New Dairy Farms As Economic Stimulus

Over the last couple of years yogurt processors have flocked into Upstate New York, bringing hundreds of millions of dollars of new investment. They have been drawn to the region by its supply of quality milk, sadly undervalued by the cooperatives marketing it for the region’s dairy farmers. So many yogurt makers have arrived in the region that, once their new facilities are fully operational, the region will be seriously short of milk to supply them.

Gov. Andrew Cuomo, while elated at the influx of new investment and employment opportunities for Upstate New York, has become concerned that New York dairy farmers need to pick up the pace to supply these new yogurt plants. To that end, he organized last August’s Yogurt Summit in Albany to address this. Out of the Yogurt Summit came several suggestions of action Cuomo could take to increase New York dairy farmers’ milk output and reduce their expenses.

One of the most financially significant of these options involves the New York State Energy Research and Development Authority. NYSERDA offers New York livestock farmers development grants of up to $1 million, per farm, to install manure digesters on individual New York farm operations. Most of these grants go to Concentrated Animal Feeding Operations. CAFO’s are large (more than 200-cow) farming operations. Manure digestion systems convert animal waste to methane gas which is then used to power electrical generators to generate on-farm electricity. Gov. Cuomo proposes increasing these $1 million per farm grants to $2 million per farm. On a yearly basis this might render as much as a $100,000 per farm in savings in the cost of electrical service. Cuomo’s theory is, these savings will then be passed, by the farm, on to stimulate the New York general economy. An opposing view is, given their size, these farms could and should be able to purchase their own manure digesters and, in and of themselves, NYSERDA grants will do nothing directly to increase overall state milk production.

An alternative solution? This same $2 million state investment would go the the lion’s share of the distance in revitalizing one of a multitude of decommissioned smaller New York state dairy farms. Such a revitalized farm, in the the able management of a deserving young farm family, truly makes much better economic sense as a use of state money. Looking at the numbers returned on the state’s $2 million investment, a revitalized new farm operation has a much more positive return than a corresponding NYSERDA $2 million manure digester grant.

Consider; average milk production per cow in New York state is 20,700 pounds a year. Multiply that by 200 cows and it equals 41,000 cwt. total production per farm. Multiply that by $20 per cwt. and the total is an $828,000 annual return per revitalized farm to the state’s general economy: better than eight times the annual return of a NYSERDA manure digester grant to a large farm. At this rate that $2 million state investment on a revitalized farm would be returned back to the state’s general economy in less than two and a half years. From that point on, these new farms would be a perpetual economic stimulus to Upstate New York’s economy.

According to the Northeast Dairy Foods Association, a milk processor lobbying organization, when these new yogurt plants and existing plant expansions are complete, New York state will need an additional 180,000 cows to service these plants’ needs. That would be the production of a potential 900 newly minted 200 cow dairy farms. 900 farms times $828,000 gross income per year, per farm equals $745 million per year additional revenue into the Upstate economy from the new dairy farms alone.

Some years back, an agricultural economist from a land grant university – Penn State, if memory serves – came up with an interesting hypothesis: the economic stimulus value of an individual dairy cow’s annual output to a local economy was something slightly north of $13,400 per year. This theory has taken root in the media and is often cited by current state economic development officials when seeking to justify enticing dairy farmers from other regions to relocate their operations into their states, (think South Dakota, Idaho, Wisconsin, etc.) According to the current estimates of these people, a single dairy cow now stimulates $15,000 per year in overall economic activity into a local economy. If true, 180,000 additional dairy cows in New York state would have an estimated annual economic benefit of some $2.7 billion to Upstate New York’s general economy. Even in free spending Albany, promise of that kind of potential dough ought to get someone’s attention.

Nate Wilson, 66, is a retired dairy farmer from Sinclairville with 40 years experience and is now a regular contributor to The Milkweed, a national dairy industry monthly.