs and low milk prices -- and looking east for a solution.

One reason Bledsoe's stayed in business these past couple of years is that he's been able to leverage equity off of the value of his land. Other dairymen have done the same thing, but many have come close to leveraging the maximum equity on their land and are on the brink of losing their businesses.

"If things don't get better for us here before all the equity is gone, we might move," said Bledsoe, who is also president of the board of Western United Dairymen. "There are many places in the country that want dairies -- that have incentives for us to be there."

In Indiana, it takes 90 days to six months to get a permit for a new dairy. In California, it takes five to six years, said Michael Marsh, chief executive of Western United Dairymen.

As a result of dropping milk prices and other difficulties, California lost 61,804 cows from 2008 to 2009, which has in turn caused several California milk and cheese production facilities to cut back or relocate to other states.

Nestle had been considering making the Central Valley its central base for production of its Nesquik products.

"But then they went out to other states like Colorado, where they rolled out the red carpet," Marsh said. "Here they rolled out the red tape and they decided to go elsewhere."

Other states, such as Idaho and Iowa are actively recruiting California dairymen. Mike Meissen, vice president for value-added agriculture for the Iowa Area Development Group, said he goes to four or five major U.S. dairy shows each year, trying to recruit more dairymen to the Central Plains.

The estimated economic impact for each new dairy cow that comes into production in the state is $15,000 a year, he said.

Iowa hasn't been known as a top milk-producing state, Meissen said. But since upping its dairy cows from 181,000 to 230,000 , Iowa is now the No. 12 milk-producing state.

"We do a lot of work to encourage people to be here," Meissen said. "For one thing, we are putting in more milk-processing space. There's also a new cheese plant looking at adding another 5 million pounds of daily capacity."

Another advantage for California dairymen considering moving to the Midwest is that the cost of both land and feed is cheaper.

"One big glaring thing is feed costs," Meissen said. "We know that feed is a dairyman's largest expense and that they have to pay more for rail charges these days for sending stuff from the Midwest out to California."

In California, the cost of feed is getting higher while supplies are getting more scarce. This year, Bledsoe tried to contract out a farmer to grow 400 acres of corn for him at $25 per ton. The farmer said he'd take $35 a ton for corn standing in the field.

"The farmer told me he was planning on growing cotton instead because there was money in it. He said he knew he could get $32 a ton for it and that he could get the money just two weeks after he delivered it to the gin," Meissen said.

Meissen wasn't able to find a contractor to grow corn for him, so this year he's making due by feeding his cows more grain, triticale and oat blends.

In the past, Bledsoe fed his 1,200 cows 60 percent corn silage and 40 percent roughage.

"Now we've flipped that mix and are feeding our cows 60 percent roughage and 40 percent corn silage," Bledsoe said. "Our cows have stayed healthy, although they're losing production."

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