Dairy industry’s contribution to Louisiana’s economy: More than a drop in the bucket

6/3/2005 1:39:57 AM

Louisiana’s dairy industry continues to hold its own despite a threat from the West’s rapidly growing dairies and fast-changing technology that may eventually erode any advantages over other regions.

The dairy industry generates nearly $100 million in farm income and more than $150 million in value-added income for the state, according to the 2000 Louisiana Summary of Agriculture and Natural Resources published by the LSU AgCenter.

The three parishes of St. Helena, Tangipahoa and Washington comprise the vast majority of Louisiana’s current milk production with a few farms scattered in northwest Louisiana.

Generally speaking, says Jim Beatty, resident director of the LSU AgCenter’s Southeast Research Station in Franklinton, La., both milk prices and production costs are higher as you move from north to south in the United States. And because Louisiana is so far south, shipping milk north is not profitable. Northern dairy producers, on the other hand, can ship milk south, taking advantage of those higher prices to offset transportation costs.

Approximately 700 dairy farms operate in an 80-mile radius of Franklinton. This area represents about 80 percent of all Louisiana production and about 55 percent of all Mississippi production, accounting for about 1 billion pounds of milk per year.

“This is the only concentration of milk production between central Texas and Florida,” Beatty says.

During the mid 1990s, experts were fearful Louisiana’s milk industry would vanish completely.

“Twenty years ago Louisiana had more than 1,000 dairy farms. Today there are about 430,” says Wayne Gauthier, an economist in the LSU AgCenter’s Department of Agricultural Economics. “The dairy industry is moving to fewer, larger farms with more geographic pockets of milk production.

“Generally, the initial investment in any dairy-specific technology constitutes a high fixed cost,” he says, adding that if farmers decide to invest in technology, they must also get larger to spread the high fixed costs over more units to reduce their average costs and remain competitive.

After the mid 1990s, the producers left are efficient operators who have been in business for a long time and have a low debt burden, Beatty says.

“They practice dairying because there are few alternatives to crop the land,” he says.

To gauge how well a dairy farm performs, Beatty says the LSU AgCenter research programs look at productivity per cow.

“A living wage requires a critical mass,” he says. “Dairy producers with low margins but with enough production can realize a reasonable income.”

Average herd size in Louisiana is about 140 cows, much smaller than large operations in California and the Pacific Northwest, where production is growing while other states are declining. The national average herd is 111 cows, Beatty says.

For northern Louisiana, the diminishing number of dairy farms is lowering the critical mass and making such things as hauling more expensive. Southeast Louisiana still has enough concentration.

“The dairy industry in local areas must be careful of falling below the critical mass needed to maintain the industry,” he says. “There must be enough production to make hauling, feed production and equipment dealers profitable enough to be in business in close proximity to the producers.”

In cooler climates, cows produce well in summer months while production falls off in colder winter months. For southern producers, winter is prime time.

“Heat and high humidity depress production,” Beatty says. “Summer forage of bahiagrass and bermudagrass provides low-quality feed, and farmers can’t afford to haul in forage.”

Winter and spring, however, are different.

“Ryegrass in winter has kept us in business,” Beatty says. “November to May, we have excellent pastures and cool weather.

“Around here, it’s cheaper to let the cows get the grass for themselves,” he says. “About 250 head appears to be the limit for pasture-based production in Louisiana.”

Scientists at the Southeast Research Station have been experimenting with ryegrass “baleage,” wrapping plastic around bales of ryegrass hay to provide summer feed. It’s proving to be effective in improving milk production and summer profitability.

Unlike those in other parts of the country, Louisiana farmers keep their cows on pasture rather than in confined lots. Along with year-round pastures,

Louisiana dairy farmers don’t have to invest in warm, weather-tight barns or confinement facilities.

Louisiana consumers would face higher milk prices without local producers, Beatty says.

“Our advantage is distance our competitors have to travel,” he says. “We’re going to have to keep our costs low enough to compete with other parts of the country.”

The state’s dairy farmers have proved adept at low-cost production, even though average per-cow productivity is the lowest in the United States. But many established dairy producers have few alternatives for their labor and their past investments in dairy-specific assets, Gauthier says.

Until urban pressures drive up the costs of land, the limited alternative uses will continue to allow dairying in southeast Louisiana.

A looming concern is milk production’s movement away from consumers. Comparing the first quarter of 1995 with the first quarter of 2000, national milk production increased 8 percent. Regionally, however, production fell 9 percent in the Southeast, rose 6 percent in the Northeast, rose only 2 percent in the North Central and rose a whopping 27 percent in the West.

This means more milk is coming to market from farther away. If milk marketing programs do not change, Beatty and Gauthier say, local milk production and the accompanying economic benefits could disappear as technological advances reduce production and transportation costs.


Rick Bogren

(This article appeared in the summer 2001 issue of Louisiana Agriculture.)

 

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