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Large Dairy Development in the Midwest Vreba-Hoff Dairy Development, LLC Cecilia C.M. Conway. 2006 National Association of County Agricultural Agents Annual Meeting & Professional Improvement Conference July 24, 2006. Agenda. Introduction to the Vreba-Hoff Companies

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Large Dairy Development in the MidwestVreba-Hoff Dairy Development, LLCCecilia C.M. Conway

2006 National Association of County Agricultural Agents Annual Meeting & Professional Improvement Conference

July 24, 2006


Agenda

  • Introduction to the Vreba-Hoff Companies

  • Market Trends – European & US Dairy Industries

  • The Vreba-Hoff Project Model

  • Siting\Permitting\Licensing Requirements

  • Farm Innovations

  • Dairy Development Positives & Challenges

  • Working with State Extension Agencies

  • Questions


IntroductionVreba-Hoff Dairies

  • In 1997, the Van Bakel and Vander Hoff families partnered to build a 3,000 cow dairy facility in Hudson, Michigan

  • In 2000 the second 3,000 cow facility began operation

  • Interest from Uncle opened development opportunities for other farm families


Introduction

  • Vreba-Hoff Dairy Development LLC

    • Established in 1998

    • Private, family-owned Firm

    • Located in Wauseon, Ohio

    • Assist European & American families relocate or expand their dairy businesses


Introduction

  • Vreba-Hoff Dairy Development assists with:

    • Sale of Real Estate Overseas (through sister company)

    • Identification of Possible Project Sites

    • Recruitment of Project Financing

    • Application of Necessary Permits

    • Coordination of Project Construction

    • Coordination of Family Re-settlement


Introduction

  • Since 1998 Vreba-Hoff has developed:

    • 2 Vreba-Hoff Owned facilities in Michigan

    • 7 Other facilities in Michigan

    • 12 facilities in Indiana

    • 25 facilities in Ohio

    • 23 facilities under construction or development

      • Total 62 new dairy projects

      • Equals over 70,000 cows


Michigan

One New Project Under Development in Thumb Area


Indiana

  • Blue = 13 Dairies Under Development

  • Green =12 Dairies Operating


Ohio

  • Blue = 9 Dairies Under Development

  • Green =25 Dairies Operating


Introduction

Why Focus on the Midwest

  • Temperate Climate

  • Large grain production provides a consistent supply of forages and opportunities to partner with growers

  • Good Infrastructure to move crops and milk

DFA re-opens Adrian, Mich. dairy processing plant

March 2006


Introduction

Why Focus on the Midwest

  • Good access to medical, educational and social centers for the dairy producers and their families

  • Over 70% of population within 24 hours transport; providing a strong and accessible market for milk sales


Market Trends - European Dairy Industry

  • Why Are Dutch/

    European Farmers Desiring to Relocate their Dairy Businesses?


Dairy Farming in The Netherlands

  • Country

    • Small Land Area

      • Ohio is 2.5 times larger than NL

    • High Population

      • Population is 16 million

      • Ohio’s population is approximately 70% of NL


Dairy Farming in The Netherlands

  • Market Conditions

    • Constant pressure to take agricultural land out of production for housing or industry

      • Price of Land in 2004 was $16,000/acre

    • Milk Production Limited by Quota System

    • Value of Milk Production Rights continues to increase

      • Current Milk Quota cost is $25,527 per cow


Dairy Farmingin The Netherlands

  • Future Outlook

    • Expansion is cost prohibitive

      • The cost to add one cow to an operation is about $41,000

    • Number of Farms to Decline

      • Currently there remain 22,000 dairies left with about 4,500 evaluating the relocation of their business


Market Trends -United States Dairy Industry


There are 66,830 U.S. dairy farms.

-Hoard’s March 2005


  • - 90% of farms are less than 200 cows

  • Average age of a farmer is approx. 58 years old

  • No successor available


  • The only dairy farm size growing is 500 cows+

  • 60% of the cows are on farms with 200+ cows


Dairy Industry Trends

Dairy Expansion Areas

(source: Monsanto)


Market Trends

Livestock Population by County – Milk Cows, Heifers & Cattle

Source: Ohio Dept. of Agriculture

  • New Dairies are bringing cattle back to areas which previously held much larger livestock numbers


Market Trends - Ohio

  • Market Conditions - Ohio

    • Milk deficit state and imports milk from other states

    • Significant decrease in Ohio cows numbers: 892,000 cowsin 1956266,000 cowsin 2005

    • Dairy receipts represents 1/3 of the total value of animal agriculture in Ohio

    • Ohio boasts 94 processing and receiving plants


Market Trends - Indiana

  • Market Conditions

    • Significant decrease in Indiana cows numbers:

      140,488 cows in 1978

      136,000 cowsin 1999150,000 cowsin 2004

    • State Dairy receipts equal $230 million dollars

    • Indiana Ranks 2nd nationally in ice cream production


Market Trends – United States Dairy Industry

  • Market Conditions

    • Overall number of dairies decreasing

    • Trend toward larger dairies provide owner more labor flexibility and economies of scale

    • Increasing milk production per cow due to breeding methods such as artificial insemination and improved feed rations


Market Trends

  • Market Conditions

    • Production in volume helps maintain profitability during peaks and valleys of milk market price


The Vreba-Hoff Model


The Vreba-Hoff Model

  • Farm Designed to Promote Milk Production & Cow Comfort

  • Focus: Farm Management

  • Minimize Real Estate Investment

  • Partner with Local Crop Growers


Farm Design


Farm Design – the complex

  • Parlor and Freestalls in “H” design to move cows efficiently

  • Side Settling Basins to collect Sand

  • Concrete or earthen Lagoon structures to hold 12 months storage

  • Bunker area arranged to efficiently handle feed storage


Farm Design – Milk Production

  • Parlor Designed for Efficiency

  • Natural lighting benefits staff and animal herd

  • State of the art technology for monitoring dairy herd production

  • Each cow is milked 3 times per day


Farm Design -Freestall Barn

  • Barn Design promotes cow comfort

  • Feed can be accessed at all times

  • Adjustable side curtains to promote ventilation

  • Fans are utilized to cool in summer

  • Sand bedding keeps cows cleaner & drier

  • Easy monitoring of cattle


Farm Management

- Focus on herd health, cow comfort resulting in improved production

- Cost management advantages through economies of scale

- Increased attention placed on environmental management

- Good Cow Management directly correlates to a successful dairy operation


Minimize Purchase of Real Estate

  • Real Estate is minimized to reserve capital for herd investment and cow friendly facilities

  • Approximately 80 acres is required to construct a 2200 cow dairy facility


Partnership with Local Farmers

Dairy Farmers partner with local crop farmers to produce quality feed for cattle


Partnership with Local Farmers

Manure is a natural fertilizer

Local Crop Growers reduce reliance on commercial fertilizers by using dairy manure


Partnership with Local Farmers

  • Reduction in Costs for Crop Farmers

    • Growers can sell directly to their local end user; keep more marketing dollars in their pocket;

    • Growers can eliminate costs for drying, shelling and transporting crops;

    • Growers can gain $120 - $160 per acre growing corn silage

    • Growers can reduce costs of chemical Fertilizer use and gain organic fertilizer


Funding of Dairies

  • Typical Investment Amount for 2,200-cow Dairy

  • Equipment$ 440,000.00

  • Cows @ $2,250/cow$4,950,000.00

  • Dairy Bldg. & Land$9,000,000.00

  • Operating Capital$1,100,000.00

  • Total Investment $15,490,000.00

  • Investment per cow$ 7,040.00


New Project Siting & Permitting


New Project Siting Criteria

  • 80 acres relatively flat land

  • Well production of 35+ gallons/minute quality water

  • Proximity to residences

  • Proximity to Three-Phase Power

  • Proximity to class A roads

  • Land for crop production and manure disposal adjacent/close proximity to proposed dairy site

  • Contracts established with local crop growers

  • Setback required from Neighboring homes

  • Clay soils for Lagoon construction


Siting Criteria

Sample 1500 Cow Dairy – Feed Production & Manure Disposal Land Requirements


Site Evaluation

  • Once possible site is identified

    • Professional Engineering Firms evaluate integrity of Site

    • Identify if Adequate Resources and isolation is available

    • Initial ground water and geological testing is initiated


Dairy Farm Permitting

State Permits

  • Cow number triggers requirement for permit

    • Permit Application Includes

      • Engineered Plans by a Professional Engineer

      • Verification of manure disposal fields (Nutrient Management Plans)

      • Emergency Spill Response Plan

      • Notification to adjoining landowners & local officials of application submittal


Dairy Farm Permitting

  • State Permits (Ohio)

    • Siting Setback Requirements

      • 1000 ft. from residence to manure storage

      • 300 ft. from well to manure storage

      • 100 ft. from property lines to manure storage

      • 15 feet of low permeable soils from bottom of lagoon to aquifer


Dairy Farm Permitting

  • State Permits

    • Dairy Farm Siting requires special requirements in areas of

      • Public Water Source Wellhead protection area

      • Floodplains & Floodways

      • Wetlands

      • Cold water Habitats

      • Underground mines


Dairy Farm Permitting

  • State Permits

    • Require regular inspections

    • Operator must maintain operational records and inspection logs

    • State permitting entity inspects adherence to permit requirements

  • Licensing

    • Farms are required to be state licensed to ship Grade A Milk

    • State Licensing entity inspects farm to monitor on-farm practices


Dairy Farm Regulation

  • Federal Law

    • US Clean Water Act

      • Containment of contaminated Storm Water

      • Containment of Silage Leachate

      • Containment of Processed Water

      • Required Operational Storm Water Pollution Prevention Plan

      • Required Farm Inspections and Record Keeping


Dairy Farm Regulation

  • Local Permitting

    • Indiana allows zoning of agriculture at a local level

    • Ohio and Michigan have right-to-farm legislation (Ohio law is currently being challenged)


Farm Design Innovation


Farm Innovation

Current Design Standard = Sufficient Containment

  • 12 month Manure storage capacity (including 100 year storm event)

  • Silage Leachate containment

  • Contaminated Storm Water Containment

  • Operational Storm Water Pollution Prevention Plan

  • Clean storm water retention and discharge planning

  • Comprehensive Nutrient Management Plans


Farm Innovation

  • Complex Efficiency

    • Move toward Carousel Parlor for Higher number of cows

    • Arrange Freestalls in “T” design to Parlor to minimize cow travel


Farm Innovation

  • Improved Manure Management

    • Attempts to reduce volumes

    • Trend Towards Manure Treatment

      • Multiple Lagoons

      • Solids-Liquids Separation

        • Encourage recycling of bedding material

      • Composting/Drying


Farm Innovation

  • Reduce Manure Volume

  • Cousin’s firm developed improved manure vacuum

  • Turns on its own axles

  • Allows more flexibility in farm Design/lagoon placement


Farm Innovation

Getting the manure out of the barns

efficiently and economically.


Farm Innovation

  • Reduce Manure Volumes

    • The Ohio State University Extension supported dairy water use study:

      • Water meters were installed throughout dairy facility

      • Determined average cow water use was 31.9 gallons per day (includes wash water)

        • Leading to better evaluation of facility wide water usage

        • Trend toward Direct Loading of Milk


Farm Innovation

  • Manure Treatment

  • Recycling Bedding Components

  • Sand

    • Mechanical

    • Non Mechanical

Sand Recycling Lane


Farm Innovation

  • Separation of Manure Solids

    • Vreba-Hoff implemented system in early 06’

      • Rotary Drum Thickener

      • 16 inch screw press

      • Alum & Polymers added flocculate suspended solids

      • Liquid run through Air flotation tank

      • Compost solids for bedding

      • Irrigate liquids at high speed on growing crops


Farm Innovation

  • Manure Treatment

    • Earthmentor System –(patent pending system developed by Ag Consultant Tom Menke)

      • Mechanical Solid Separation (sand & manure)

      • Multi-lagoon system for waste treatment


Earthmentor® System

Example Layout


Earthmentor® System

Summary – Advantage to Dairy

  • 2.5  reduction in annual application acres

  • Positive economics: manure handling costs reduced by >50%

  • All manure is treated and precisely applied

  • Minimizes environmental risks and farm nuisance potential

  • Window of application opportunity for manure applications extended


Farm Innovation

  • Manure Treatment

    • Methane Digesters

      • Cost of systems still significant

      • Does not eliminate by-product to haul

      • Energy suppliers not reimbursing fair rate for energy (dependent on state)


Farm Innovation

  • Manure Treatment – What We Know

    • Complete Treatment is too expensive

    • Partial Treatment stabilizes manure to reduce odor, solids and nutrient content

    • Most systems are high in management, labor, and cost with little economic return


Farm Innovation

  • Manure Treatment – What We Need to Keep Researching

    • How to economically remove and concentrate nutrients from manure for use as soil amendments


Dairy Development Positives & Challenges


Dairy Development Positives

  • Farm Land Preservation

    • New Farm development keeps local land in crop production

    • 2000 cow dairy keeps 2000 acres of land as green space


Positives of Partnering with Livestock

Economic Benefits

  • Dairy Farms create demand for local production crops which yields higher profits per acre locally

  • Each 600 cow farm contributes approximately 3 million dollars annually to the local economy

  • Each job created at the dairy creates 2.25 jobs in other sectors of the industry

  • A dollar increase in livestock and poultry production creates $1.32 to $1.64 in economic activity

  • One farm supports approximately 100 Ohio businesses

    (Source: The Ohio State University Extension & Ohio Livestock Coalition)


Dairy Development Positives

  • New Business Opportunities

    • Heifer Raising

    • Feed Production

    • Calf Raising

    • Custom Manure Applicators

  • New Career Opportunities

    • Farm middle management


Dairy Development Positives

  • Addition of new dairy producers helps maintain infrastructure for dairy producers of all sizes

    • Dairy Processors

    • Veterinarians

    • Milk Equipment Suppliers

    • Ag Equipment Dealers


Dairy Development Challenges

  • Farmers vs. Residential Growth

    • Family Farms versus “Factory Farms”

    • Media attention is unbalanced

    • More housing in agricultural areas

  • Increased Environmental Regulation

    • Air Emissions

  • Need for Public Education

  • Length of Permit Issuance


Working With OSU County Extension Agents

  • Earlier and more contact with local Extension Offices by VH and new farmer

    • We welcome any comment and suggestions

    • Site Selection – we welcome assistance/suggestions

    • Encourage questions or voicing concerns


  • Questions?


Thank you

for the opportunity

to speak with you.


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