The Economic Impact of Dairy Processing Expansion in Nebraska (June 17, 2021 Webinar)
With: Elliott Dennis, Assistant Professor of Livestock Economics; Eric Thompson, Karl H. Nelson Associate Professor of Economics and Director, Bureau of Business Research; and Ellie Foral, undergraduate research student — all with the University of Nebraska-Lincoln.
Nebraska has significantly expanded its annual corn and soybean production over the last decade, creating an opportunity to expand value-added agricultural production across the state. In particular, opportunities are potentially available to expand livestock production and processing, which will have a subsequent economic impact on rural economies. One opportunity is to significantly expand the dairy cattle industry in the state, by bringing in a cluster of dairies in conjunction with a type of dairy processor, such as fluid milk cheese, butter, or yogurt plant.
The associated leap in production would be difficult to achieve but has the potential to significantly expand employment opportunities in Nebraska’s small metropolitan and micropolitan areas, as well as rural regions. We will review findings from a recent report that considered the potential economic impact from developing a new cluster of dairies in conjunction with differing sizes of either fluid milk, butter, cheese, or yogurt plant located in either the Grand Island metropolitan area, Norfolk micropolitan area, and the Nebraska portion of the Sioux City metropolitan area.
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[00:00:33.810]Elliott Dennis: Well, good afternoon, and thanks for joining our webinar today i'm Dr Dennis assistant professor in lifestyle economists and the Department of agricultural economics at the University of nebraska Lincoln.
[00:00:44.910]Elliott Dennis: today's part or to today's webinar is part of the weekly series of webinars produced by our our extension farm and ranch management team to find a complete schedule and past recordings, you can go to our website at farm you and l.edu.
[00:01:00.690]Elliott Dennis: So today's webinar focuses on on the brassica and specifically dairy processing expansion, we common that nebraska has experienced.
[00:01:12.840]Elliott Dennis: Significantly expanded annual corn and soybean production over the last decade and it's created an opportunity to expand value added agricultural production across the state.
[00:01:23.430]Elliott Dennis: One opportunity that's particularly important is to expand the dairy cattle industry in the state by bringing potentially bringing in the cluster of dairies in conjunction with the type of dairy processor, such as fluid milk cheese butter or yogurt plant.
[00:01:40.050]Elliott Dennis: Over the associated leap and production would be difficult to achieve, but does have the potential to significantly expand employment opportunities.
[00:01:48.780]Elliott Dennis: In nebraska small metropolitan and Michael pollan areas, as well as rural regions today will review findings from a new study that considered the potential economic impact from developing a new, cluster of dairies in conjunction with different different sizes of.
[00:02:06.480]Elliott Dennis: Either fluid butter, milk.
[00:02:09.090]Elliott Dennis: or yogurt plants that are either located in the Grand on metro area Norfolk metro area and then nebraska portion of the Su Su city metropolitan area.
[00:02:22.290]Elliott Dennis: i'm joined today by the two of the co authors from this report, Dr Eric Thompson.
[00:02:30.930]Elliott Dennis: Thompson is the Carl H Nelson associate Professor of Economics and director of the business bureau of business, research at you know.
[00:02:38.970]Elliott Dennis: we're also joined by le formal an undergraduate research assistant and the Department of Economics and Business and the business of bureau research fellow thank you both for being here with me today.
[00:02:53.520]Eric Thompson: happy to be here.
[00:02:56.520]Elliott Dennis: Well, go ahead and share my screen and then we'll just start the presentation.
[00:03:09.780]Elliott Dennis: So, as I mentioned today, the focus of the webinar is about the economic impact of potentially adding dairy processing in nebraska, I would like to.
[00:03:22.470]Elliott Dennis: state that we were funded by the Alliance for the future of agriculture in nebraska, also known as a fan, and the nebraska soybean Board, which had an interest in seeing what the potential impact would be for a potential expansion.
[00:03:39.300]Elliott Dennis: So we were really tasked with trying to determine nebraska's current competitiveness, relative to other states from a production standpoint.
[00:03:48.270]Elliott Dennis: And summarize what these what the previous economic impacts have shown on a per account basis and benchmark where nebraska is relative to other states.
[00:04:00.600]Elliott Dennis: And so what we did is we summarize those find all those reports for what the nebraska and surrounding states summarize those.
[00:04:09.960]Elliott Dennis: try to provide some talking points on what are some of the reasons why there were differences or similarities between the findings.
[00:04:19.080]Elliott Dennis: And then use that as a stepping board to how we model, a potential expansion in the very processing industry in nebraska, which would then be accompanied by so many additional dairies required to meet the added milk demand.
[00:04:38.610]Elliott Dennis: So, to give you an idea of where we are at in the nebraska dairy industry, right now, I wanted to show you some of the data that we had collected from.
[00:04:47.610]Elliott Dennis: usda nass so every year since really 1930 NASA has been collecting the number of dairy cows that are we're milking in in nebraska as well as the productivity or.
[00:05:02.130]Elliott Dennis: per cow per year, and so on the left hand side, this is the graph that shows that and what we really see as a decline in the number of milk cows.
[00:05:13.110]Elliott Dennis: And then on the right axis, we see an increase in the number and the per head per head per year productivity of the animals, and so what this really shows is that over time.
[00:05:25.020]Elliott Dennis: The number of animals required in nebraska is really decreased, and one of the primary reasons, that is, is because the productivity per animal has really increased and so there's less animals really required to to have this to meet satisfy the same level of demand.
[00:05:45.540]Elliott Dennis: One of the other ways that we can show kind of productivity differences between where nebraska is and relative to other states or just on the US on average is to look at.
[00:05:57.060]Elliott Dennis: On these differences relative to each other, so I chose there's many productivity measures we could use, I chose to that were representative.
[00:06:07.890]Elliott Dennis: For the types of plants that we were looking at and we looked at milk fat content and per cow productivity and what we're seeing here on the right hand side is the percent difference between.
[00:06:21.300]Elliott Dennis: nebraska and and the United States numbers and so values above zero would indicate that nebraska is relatively more productive or relatively more efficient than the US on average.
[00:06:35.580]Elliott Dennis: And numbers below zero would indicate that, on average, and nebraska is less efficient for that measure and so taking those numbers, this is yearly data see that really for.
[00:06:50.250]Elliott Dennis: About 20 to 25 years the percent differences were about the same there were variations that cross year to year, but on average.
[00:07:01.650]Elliott Dennis: per milk cow productivity was about 18% less than nebraska relative to the US on average and milk fat content was about about seven seven and a half percent lower in nebraska than it was on average in the US, then in about 2008 we see us really dramatic increase in the.
[00:07:24.690]Elliott Dennis: PR cow productivity and also milk, milk fat.
[00:07:30.090]Elliott Dennis: In nebraska and real in really in about 2014 nebraska became relatively more competitive, or more efficient relative to the US on average.
[00:07:42.570]Elliott Dennis: It has tapered off some and started to moderate.
[00:07:46.800]Elliott Dennis: If we are to take 2017 2018 we're about three and a half percent maury nebraska is three and a half percent more efficient than.
[00:07:58.500]Elliott Dennis: for milk fat content and about seven and a half for milk cow productivity.
[00:08:06.150]Elliott Dennis: And i'll turn it over to ellie who is responsible for looking at on summarizing the studies.
[00:08:13.470]Ellie Foral: yeah so another way that we compare get contact context for nebraska is dairy industry was by comparing its total economic impacts.
[00:08:23.100]Ellie Foral: To the total economic impacts of the dairy industries of other states, so what we see here is the top 10 dairy states in the country by account inventory.
[00:08:33.030]Ellie Foral: As well as iowa which is 12 as South Dakota which is 19 and nebraska which is 26 in dairy cattle inventory.
[00:08:40.800]Ellie Foral: So we see their gross economic impacts and then our kind of metric of choice is the economic impact per cow.
[00:08:47.670]Ellie Foral: So it's just that gross economic impact number divided by cow inventory and that kind of tells us.
[00:08:53.460]Ellie Foral: The impact that each individual dairy cow has on the state's economy in the long run, we looked at two different studies different kinds of studies here.
[00:09:03.420]Ellie Foral: The first is academic studies kind of similar to ours coming out of accredited universities and each individual state they had varying methodologies.
[00:09:12.450]Ellie Foral: But generally are similar and our methodology is aligned with those studies and, if you look at the study numbers you'll see that.
[00:09:18.420]Ellie Foral: nebraska has impact per cow is kind of similar to a lot of these major states and especially similar to, I was in South Dakota, which are two states that are fairly similar to us, we also looked at private studies i'm so from the International.
[00:09:34.950]Ellie Foral: Oh God dad dairy foods association idea, they they produce a study that covers all 50 states and has a special emphasis on dairy processing, so their figures kind of.
[00:09:47.370]Ellie Foral: way dairy processing effects more heavily because of their methods and, if you look at that you'll see that nebraska's impact for cow is actually similar to or greater than.
[00:09:57.090]Ellie Foral: A lot of these big states so keeping that in mind, we wanted to kind of understand what are some of the things that make nebraska more similar or more different than the states that we can maximize.
[00:10:08.730]Ellie Foral: Impact per cow in our state so on this next slide.
[00:10:13.980]Ellie Foral: um.
[00:10:17.160]Ellie Foral: Maybe.
[00:10:21.180]Ellie Foral: Here we see a regression of these two.
[00:10:25.140]Ellie Foral: separated by the kinds of studies so looking at the academic studies you'll notice that the count inventory does not very the gross economic impacts much necessarily um.
[00:10:36.990]Ellie Foral: But the idea face study does show grapes difference, so what we took from this is that perhaps the number of cows isn't necessarily what's changing the economic impact.
[00:10:48.900]Ellie Foral: For the cows for each state, but instead has more to do with processing effect so diversity of processing or number of processors within the state, maybe has a larger impact, so that was that affected our methodology so as well next slide.
[00:11:05.190]Ellie Foral: So in reading all of these studies we developed a couple of considerations and things that we noticed other studies were controlling for.
[00:11:13.500]Ellie Foral: to analyze the dairy impact the impact of the dairy industry.
[00:11:18.870]Ellie Foral: First, is that people to find the dairy industry in different ways, some people had dairy production, only some people were measuring dairy processing only and other studies combine the processing.
[00:11:31.350]Ellie Foral: In dairy production effects to kind of define dairy industry which, as we saw on the last slide can change a lot, the impact numbers that we receive.
[00:11:40.830]Ellie Foral: Also, some studies include further processing and retailing, which really amplifies the the effects of dairy processing in the state and can lead to much bigger numbers there so that can kind of be a clue that processing is having a bigger effect, then say typical dairy production.
[00:11:59.550]Ellie Foral: Many studies were historical studies unless we're forward looking models.
[00:12:05.820]Ellie Foral: So taking that into account, we kind of.
[00:12:10.260]Ellie Foral: took us from both of those and added that into our study and finally location considerations, so a lot of different things go into.
[00:12:18.300]Ellie Foral: Where dairy processors decide to locate and specifically its proximity to feed and water and also available availability of transportation to transport that milk back and forth So these are discussed further.
[00:12:31.770]Ellie Foral: In our report, but kind of the gist of it was that nebraska had proximity to food and water and ease of transportation, so we modeled several different scenarios based on that and i'll pass it over to Dr Thompson to talk about that.
[00:12:49.320]Eric Thompson: So i'm going to talk a little bit about our economic impact methodology for estimating economic impact and then also summarize our various results for you so.
[00:13:00.840]Eric Thompson: We developed an economic impact analysis showing how the expansion of the dairy processing sector and associated dairies would impact local economies in several example locations in the state.
[00:13:20.310]Eric Thompson: to capture the the aggregate impact on the economy, we looked at both the direct economic activity at the dairy processing business and the dairies that would supply it, but then also and economic multiplier.
[00:13:39.810]Eric Thompson: That captured additional economic activity in the local economy that would occur so.
[00:13:48.150]Eric Thompson: So we're very much looking at both very processing facilities such as a fluid milk yogurt butter or cheese plant, but also the associated dairies that would be required to supply those.
[00:14:00.450]Eric Thompson: And made made an assumption, for the purposes of the study that those theories would would also be within the local region, even though we know that in some cases.
[00:14:11.610]Eric Thompson: processing plants are supplied by dairies in a you know, in a wider surrounding region, sometimes even a multi state region.
[00:14:23.310]Eric Thompson: That being the case.
[00:14:25.950]Eric Thompson: So that's your direct economic impact, but there's also a multiplier impact to additional economic activity in the economy.
[00:14:33.510]Eric Thompson: So, to understand how that works, think about a dairy processing business it obviously would be supplied by dairies, but it would also be supplied by other local wholesalers, it might it might employ a local accounting firm or a law firm to help it with various business functions.
[00:14:55.500]Eric Thompson: It would it would employ trucking services and things of that nature, so there would be additional economic activity beyond what was just happening at the dairy processor.
[00:15:07.050]Eric Thompson: That is that cheese plant or butter plant or yogurt plan.
[00:15:11.640]Eric Thompson: The other part of a multiplier impact, flows through the workers, so if you think of all the workers at the dairy processing facility or the associated dairies.
[00:15:21.780]Eric Thompson: If you think about them spending their paychecks on everything that all household spend their money on rent or mortgage.
[00:15:29.280]Eric Thompson: and health insurance on health care services on restaurants on retail shopping and entertainment on vehicles, all the various components of household spending so that really creates a multiplier impact throughout the economy and businesses of all kinds, can benefit.
[00:15:50.010]Eric Thompson: If a significant employer, such as a dairy processing plant and associated dairies where to locate in a community, so we tried to capture.
[00:16:00.270]Eric Thompson: Both of those things, both the direct activity at the dairies and dairy processor, but also the multiplier impact throughout the Community.
[00:16:09.720]Eric Thompson: To get a sense of what the rewards would be if you will these from employment creation, economic activity for a local economy that could attract such a cluster of activities of processor and associated dairies we looked at a variety.
[00:16:30.570]Eric Thompson: Perhaps it could have been a broader variety of locations, but we looked at three example location certainly there'll be opportunities to locate theories.
[00:16:38.640]Eric Thompson: In other other communities in nebraska as well, but as an example, we looked at grand island the nebraska portion of the sioux city metropolitan area and then also microphone area of Norfolk nebraska.
[00:16:52.260]Eric Thompson: We looked at four different types of processing plants and fluid milk yogurt butter or cheese plant and the results did vary, based on the type of processing plant in part because some types of processing plant require.
[00:17:09.720]Eric Thompson: require a lot more dairies in order to operate Lastly, we tried to look at the variety of sizes, so you can have small, medium or large plants for each of these four.
[00:17:24.240]Eric Thompson: types, so, in the end, then we had for each city or metro metro or Mike or area that we looked at, we had 12 scenarios, a small, medium large.
[00:17:33.390]Eric Thompson: fluid milk plant a small, medium large yogurt plan, but you get the idea and all their be 1212 possibilities multiply that by the three example areas that we looked at, we had a total of 36 scenarios so i'm not going to.
[00:17:52.830]Eric Thompson: bore you are damaged or damage your eyes, by asking you to look at a table with all the results for all 36 scenarios, but we're going to try to summarize results in a few ways in the slides to come.
[00:18:06.450]Eric Thompson: last thing i'd point out is we really gathered our information on.
[00:18:12.060]Eric Thompson: The characteristics of these berries or dairy processing plants from a variety of sources.
[00:18:20.430]Eric Thompson: We we looked at business business lists nationwide for the dairy and and processor industry to get a sense of the size of businesses, we got advice on this topic from the risk of dairy state dairy association.
[00:18:41.010]Eric Thompson: And really looked at a variety of sources in order to develop our scenarios next slide please.
[00:18:47.640]Eric Thompson: So this is one of my first or first summaries of our results, so in this case we're summarizing by plant sides.
[00:18:57.210]Eric Thompson: So we look, the first row of this table would show you the the annual economic impact for operating a dairy processor and associated very plants.
[00:19:11.190]Eric Thompson: Including the multiplier impact, so there would be 12 such scenarios so here's kind of the average impact for those 12 scenarios.
[00:19:21.480]Eric Thompson: And you can see that a large plant would have almost a billion dollar local economic impact again when you consider the activity at the processor itself.
[00:19:31.920]Eric Thompson: The associated dairies which we're assuming would be located locally and the multiplier impact, I think the thing really focus on in this slide is that the amount of impact.
[00:19:47.430]Eric Thompson: Really varies quite a bit by whether a large, medium or small processor is attracted to a Community so a small process are going to have a very significant economic impact.
[00:19:59.310]Eric Thompson: Over 300 billion in excuse me million and output and between seven and 800 jobs so for a lot of communities most communities in nebraska but just a few exceptions, that would be a very large employment impact.
[00:20:15.990]Eric Thompson: But the impacts grow substantially for a medium and large, so I think it'd be a big benefit to our state if we attracted a small profit and associated dairies but the impacts will be much larger.
[00:20:29.940]Eric Thompson: three times as large if we attracted a large process next slide please.
[00:20:36.480]Eric Thompson: Here we summarize the impact for the different types of plants, but what we see here is that the impact of butter plan, on average, and this is kind of the average across small, large and median butter plants in the three locations.
[00:20:51.750]Eric Thompson: Is the largest primarily because butter plants require support from more dairies than other types of processing businesses.
[00:21:03.120]Eric Thompson: Cheese plants, also have a very large impact and substantial impacts for yogurt and fluid melt plants as well, but those are smaller than they are for a butter she's playing, so the biggest payoff would be from attracting butter or cheese plan next slide please.
[00:21:23.280]Eric Thompson: The last issue is how much with the impacts vary based on where the plants are located so again, we ran our nine or 12 scenarios in three example metropolitan areas and what you see here is the impacts are pretty similar, regardless of where.
[00:21:44.070]Eric Thompson: The facility might be located South sioux city is a little bit less, particularly in terms of employment, obviously there's a lot of.
[00:21:52.320]Eric Thompson: iowans in the workforce over by the nebraska portion of sioux city, so you might have a little of that employment being captured elsewhere.
[00:22:01.050]Eric Thompson: But it's pretty pretty consistent the impacts are a little bit larger and grand island that's obviously the largest of the three economies.
[00:22:09.840]Eric Thompson: Again, if you're only focused on the nebraska portion of the sioux city area so to me, I take this to mean that if you were to think beyond our three examples.
[00:22:21.330]Eric Thompson: That we looked at grand island North fork sioux city if another Community in the in the nebraska metro nebraska area was able to attract the dairy.
[00:22:30.390]Eric Thompson: We haven't produced specific numbers, but I think it's safe to assume, given the consistency and the impacts, we find here.
[00:22:36.720]Eric Thompson: That numbers in this range would apply in those communities as well, so I think there's multiple areas in the state that could potentially attract the dairy i'm sorry a processor and associated dairies and there would be a large impacts, regardless of where that occurred.
[00:22:54.030]Eric Thompson: i'm going to turn it back over to Dr Dr Elliot Dennis to complete our presentation.
[00:23:02.910]Elliott Dennis: Thank you, Dr Thompson and ellie, and so what we wanted to do was then, given that a dairy processor would come in assuming that all of the.
[00:23:14.820]Elliott Dennis: processing or all the dairies for currently providing milk for other dairies or for other processing plans, what would be the additional feed requirements.
[00:23:27.540]Elliott Dennis: To support the additional dairies that would potentially come in and in the report, which will release you'll see that Dr Thompson was referring to the additional dairies and the primary differences between.
[00:23:43.170]Elliott Dennis: The different types of dairy processing plant impacts, he would have to butter and suggested that one of the reasons why we have the largest economic impact, there is because of the additional supporting dairies, and so this tries to get at what would be the feed costs.
[00:24:05.580]Elliott Dennis: The opt or the maximum level of feed expenditures based upon these additional dairies.
[00:24:12.810]Elliott Dennis: And I should note that these estimates were taken from a usda fsh.
[00:24:20.460]Elliott Dennis: And P P program, and so this is a sort of insurance program and essentially what happens here is that they try to estimate what a dairy ration would be.
[00:24:32.280]Elliott Dennis: And they use this dairy ration to then suggest you know payment for milk and so this is so, I I condition that by saying that these are obviously upward or.
[00:24:48.330]Elliott Dennis: You know upper limit estimates for instance soybean meal as a good example that.
[00:24:55.140]Elliott Dennis: These estimates, I know the dairy is not going to use, you know 27% of their ration and soybean meal because it's just so expensive and so.
[00:25:05.340]Elliott Dennis: These numbers are just qualify that by saying their upper upper estimates, so the way this this graph is setup is feed expenditure and millions of dollars is on the left hand side and then you have small, medium and large plans, these are averages.
[00:25:23.130]Elliott Dennis: across all the plants so fluid milk dairy process or across all the different types of dairy processing for those types of plants, so the different colors are the different plants, and then we have the type of feed required.
[00:25:42.150]Elliott Dennis: So really what we see is that because the associated dairies with butter are.
[00:25:48.210]Elliott Dennis: There are so many more dairies it's just going to require more feed, so the most dairies that are going to be required are going to be for butter.
[00:25:57.090]Elliott Dennis: followed by cheese, then by yogurt and then by fluid milk plan so that pattern is consistent for hey hey production or hey feed us corn use soybean meal use.
[00:26:09.240]Elliott Dennis: across the different plant sizes and so really what we what we trying to show here is that corn is definitely going to be the one that's going to be the largest feed demand.
[00:26:21.900]Elliott Dennis: followed by.
[00:26:24.030]Elliott Dennis: Pretty.
[00:26:25.980]Elliott Dennis: it's about average between PE and soybean meal, but there's going to be a large amount of feed expenditure, just to support the dairies, and so what we'd expect is that this would create pressure on.
[00:26:40.530]Elliott Dennis: Local crop production to either switch crops on into into different types to support that to support the existing dairies or what we'd see is that given no crop choice that had probably put additional pressure on local cache prices.
[00:26:58.350]Elliott Dennis: and potentially raise local cache prices, what the long term economic impact would be for let's say basis.
[00:27:07.230]Elliott Dennis: would really depend on crop choice changes.
[00:27:15.810]Elliott Dennis: So we do want to put a couple caveats as with if you've ever heard economists talk they always say the the estimates are always a function of the.
[00:27:27.630]Elliott Dennis: assumptions that we've been using and our best best guess of what those could be so we do want to just clarify some of the things we did not capture in these estimates, as well as provide what this potential.
[00:27:43.410]Elliott Dennis: How these assumption will potentially impact our our baseline numbers so things we didn't capture was things like half for development, so when you think about a dairy there's going to be.
[00:27:55.320]Elliott Dennis: Before that cow is able to produce that heparin has to be developed.
[00:28:01.440]Elliott Dennis: We did not capture those potential economic impact so whether that heifer development happens in state that would be a positive net benefit to the number so that economic impact would be that we've stated would be actually larger.
[00:28:16.740]Elliott Dennis: If they have for development happens outside of outside of the State, then.
[00:28:21.750]Elliott Dennis: Obviously, those benefits would not be captured dairy steer finishing, although we've made larger improvements in selecting semen, there is a fair amount of both crossbreeding dairy on beef is becoming a larger.
[00:28:39.720]Elliott Dennis: trend in the industry to capture additional value from dairy dairy steer finishing, we did not include that, and so we would expect that a large.
[00:28:50.250]Elliott Dennis: large amount of the dairy steer finishing would would happen within within nebraska given our presence in the feedlot and that would additionally increase the economic impact estimates which we've.
[00:29:07.830]Elliott Dennis: Which we've put put forth.
[00:29:12.000]Elliott Dennis: The other thing would be the these are what we consider long run, economic impacts, and so this is once the plan is already up and running these would be the economic impacts.
[00:29:25.200]Elliott Dennis: And so we don't actually account for the actual construction of the plants or the dairies that would be that would be there and we, the reason why we didn't capture those or tried to capture those is because we view these as one time payment costs and we're if we're thinking about.
[00:29:43.770]Elliott Dennis: Long term employment or long term benefits to Community we were really focusing on trying to capture long term impacts, rather than.
[00:29:54.090]Elliott Dennis: Short short term impacts.
[00:29:57.480]Elliott Dennis: And so that would provide a short run impact for the construction, but not provide a long run, so that would additionally boost the.
[00:30:07.380]Elliott Dennis: Impact assessments which we've provided.
[00:30:10.560]Elliott Dennis: The other one is the ships and craft choices and that potential impact.
[00:30:16.920]Elliott Dennis: From the grain side, this really the reason why we didn't capture, this is it really depends on the local area current crop production.
[00:30:25.620]Elliott Dennis: So that gives us our total supply in the area, and then we really would have had to make assumptions about how many producers are would shift to a different crop.
[00:30:35.520]Elliott Dennis: Growing a different crops under contract for the dairies and we really just had no way of fully estimating that so that could potentially.
[00:30:45.390]Elliott Dennis: increase or decrease the estimates which we found, and the last would be that these existing dairies would potentially have the opportunity to sell manure as a really cool product production.
[00:31:00.630]Elliott Dennis: To existing.
[00:31:03.030]Elliott Dennis: Grain production, and that would be a positive impact on the total impact, but all of that would be a crude back to the dairy producer as well.
[00:31:20.250]Elliott Dennis: Just to kind of summarize where we're at.
[00:31:23.730]Elliott Dennis: The largest is Dr Thompson sent the largest economic impact would be.
[00:31:29.820]Elliott Dennis: For the butter industry and really some of these estimate or impacts can be quite large reaching almost $1.7 billion on an annual basis, as well as you know, in some cases, thousands of jobs.
[00:31:45.420]Elliott Dennis: And, as he pointed out that even these even if nebraska his ability to attract a small processor would be somewhere in the range of 300 million.
[00:31:54.930]Elliott Dennis: Annual.
[00:31:56.910]Elliott Dennis: impact and so doesn't necessarily have to be a large processor, that would come in, but even small presses would have a significant impact on both.
[00:32:08.220]Elliott Dennis: During development and the surrounding region, and what we tried to show is that if the processor was brought in how this would impact the total.
[00:32:22.260]Elliott Dennis: Total impact per cow that ellie provided for us and really what we see is just modest improvements and I.
[00:32:28.230]Elliott Dennis: Think that's really the graph that le showed with the the difference between the idea face studies and the per calorie impact from the academics days really would support that that.
[00:32:40.680]Elliott Dennis: Increasing the amount of calories isn't necessarily going to substantially change the economic impact per cow it's pretty it's going to be constant will we'd say is a linear increase in production.
[00:32:56.760]Elliott Dennis: And net, the last thing we want to just point out is that.
[00:33:02.040]Elliott Dennis: If you review the report you'll see that the development of the dairies would be actually quite large and, in some cases, it would be more than doubling the existing dairy industry that's currently in nebraska, and so we qualify this by saying that.
[00:33:17.730]Elliott Dennis: These impacts are large, and so the challenge, would be to have a sustainable development, where a job production.
[00:33:28.200]Elliott Dennis: could be sustained in order to attract this large dairy or a potential dairy processor in the state.
[00:33:38.610]Elliott Dennis: know that like to once again acknowledge our funding sources a fan, and the nebraska soybean board as well as Spencer cook who was also a Co author on this report that and he is also an undergraduate researcher and a fellow from the business bureau research.
[00:33:56.700]Elliott Dennis: And he was unable to be with us today, but with that will open it up for questions.
[00:34:04.200]Elliott Dennis: So.
[00:34:04.950]Eric Thompson: Earlier we also had to two chats.
[00:34:07.950]Eric Thompson: That were to chat comments or effectively questions as well.
[00:34:14.880]Elliott Dennis: So I will start with.
[00:34:17.310]Elliott Dennis: The Q amp a and then I will go to the chat and what i'll do is i'll just read the question so all.
[00:34:24.600]Elliott Dennis: aware of that and then I will pass it off to the appropriate person.
[00:34:30.000]Elliott Dennis: Okay, so this one is, could you and L research, the latest technology available to build a fully automated processing plant and construction costs.
[00:34:40.560]Elliott Dennis: I think, yes, you know could do that.
[00:34:45.090]Elliott Dennis: This something like that would probably be in conjunction with the innovation campus.
[00:34:53.070]Elliott Dennis: And then, a lot of times those cases would be.
[00:34:57.810]Elliott Dennis: Generally around project funding Dr Thompson do you have anything to add on that.
[00:35:07.980]Eric Thompson: Only only in the sense that, while we didn't look at a fully automated example I think that the employment levels that we gathered.
[00:35:18.360]Eric Thompson: were meant to represent newer plants.
[00:35:22.710]Eric Thompson: Rather than you know the entire industry, including older older facilities, so in that sense of did reflects.
[00:35:32.640]Eric Thompson: Modern levels of automation.
[00:35:35.490]Elliott Dennis: Yes, yeah.
[00:35:36.540]Eric Thompson: and not the most modern.
[00:35:38.160]yeah that's it possible.
[00:35:41.310]Elliott Dennis: yeah the the estimates for.
[00:35:46.830]Elliott Dennis: Millions of gallons per day per user per plant plant size.
[00:35:52.740]Elliott Dennis: were really developed.
[00:35:56.040]Elliott Dennis: In conjunction with people from idea fe nebraska the dairy association and and other state associations.
[00:36:06.210]Elliott Dennis: Okay, let me go over the chat here.
[00:36:12.120]Elliott Dennis: Okay, so.
[00:36:14.400]Elliott Dennis: rod Johnson says that a butterfat amounts to only about three to 4% of milk volume, what are you projecting to be the usage of leftover skim milk after the butter, that is extracted and i'd say that we didn't actually address that point I think what are our full go back.
[00:36:36.750]Elliott Dennis: To the.
[00:36:41.850]Elliott Dennis: slide this slide was meant to represent.
[00:36:46.980]Elliott Dennis: The type of dairy cows that are currently existing in nebraska and the type of production so milk cow perfect content on this right hand graph was trying to illustrate that.
[00:37:02.160]Elliott Dennis: The nebraska dairy industry has increased its competitiveness, which shows that there's producers and that are able to be other states on average.
[00:37:13.380]Elliott Dennis: And so it would provide a situation where the dairy industry could potentially be more competitive, relative to other locations in the state, so if we're talking about a processor, who is trying to come in, they want the most efficient dairies to limit the amount of.
[00:37:32.190]Elliott Dennis: Coordination that they would have to do between contracts and so that was our main point of trying to illustrate here is that although we've.
[00:37:42.270]Elliott Dennis: nebraska is decrease in the number of cows, the productivity is increased in relative to the US it's actually been increasing faster than than other states.
[00:37:54.870]Elliott Dennis: Okay we'll go back to another question, Stephen England and it says it might be possible to recruit investors to build a plant and least to a quality processor with expertise to operate.
[00:38:07.410]Elliott Dennis: Or maybe a cooperative venture of dairies in communities so that's probably a two part question of whether it is possible i'll probably turn it over to Dr Thompson to address.
[00:38:21.900]Eric Thompson: Oh.
[00:38:23.670]Eric Thompson: Certainly that.
[00:38:27.000]Eric Thompson: We were.
[00:38:29.250]Eric Thompson: We were not specific in what the business organization would be, and I think you're right to point out that.
[00:38:37.740]Eric Thompson: Sometimes it's the dairies themselves that.
[00:38:41.640]Eric Thompson: That facilitate the process yeah.
[00:38:47.100]Elliott Dennis: yeah I would add to that that we see this happening, a little bit on the the Fed cattle swatter side right now with if you've been following some of the conversation about packing plant issues and concerns around that.
[00:39:04.140]Elliott Dennis: There are some cooperatives that are being developed to open up new packing plants, some of them have been able to get large amounts of investors, think about like sustainable beef llc that's going in at North platte and they've been able to.
[00:39:21.840]Elliott Dennis: Basically, build like a cost share model and so as Dr Thompson said we didn't we weren't focusing on the business structure we're just focusing on what these would be if there were a plant now how that was developed was is really left up to.
[00:39:40.920]Elliott Dennis: Who would develop the dairy itself.
[00:39:46.530]Elliott Dennis: Okay we'll go back to the chat.
[00:39:50.910]Elliott Dennis: When this is from.
[00:39:53.280]Elliott Dennis: amy how to check with said that right, so it said, so the shift and crop choice from producers is really the only limitation of the five listed autonomous Mr Dennis Is this a go when will you pick the location choice of three possible ones you listed Okay, let me go back to the.
[00:40:18.600]Elliott Dennis: limitations standpoint.
[00:40:22.770]Elliott Dennis: um.
[00:40:26.400]Elliott Dennis: So the shifting crop choice.
[00:40:31.350]Elliott Dennis: When we're talking about limitations what we were trying to talk about here was things that would potentially modify the impact which we've which we had.
[00:40:44.430]Elliott Dennis: So that would be that top portion we didn't capture these effects are we didn't try them capture these effects when modeling.
[00:40:53.910]Elliott Dennis: And so we were saying that in fact really would say that these estimates that we provided are probably lower bound estimates, because we did not capture these things that could potentially impact.
[00:41:09.240]Elliott Dennis: Our bottom line, the key assumptions down here are the things that would really, you know as you're talking about referring to here amy and the things that could impact our.
[00:41:20.790]Elliott Dennis: Our report so think about the key assumption that I shared here with feed me feed us here, this was a very simple dairy ration with just hey corn and soybean meal and then from there we're backing out both expenditures and total tons of crop needed.
[00:41:43.260]Elliott Dennis: that's a pretty big assumption, I tried to allude to that a little bit with soybean meal because.
[00:41:50.820]Elliott Dennis: We know that dairies are going to be cost minimizing and they're not going to use 30 almost 30% of their ration on soybean meal it's just going to be too expensive.
[00:42:03.600]Elliott Dennis: That would be a pretty big assumption on that the other one which we've kind of alluded to throughout has been these estimates are really taken and based upon the plant size and the total fluid milk amount.
[00:42:26.520]Elliott Dennis: per day.
[00:42:28.350]Elliott Dennis: That food total food milk amount per plant per day was then used to calculate how much milk per year that dairy would or that dairy process or would require and then from there, we built What would we call a representative dairy and that representative dairy.
[00:42:49.080]Elliott Dennis: had both a per cow per day milk production assumption which fed into total pounds per day, so there, there were a lot of assumptions we use to get to these numbers and so.
[00:43:07.140]Elliott Dennis: We tried to just to point those out that these are the things that were that we use to to come to these numbers, Dr Thompson is something.
[00:43:16.110]Eric Thompson: Where I yeah I would just add that we just.
[00:43:20.310]Eric Thompson: Those three metropolitan areas were selected just sorry metropolitan right problem areas were selected, just to be examples so.
[00:43:29.430]Eric Thompson: Really, the development could happen in here there's so much crop production throughout nebraska I think there's potential for such a development in many, many locations throughout the state so, but the real challenge will be for economic development community.
[00:43:47.220]Eric Thompson: To bring in or processing plant and then I think with the level of dairy activity in nebraska you know we're not among the highest ranked States currently but we could be a higher rank state terms of dairy.
[00:44:03.360]Eric Thompson: dairy production, you know the coordinate both those things at the same time, I think, will be a challenge so.
[00:44:12.540]Eric Thompson: We should look at all the possible locations in the state that will be hard to do so, we should we should leave it open to all possible locations in the state to try to.
[00:44:22.410]Eric Thompson: To try to get that accomplished in the you know it's obviously something the economic development community would need to spearhead or, as was mentioned, perhaps local local dairy producers or cooperatives yeah.
[00:44:36.630]Elliott Dennis: And then maybe.
[00:44:37.980]Elliott Dennis: touch base on this figure that are the table that it tends to Thompson talked about was that the impact would be a little bit different across these different states, but on average it's it's a likely pretty similar.
[00:44:54.390]Elliott Dennis: With larger metropolitan areas driving higher economic impacts.
[00:45:04.140]Eric Thompson: The other hand, you know unemployment impact of seven 800 in a smaller community would be a much bigger effect on the overall economy than 1700 jobs and grand island where where there's already 10s of thousands of jobs.
[00:45:24.870]Eric Thompson: Oh OK.
[00:45:28.110]Elliott Dennis: So another question from.
[00:45:31.920]Elliott Dennis: Stephen England said, why did you not mention ethanol byproducts as a resource.
[00:45:37.830]Elliott Dennis: Absolutely.
[00:45:40.650]Elliott Dennis: ethanol byproducts are an important resource as far as the ration goes it which goes back to my.
[00:45:49.200]Elliott Dennis: statement that rather than tried to build out a complete ration.
[00:45:55.350]Elliott Dennis: What we were trying to do was show Okay, if this was the ration what would that potential impact to be on total feeding green usage and crop production and so.
[00:46:10.530]Elliott Dennis: rations are constantly be adjusted so we tried to find a source that could be basically used.
[00:46:20.340]Elliott Dennis: across all the different types of dairies dairy rations, and so we ultimately settled with using usda fsh and PP ration calculated that was developed.
[00:46:32.550]Elliott Dennis: You, we can think of like soybean meal as.
[00:46:37.320]Elliott Dennis: Basically, like a protein.
[00:46:40.980]Elliott Dennis: or soybean meal equivalent and so ethanol byproducts would definitely be a portion of that in.
[00:46:49.980]Elliott Dennis: This i'm sure everyone knows that the ethanol industry is he is a huge benefactor and the dairy industry does use quite a bit of distorted screens So yes, that that could be in there.
[00:47:04.020]Elliott Dennis: But for simplicity on trying to summarize the Cross these we just chose a standard standard crashing.
[00:47:16.200]Elliott Dennis: Okay, oh lindo hot dorf said that in the dairy plant analysis, did you account for Class for milk prices historically pay.
[00:47:26.550]Elliott Dennis: The lowest to dairy producers.
[00:47:29.490]Elliott Dennis: So I guess i'll take that again.
[00:47:33.180]Elliott Dennis: So yes, so what we used for the milk prices was the history, the 10 year actually the 20 year.
[00:47:45.300]Elliott Dennis: Was 10 or 20 years so i'll have to go back and double check, but it was a long run, historical average of prices over time across a month, and so what this.
[00:47:57.900]Elliott Dennis: The reason why we did, that is, we didn't want to just choose a single price we wanted to show that that dairy or that milk production is going to happen, both seasonally variation and there's also going to be long run cycles that are happening, we think about like.
[00:48:15.570]Elliott Dennis: Like the cattle cycle right there's going to be increasing.
[00:48:20.580]Elliott Dennis: Cattle inventory and then there's going to be decreasing decreasing cattle inventory in that cycle is going to take you know seven to 15 years and so averaging across the long time allows us to give over that long long term cycle, what would be the actual.
[00:48:39.390]Elliott Dennis: average price, and so we didn't just use one price who use a long run, average price for that.
[00:48:49.920]Elliott Dennis: Okay.
[00:48:53.340]Elliott Dennis: And also said, did you consider any niche like organic ice cream processors.
[00:49:01.260]Elliott Dennis: No, we did not as we mentioned, we only focused on four types of processors that will lead consider standard processors and those were the food milk butter dairy and yogurt.
[00:49:17.400]Elliott Dennis: Those are all variations and they would look differently, but we were looking primarily looking at.
[00:49:26.970]Elliott Dennis: Those four major regions and.
[00:49:30.240]Elliott Dennis: One of the studies.
[00:49:34.140]Elliott Dennis: going off that one of the reasons why it might be difficult to do that in the future is because.
[00:49:40.290]Elliott Dennis: This relies upon a lot of estimation and trying to figure out what that plant or processor would look like.
[00:49:48.960]Elliott Dennis: As le mentioned, and also Dr Thompson that we used a lot of proprietary databases, to look at and try to relate plant sized annual sales.
[00:50:01.740]Elliott Dennis: And plant size to employment levels, based upon when that plant was put in place, and so you can imagine, of all the plants in the US and you start you know trimming that down into organic ice cream processors.
[00:50:20.970]Elliott Dennis: That would that number would be pretty small and how accurate to be on that number might be.
[00:50:29.070]Elliott Dennis: I know, probably.
[00:50:31.080]Elliott Dennis: More subject to outliers.
[00:50:36.840]Elliott Dennis: Okay.
[00:50:38.460]Elliott Dennis: amy had a checks.
[00:50:41.100]Elliott Dennis: Asked most were positive or had and or had a positive effect, I think she's referring to the limitation slide here.
[00:50:52.530]Elliott Dennis: So isn't nebraska being seriously considered for a dairy processing facility now and when will they decide at nebraska is a finalists can you provide contact information or are you an email.
[00:51:05.700]Elliott Dennis: We are going to be posting our report and so all our information will be there for both myself Dr Thompson ellie and Spencer cook.
[00:51:17.940]Elliott Dennis: feel free to reach out to us, we don't we don't know can't really address what is being considered or not being considered, because because we don't know we were asked to.
[00:51:29.070]Elliott Dennis: Potentially consider what a dairy processing and how this might vary across the different States this is unlike it's not this is similar to what was tasked about 10 years ago from the Department of ag ECON to look at.
[00:51:48.390]Elliott Dennis: What a percentage increase in production might be, we were more specific on the type of plant and location so.
[00:51:58.050]Elliott Dennis: Like can't really address that just because we don't we don't know.
[00:52:04.320]Elliott Dennis: Okay i'll go back to the Q amp a.
[00:52:10.110]Elliott Dennis: Good this kind of goes along that is one reason grand island more profitable because there's not an existing dairy plant that or existing plant there.
[00:52:19.740]Elliott Dennis: But there's already plants and other areas norfolk's you city.
[00:52:24.270]Elliott Dennis: grant out to open up to the central western parts of the state and better climates for dairy cattle do to lower humidity.
[00:52:31.980]Elliott Dennis: Dr Thompson Maybe you can address that.
[00:52:35.820]Eric Thompson: is actually more related just to the fact that the grand island kind of us a larger, more diverse economy so whereas nor folk or especially so the nebraska portions only of South sioux city.
[00:52:52.320]Eric Thompson: There would be supplier businesses or places where workers might spend might want to spend their money.
[00:52:59.790]Eric Thompson: That are not available in the local economy, so the larger your local economy, the more of the business and consumer spending you're going to capture.
[00:53:09.810]Eric Thompson: And therefore, your multiplier is a little bit larger so that was the primary reason for the difference, so you imagine that there could be.
[00:53:20.340]Eric Thompson: Employees might spend a portion of their money, and especially healthcare or specialty stores.
[00:53:28.740]Eric Thompson: retail stores and it's just more likely that there'd be a provider of those things in grand island, then in Norfolk given the grand island is, I think.
[00:53:40.740]Eric Thompson: Maybe about 60 70% larger than or folk in terms of the size of the economy, employment and so forth.
[00:53:52.500]Elliott Dennis: And the last question I think we'll have for today is.
[00:53:56.760]Elliott Dennis: Farmers are flexible, so if opportunities are there available for cropping options that will conform to that opportunity costco chicken farmers are an example of that we, we would tend to agree with that.
[00:54:10.110]Elliott Dennis: That, if the numbers work out financially, people are going to see.
[00:54:16.800]Elliott Dennis: short term benefits and short term profits and they're going to change cropping choice, one of the primary reasons why we didn't try to model that is because we just don't know.
[00:54:29.280]Elliott Dennis: we'd have to estimate how much price would go in and figure out that people his willingness to adopt given different prices that was just going to be more complicated than what we are objective, which was to show how different regions might impact and just state that.
[00:54:48.960]Elliott Dennis: These numbers could be lower.
[00:54:52.290]Elliott Dennis: or larger than than what we've impacted given cropping choice.
[00:54:58.410]Elliott Dennis: would like to to also point out that ellie and ellie formal and Spencer cook did do a large portion on this project and we're.
[00:55:09.330]Elliott Dennis: Large contributors Elliot want to just provide you the opportunity to talk a little bit about just briefly summarize for us there's some of the things that you learned, as you were talking talking about these you've expanded this a little bit more across different states tell us.
[00:55:26.820]Elliott Dennis: kind of what your thoughts are on the potential impacts on a per account basis as you've now tried to expand this.
[00:55:34.620]Ellie Foral: Sure um I would say generally i've learned that not.
[00:55:39.840]Ellie Foral: there's a lot of variables that go into every.
[00:55:42.930]Ellie Foral: The dairy industry in every State, as well as all of the studies about the dairy industries and my understanding is that.
[00:55:49.980]Ellie Foral: Really it all comes down to the ripple effect that multiplier effect every study on this topic utilizes that same methodology and we see the greatest impacts, when you trace $1 coming in from.
[00:56:04.140]Ellie Foral: Pro processor throughout the entire economy so as Dr Thompson mentioned.
[00:56:10.080]Ellie Foral: The bigger more diverse economy, you can you can share that dollar in the greater impact so.
[00:56:16.320]Ellie Foral: I would say my biggest takeaway is just that.
[00:56:19.680]Ellie Foral: The more opportunities for those dollars to move around in smaller nebraskan economies, we would see a greater impact per cow that way, as opposed to just increasing cow inventory, but continuing to take that milk out to other states.
[00:56:41.940]Elliott Dennis: Great well, thank you ellie Thank you Dr Thompson and once again acknowledge Spencer cook who also helped us with a lot of the the modeling and.
[00:56:53.880]Elliott Dennis: The lines for future of agriculture nebraska for and the nebraska and soybean board for funding this project.
[00:57:02.610]Elliott Dennis: As i'd like to mention that a webinar or recording of this webinar will be posted and.
[00:57:12.510]Elliott Dennis: Online at farm you and all that EDU so you're more than welcome to to rewatch the recording as well as read the report.
[00:57:22.260]Elliott Dennis: Please do check your email today for a brief survey about today's webinar because we really appreciate your feedback and helps us inform future sessions.
[00:57:32.040]Elliott Dennis: And as a reminder check farm that you and know that you do for a scheduled more webinars in this series focusing on farm or ranch management issues robots nebraska.
[00:57:41.610]Elliott Dennis: and specifically join us next week for a session on communication and negotiating for farm transition and farming leasing Thank you everyone again and look forward to seeing you soon.
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