Ep. 109 Inside Ohio's Dairy Industry with Scott Higgins
- Transcription
Speaker 1 (00:08):Welcome to AgCredit Said It, your go- to podcast for insights on farm finance and maximizing your return on investment. Join us as we talk to industry leaders, financial experts, and area farmers, bringing you skillful advice and strategies to grow your farm's financial future. AgCredit Said It, where farm finance goes beyond the balance sheet.
Phil Young (00:40):Welcome back to another episode of AgCredit Said It. I'm your host, Phil Young. We're about to wrap up dairy month in June and kick off National Ice Cream Month in July. So we thought it'd be great to bring in Scott Higgins, who's the chief executive officer of the Ohio Dairy Producers Association to talk with us about dairy production in Ohio. So welcome, Scott.
Scott Higgins (00:58):Hey, thanks for having me, Phil. I look forward to visiting with you and your audience.
Phil Young (01:03):So good, good. Yeah, welcome. So yeah, to start off, could you share about yourself, your background in the dairy industry and just your role with Ohio Dairy Producers Association?
Scott Higgins (01:12):Oh, sure. Well, first of all, I'm proud to say I grew up on a dairy farm and milk cows with my dad and my brother until 1988 till 84 when I graduated from Ohio State University. And I started working for the Dairy Association in 1984. So I've got 42 years of service in with the American Dairy Association Mid-East, which is the dairy promotion program, but I've been CEO of the Ohio Dairy Producers Association since 2005. And so now I serve in a joint capacity as CEO of both organizations. So I've got a rich history and a rich heritage in the dairy industry. I am passionate about working for dairy farmers. I wake up every day thinking about what am I going to do to help dairy farmers today? And I go to bed at night, lay my head on a pellet and say, did I give it everything I had?
(01:57):So that's the way I look at my day and I provide leadership with passion and I just really care about the dairy farmers that I work for and I want to help them be successful.
Phil Young (02:06):Nice. Good. Yeah. Can you give listeners a snapshot of just the dairy industry in Ohio today, how many producers there currently are, that kind of stuff? Yeah.
Scott Higgins (02:15):Absolutely. Be happy to do that. So Ohio's dairy industry, when it comes to national ranking, we're 12th in the nation in milk production. We're currently producing a little over 5.6 billion pounds and we're doing that on just under 1,300 dairy farms in the state. Those 1,300 dairy farmers and their dairy farm families are milking just over 253,000 cows. That's what NRCS statistics, that's what our ag marketing statistics excuse me show and what state statistics we have. So we produce, like I said, about 5.6, 5.7 billion pounds and we've not grown as much as other states around us. And I want to change that over time. We're going to do our best to try to incentivize the dairy industry's processing and manufacturing community to grow that. And I want our dairy farmers to be able to grow within that as well. But right now that's where we stand and it's really important to us that the dairy farmers that are in business are successfully meeting those challenges that they face every day.
(03:19):And as a trade association, that's what we do.
Phil Young (03:23):Okay. Yeah. So the Ohio Dairy Producers Association, what does your day look like? What's your initiatives? How do you guys support producers across the state?
Scott Higgins (03:34):Well, the Ohio Dairy Producers Association was established to be the voice of Ohio's dairy farmers on legislative and regulatory issues that affect our family farms. So every day I've got someone watching what's going on in legislature. We are listening to the challenges that our farmers are facing, looking at for any legislative or regulatory challenges. And I'm currently in discussions. I'm constantly in conversations with our state agencies about the rules and regulations that are being imposed upon farmers. If we feel that they're excessive or over-regulatory, we push back. We let them know that our farmers want to do the right thing every day as it is. So we're all about making sure that our farms are operating effectively, but we're doing it environmentally sound. We want to be producing responsibly. We want to make sure we're doing the right thing for our communities. But the one thing that we do focus on is making sure there's not excessive regulation.
(04:29):And trust me, Phil, there's been a number of attempts to try to make it more and more difficult for our dairy farmers to do their daily jobs, whether it's manure management, cattle management. There's a lot of factors that go into that, transportation and things like that. There's all kinds of issues. So we focus on a litany of areas, everything from environment to nutrient management to labor, energy. I can go on and on about all the different challenges our farmers face, but that's my job is to make sure I'm listening to my board of directors, paying attention to the things that we can impact at the state level as well as weighing in on the federal level. So we do engage our state legislature. We have been working with them for years on the challenges the dairy farmers face. And one of them we're in the midst of right now is finishing the farm bill.
(05:17):You've got to get that over the finish line. And so federal legislation's important to us. We're in the midst right now of dealing with some ag labor workforce, if you will, reform. Dairy farmers do not have access to the H2A farm seasonal workers because we are year round labor. So we're in the midst right now of watching GT Thompson's legislation start to be introduced and we're going to be rallying behind that to help us get the labor issue at the federal level change as well as trying to get the farm bill over the finish line as well. So those are just a couple of things that we work on at the state and federal
Phil Young (05:56):Level. Gotcha. Yeah. And I think my next question was almost that, but yeah, what are the biggest challenges producers face, but also at the same time, what are opportunities? Are there other opportunities on the horizon or other challenges you want to highlight at all or?
Scott Higgins (06:09):Yeah, actually there are a number of things that we can talk about here. When it comes to what the challenges farmers face, let's be candid, it's cost. The cost of inputs have continued to increase. It makes it much more challenging. The price of milk, obviously we are price takers as a dairy industry. We do not set our own prices at the farm level, so we are dependent on the marketplace wanting our milk and the volume of that production depends heavily upon our market access both internationally and nationally. So it used to be we were regional milk market, whether it's milk, cheese, yogurt, whatever. Now it's a national and now it's international. So we're roughly at 17% of all milk production in the United States is being sold overseas. So challenges we face today, let's just talk about the big picture is having access to international markets.
(06:58):So that's one of the things that dairy farmers are saying as a trade association, we need to continue to work with USDA. We need to continue to work with national milk producers and international dairy foods and partner to make sure that we have our congressional and USDA folks need to know how important the international marketplace is to us. So we're constantly looking at markets overseas that do not have the protein and nutrients that they need and dairy certainly is clearly an option for us to carry those proteins to them in the form of cheese or milk and non-fat dry milk and other ingredients. So international markets are really important to us. So the challenge we face there at the federal level is having access to those international markets because of the trade barriers and trade wars that we've been going on. And let's put it in context, Phil, dairy is such a small blip in terms of the total US economic comparing us to steel and automobile and all those other factors were so small.
(07:56):But you know one thing that none of us can do is none of us can work without food. And so food is a critical factor that we need to make sure that we leverage the integrity of dairy industry's value to the national and international marketplace and that we have access to those markets overseas. That's important to our dairy industry. And then of course when it comes to, let's get back to some local things more at the farm level, our cost of inputs. We're dealing with increased cost of equipment, power and energy costs are going up transportation. I'm talking dairy farmers about the transportation of cost. I don't know if most of our listeners know this, but dairy farmers pay for the hauling of their milk to the processing facility no matter where it's at. So if they've got a haul at one hour, that's one fee.
(08:40):If you got a haul or two or three hours to get to the market, that's another fee. That's all born by the dairy farmer.
(08:47):So cost of transportation and as we all know, fuel costs are on the rise. So I can go on and on, but let's just centrally say cost is an issue. And then we look at the other challenges when it comes to international markets and the tightness of milk supply, when we have an oversupply milk, the prices come down. And when prices come down, our margins are razor thin and oftentimes we're on the wrong side of that and we are operating in the black or in the red instead of the black. So we are very, very excited about the fact that dairy sales right now nationally in the United States, our domestic sales are up and we are holding our own because consumers have come back to that. But on an international market basis, we need to continue to find a home for our milk as well because as we increase sales, that tightens our supply and demand and gives our farmers a better price to operate within.
(09:38):So those are some of the challenges we're dealing with and there's some other things I could venture into, but those are the two key ones, cost and supply demand and margins we're dealing with.
Phil Young (09:52):So switching gears here, dairy farming, because I mean it's evolved in the last few years. So technology, innovations, what have you guys seen as far as Ohio dairy farmers and all the new technology that's out there?
Scott Higgins (10:06):Yeah. Well, there's a couple things that are happening right now and one of them is access to labor. And I'm going to say that because when it comes to milk and cows, they have to be taken care of every day, twice a day, and in some cases three times a day. And so when we are short on labor, we really start to struggle with how are we going to get these girls milked? How are we going to take care of these cows? So robotics have come into focus and the number of robotic milking parlors that are now being put into place has really taken a hold and the economics behind those are demonstrating progres because cost of those units may still be high, they still may not be cheap. But when you factor in the cost of labor or the concern of not having labor show up for whatever reason, it becomes a factor.
(10:53):So we are seeing more robotics being introduced. And the thing that I want to point out to everybody here is that actually is very helpful to some of our smaller farms because most robots can handle about 60 to 70 cows. So we're seeing robotic milking units really be favorable for the small family farm who doesn't want to grow to two, three, 400 cows, but that technology is something that has certainly impacted it. The other things that are taking place now is we have an incredible genetic system here. With all the genetics and the breeding technologies that are out there and all I can say is our cows are genetically programmed to milk very well. And if they have the right feed and the right farm management and the right environmental conditions and they've got the right housing, those cows can produce very effectively. And so we've seen the herd average go over 22,00 pounds per cow now.
(11:49):And I remember a day when I was started here back in 1984, we were barely able to get to 15,000 pounds per cow and we're seeing milk production on average. I'm talking about herd average. That doesn't mean that we don't have guys that are getting 80, 90 pounds of milk per cow per day out of these cows. So genetics and feed are really important. So the technology around and the improvement around the feed, the feed program, our farmers are very intuitive about getting their feed tested to make sure that what they're feeding the cows is exactly what they need to produce, what they need to have the right energy level, the right productivity that obviously generates milk from the cow and her overall health, her body condition and her leg, all the things around her. The genetics makes a big difference on that. And so those are some really key factors that are impacting us.
(12:46):The thing that I want to point out is dairy farmers are always on a path of continuous improvement and I only want to celebrate that because I think it's important to recognize we don't do things the way we've always done it because you get what you've always got so long as you do what you've always done. And farmers are very intuitive about, what can I do better? How can I make it more impactful? Things that I'm seeing integrated into farm practices now is the technology around tracking animal health. They've got the neck bands with the technology that they can read what's going on with the cow. They monitified her temperature, her eating habits, her motion, her locomotion, her movement around the farm. All of that now is available on your phone. And our next generation of farmers are really looking at how do I utilize the technology that's at my fingertips to help me be more effective and help my cow be more productive and help me manage my costs and my inputs and get the most productivity I can out of that cow.
(13:44):And I just want to sell you to our general audience, dairy farmers wake every day worrying about the health of the cow. Health and wellbeing of that animal is number one. If your cows are healthy and they've got beautiful bedding and they've got a nice environment and they're comfortable and here we are in the mid, we just come out of a cold winter. Our dairy farmers take really good care of our cows in the winter, but when summer comes, we've got another factor. We got heat. So we got misters going on. We've got access to comfort zones within the barn. Those cows are more comfortable than they were when I was milking cows back in the early 80s with my dad on a small dairy farm. The farms that I see now in operation, those cows are so much more comfortable. They're so much better well taken care of.
(14:26):And I attribute that to the integrity of the farmers looking out for the best interest, the welfare of that cow. And I just think we need to celebrate that. So these are all the things that I'm seeing around technology, around innovation, around cow care. Everything is trying to make us more effective in taking care of the cow, make sure she's healthy and the technologies of milking her and feeding her. And lastly, the technology and manure management. We are constantly under the fire, under the gun, if you will, for environmental stewardship. We are being challenged every day. Whether it's deserved or not, consumers may see something but they don't understand the practice. So we are doing a much better job, I believe, of educating consumers about the practices that we use for farm management, for nutrient management. And now we're talking about manure management as a nutrient on our soil.
(15:18):It is really important. In today's age, more important than ever, manure as the first source of a nutrient for our grain and row crop community is something we're working on. And as we continue to see more concentration of our dairy farms to be able to be cost effective and have the margins to be able to survive and produce, we need to find a home for that manure. And so the technologies around capturing the manure, keeping those nutrients mixed properly, getting it transported and applied on fields, everything from technology where we're knifing it in, it's all being integrated right out of the gate. If it's topically applied, it's being incorporated. And I just came back from a tour of a new 360 rain unit, which is an automated irrigation system that is connected to the lagoon and it's taking manure from the lagoon and it's being incorporated and spread down the row during the growing season.
(16:17):So if anybody wants to look it up, just type in 360 rain and you'll see this automated irrigation system. It's a game changer, Phil. It allows us to haul manure not just in the fall and the spring, but it allows us to topically apply manure at the base at the root of the crop, just at the crop, or excuse me, at the top of the soil in the crop and we're giving it just the right amount of nutrients it needs, adding water and nutrients all season long. And I just came back from Ohio State University's data where they showed one particular soybean showing a 30 bushel yield increase and corn yields of over 25 to 30 bushels more by using this technology with our normal farm practices. So these are the technologies that fill that I think are going to make a big difference moving forward.
(17:08):Now let me just finally say this though, it's expensive. These technologies are not cheap, but I just got off the phone with a dairy farmer that's now got 12 of these rain 360 units in Western Ohio and he said, Scott, these are game changers for me. I don't have to haul manure in the spring and the fall. I can apply manure on thousands of acres all season long and my crops are getting just the right nutrients they need and they're getting the water they need at times when we may have drought or may have low access to rainfall. And we're all dependent on weather, right? But when you can control some of the environments, these are the types of technologies that are starting to work their way into it. So as I look ahead, all I can say is just listening to the tone and the passion of the farmers I talk to, they're always looking for a new way to do it better and more effectively so that they can take care of the environment and be productive and economically viable for the state of Ohio and for their farm families.
Phil Young (18:09):That's awesome. Yeah. Good. Yeah. But the fun stat I'd never looked up the data was just the average milk production per cow compared over the last 30 years. That's just fascinating data.
Scott Higgins (18:20):And we're not one of the leading states either. There are other states that are producing more per cow than we are. Our average herd size is right at 185 cows. I remember when I started back in 1984, the average herd size was 35,
(18:33):But let's be candid, it's really tough to make any profit on 30 cows right now now. I mean, it's just the margins are so thin the cost of inputs are so high. It's just really tough. So I've got a lot of our farm families that have went from 80 cows to 150, some that I grew up with during the 80s have now those generations, the next generation is now milking 500 cows to keep their farm family together. And of course they're hiring employees. So you've got families that are milking 500 cows and hiring labor. So that has economic impact on the community, obviously, and they're farming more acres, but all to be effective and not just survive, but to be able to do it effectively and be good farmers. They're all about trying to stay in business and obviously you want to make a little profit but make a living while you're doing it.
(19:24):But I think it's really important that we recognize this. Farmers don't get up every day just to make a buck. There's a lot of days and a lot of months and a lot of years they don't make any money, but the contribution they make to the economy is this. If the dairy farm is lost in that community or a multitude of farms are lost, the economic impact in that community is felt. It's negatively felt. You lose your people who are taking care of the tires, hauling fuel, servicing the equipment, all the feed supplies, all the nutrient supplies, the fuel, all those things. You start to calculate the number of jobs that are reliant upon our agricultural community and I'm going to be specific to dairy. It is a huge impact. And that's the study that I'm working on right now. I'm actually, I don't know if it's okay if I talk about it right now, but I'm actually commissioned and we're doing a study in Ohio commissioned by the dairy farmers to say, what is the economic impact of our dairy farm community and what can we do to energize and incentivize the growth of that?
(20:27):We need to make our public aware of it. We need our legislators, we need our congressional members, we need our governor and our state agencies to understand the economic impact that Ohio's dairy industry contributes. And so a lot of times all we ever talk about is the processor and the food we make. We turn milk into cheese and yogurt and all kinds of added value milks and things like that. So the marketplace sees us, but nobody really focuses on the dairy farm economic impact. So we are going to peel the, as I say, pull the leaves back. We're going to peel it back and we're going to look at it and demonstrate what are the economic impacts of each of our farms of all sizes. And that's the other factor. We are interviewing farmers of 50 cows, 500 cows all the way up to 5,000 cows and in between.
(21:17):And so we're really driving down to do that. So we want to fully understand the impact of those farms and make our legislators and our local commissioners, county commissioners and everybody aware of what that economic impact is. Because if they go away, then you have basically an employment desert. You don't have enough jobs. So I think we really have to do that. Secondly, we're talking about watching ... What we're doing now is watching the national dairy industry make a $13 billion impact of new innovative plants that are going in to produce dairy foods for a growing marketplace that we have. Ohio is not capturing much of that business. I'm concerned about that. So I've talked to our state legislators. I've talked to our governor. I've talked to Jobs Ohio. I'm currently talking to, and we're doing assessment right now to project if Ohio's dairy processing community could grow and expand a billion pounds in terms of production, how many new products can we create and make sure Ohio is the place where dairy processors want to do business.
(22:24):But you know what a dairy processor needs? They need access to milk and they're going to pick a state where they can get milk, they can get it readily. And so we've got to demonstrate to the state that we want you to stay here. We want you to be in business dairy processor manufacturer of dairy foods, but we want to also work with our state agencies and with our farmers to grow our capacity to produce the milk. So all of that works together to contribute to an effective and growing dairy industry. And so my outlook is you need to know what you've been, where you've been and where you're going in order to provide some hope and opportunity for our dairy farm families and for our processing community to make Ohio a place to do business and want to be in business and want to grow.
Phil Young (23:07):Nice. Yeah, that's awesome work. Yeah. Well, good. Yeah. I guess Scott, any other thoughts or things we didn't talk about that you wanted to share?
Scott Higgins (23:17):If I could, I could bridge just for a moment and talk about the impact of what we're seeing in the dairy business in terms of sales. I don't know how many people would realize this, but the dairy farmers are listening in. When I started with the association back in 1984, we were in the midst of a 17 and a half billion pound surplus of milk. We were producing more milk than we could sell to consumers. We were only selling 120 billion pounds of milk in the form of milk, cheese, yogurt, and all the other variations. This past year at the close of 25, we are selling 238 billion pounds of milk in the form of cheese and yogurt and whey protein concentrates and butter. I can go on and on. But I have to say this, the dairy farmers invested in dairy promotion, a checkoff program and that checkoff program has been working with and through brand partners for the last 42 years now and we have been able to partner with them and move the needle increasing access to new products, generating and working with the nutrition community to make sure that they fully understand the nutritional value of dairy foods.
(24:31):It's so important to recognize that the farmer's investment in the checkout program and our work through the National Dairy Council has proven time and time again scientifically undeniably that the nutritional components of milk are impossible to, if you will, repeat or to create in a laboratory with imitation products. And so we continue to do our molecular science and our nutritional science to prove that milk is good for you. And we are seeing more and more of a trend of food as medicine moving farther and farther away from how do we treat the disease, let's prevent it. Let's by prevent it by eating the right foods and dairy absolutely fits in that spot. So we have spent checkoff money on nutrition science, nutrition research. We are proving beyond a shadow of a doubt that nutrition and dairy contributes to good health and we are seeing people come back to dairy.
(25:30):We've seen a dairy renaissance and we're seeing whole milk back on the rebound because we found out that there were people trying to say that milk was a negative on cardiovascular health. We've actually proven the opposite. We've proven that it's not a factor. In fact, it's more important that kids get the nutrients they need and some fat level, some nutrients from fat and from the fat level and milk that help them grow. So we're seeing pediatricians now recommending 2% in whole milk again with our youngsters. And so there's been a real renaissance in dairy consumption. And lastly, I'll say this, we need to also meet consumer demand as it continues to evolve. And so one of the things we're focused very closely on is what do consumers want and how do they want their dairy served up to them? So if there's a new variation of milk, if we need to create a higher protein milk or a lactose-free product or something that's in a different type of a package, maybe it's not in a gallon jug or in a 12-ounce bottle, maybe it's in a saled aseptic, if you will, shelf stable can or some other container to make it more versatile, make it more mobile.
(26:38):We have to find what is it consumers want? And then we work with our teams to develop that new product. So my final comments would simply be this, the opportunity in the dairy industry is a front of us by simply looking at what consumers want. What are their unmet demands? What are they thinking? What do they want? So we use checkoff money to go out and investigate. We listen to consumers. What are you looking for? What do you want? And so I'm really proud of the dairy farmers checkoff program and what they've done to identify the opportunities and the future for the growth of the dairy category, whether it's cheese or variations in butter. Look at the dairy case now and just look at the yogurt section alone. Look at all the variations, look at all the new single-serve units that are out there. People like access to that.
(27:26):And so we want to continue to incentivize, we want to continue to encourage. And I really want farmers to talk to their suppliers who's buying their milk about making sure that they're participating in that growing marketplace. At the end of the day, if I'm a young dairy farmer and I want to get involved, I would just simply say this, look at the future, find ways to manage above and beyond what your previous generations have done. Be aware of the technologies available to you, learn them, educate yourself on them, find ways to incorporate those in your farm practice. So if you're growing your farm, make sure you use the technologies available to you. Do not fear the future, but let's challenge the dairy processing community and our marketing co-ops and our brands that sell our products and our retailers who are meeting consumer demand to meet the consumer demand and deliver what it is, what they want, when they want it, how they want it, at the price they're willing to pay.
(28:19):And at the end, dairy will win.
Phil Young (28:22):Yeah. Awesome. Thank you. Thank you, Scott. Yeah, thank you for your insight. Thank you for your work that you advocate for the Ohio dairy industry and thank you for joining us today.
Scott Higgins (28:31):Well, thank you for having me. I really appreciate it, Phil. Yep.
Phil Young (28:34):Have
Scott Higgins (28:34):A great day.
Phil Young (28:35):Yep. And listeners, thank you for tuning in to another episode of AgCredit Said It. We'll talk to you next time.
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