Column: Economics of dairy industry crucial
Published 12:00 am Monday, June 28, 2004
By Gene Hugoson, Ag commissioner
In addition to being a great excuse for some of us to have an extra helping of ice cream, June Dairy Month is a time to think about the important nutritional benefits and economic contributions brought to us by dairy farmers. For those of us in the agricultural community, it is also a good time for us to ponder the future of Minnesota’s dairy sector.
Too often, any discussion of the future of our dairy sector gets bogged down under the weight of the problems facing Minnesota’s dairy industry. We hear about the steadily declining farm numbers and cow numbers, and increasing concerns about the viability of our dairy processing industry. We hear about young farmers saddled with crushing debt, and older farmers looking to retire but unable to find buyers for their dairy operations.
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These facts are sobering and must be acknowledged. But it’s important to balance this with a positive vision of the possibilities that are still out there for the industry. After all, Minnesota didn’t become a major dairy state by accident. Dairy became a cornerstone of our economy because Minnesota was seen as a great place to run a dairy. Today we still have many of these favorable traits – inexpensive and abundant supplies of feed and water, a good climate for milk production and a terrific support infrastructure.
And despite the dairy decline Minnesota has experienced in recent decades, we still have a strong dairy sector worth fighting to retain. We rank sixth among all states in dairy production. Our dairy sector annually pumps more than $1.2 billion into our state economy, and the total economic impact of Minnesota’s dairy production is estimated to be $3.1 billion. The total employment impact of Minnesota’s dairy industry is estimated to be 27,402 jobs. This employment figure includes direct employment of 6,111 jobs and indirect or induced employment of 21,291 jobs.
As with other agricultural production sectors, much of the dairy sector’s total economic impact comes through the so-called “multiplier effect,” through which one business creates opportunities for other businesses. Through this multiplier effect, it is estimated that each dairy cow generates $5,000 in economic activity for the state.
Given this powerful multiplier effect and given our long history of dairy excellence, I think we can and should look at dairy production as an economic engine that can help drive our local economies.
Self-improvement experts say one of the best routes to success is to build on your existing talents and strengths. I believe this is also a sound prescription for community economic development. Not every town can host a 3M or Polaris, but even the smallest towns in greater Minnesota can host a thriving dairy sector.
Unfortunately, I believe communities sometimes overlook dairy production as an economic development option. Ensuring that dairy production remains viable, that existing operations remain in business and prosper, and that new ones are attracted to the community may be more fruitful in the long run than competing for manufacturing or telecommunications businesses that might move again when a better deal comes along.
Governor Tim Pawlenty’s administration is working hard to create new business and employment opportunities in greater Minnesota through initiatives such as the Job Opportunity Building Zones (JOBZ). The Minnesota Department of Agriculture and the rest of the administration is eager to work with local community leaders to build new opportunities for Minnesota’s dairy industry.
This summer, the Governor’s Livestock Advisory Task Force will issue recommendations on what Minnesota can do to encourage its animal agriculture industry – and dairy will certainly be a focal point. It is my hope that through these efforts at the state and local level, we can reach a point where the state’s dairy farmers are recognized not only for their nutritious, healthy products but also for their ability to be economic powerhouses for our local communities.
(Gene Hugoson is the commissioner of the Minnesota Department of Agriculture.)