Dairy farms impact economy

SALEM, Ohio – Economists say Dutch dairies will strengthen the dairy industry, but some Ohio farmers don’t see it that way.

Instead, many say that more cows mean more milk – something that isn’t needed in times when a milk surplus and low prices rule the market.

But according to an Ohio State University economic analysis, seven dairies created nearly $23 million in economic impact in Paulding and Van Wert counties.

Before these seven dairies were constructed, the local dairy industry contributed only one-tenth of 1 percent to the area’s total economic activity, according to the study. Today, the dairy sector accounts for about 1 percent of all economic activity in these two counties.

Some experts say the Dutchmen have chosen the right place to relocate, despite the strong opposition they face.

Ohio’s roadways provide milk tankers access to 70 percent of U.S. consumers within 24 hours, making it easy to ship raw milk or processed dairy products from Maine to California.

Canadian markets can be reached just as quickly, according to Tim Demland, ag extension agent in Putnam County.

Buying locally

The study found the dairies’ impact could be even greater if the farms purchased more of their inputs locally.

The new farms have bought only 1 percent of their pre-mixed feed locally, giving room for more producers and businesses to cash in.

“They told us they are interested in doing more local purchasing, but I’ve found in other research that it can take a while to establish local business relations,” said Brian Roe, agricultural economist.

“New farms in an area are just less likely to buy locally. As they establish themselves, they’ll find the local supply chains they need.”

Already the farms have created neighbor-to-neighbor demand for corn and other grain crops, buying 71 percent of their corn for grain and 100 percent of their corn for silage locally.

The farmers are willing to pay to have their herds’ feed raised close by, paying enough for their neighbors to invest in silage wagons and choppers and spread their cost over a shorter period.

Even in years where the corn crop looks bad, dairymen will still buy acres of corn for silage, Demland said.

“These guys hire what they’re not good at,” Demland said, noting the Dutchmen are here to milk cows, not to farm ground.

Room to grow

Two Putnam County farmers have already cashed in on forward-thinking. The two men invested more than $250,000 in manure pipes and injection equipment, building a substantial business in manure hauling and application based on the new dairies, according to Demland.

As the commercial dairy base keeps growing – and farms get the green light to expand – Demland sees more opportunities for raising heifers, even beyond northwestern Ohio.

Demland sees potential for graziers in southeast Ohio to capitalize on their hilly ground, which is mostly unsuitable for harvesting grain, to raise heifers.

“Larger farms need small farms, and small farms need large farms. It will take some time until everybody realizes that,” Demland said.

The influx of dairies created demand for new tractors, loaders and TMR mixers.

On the people side of things, there is more need for veterinarians with dairy backgrounds and specialties, as well as artificial insemination technicians.

Touchy subject

The Ohio State study also covered another sore spot in the minds of many farmers: the possibility that Dutch farmers are getting tax incentives or tax breaks.

In the case of the seven farms in the study, each entered Tax Increment Financing agreements to distribute the new tax dollars to specific government agencies.

In four of the seven agreements, part of the tax money was directed as “gifts” to local schools. Since it is a gift, it protects a school’s state funding.

Roe stresses that the Dutch farmers’ payments in lieu of taxes are the same as if they were paying the county. However, with this setup, the money goes directly to the school or highway department, rather than first going through the county where it would be split between funds.

The thinking is that the “gifts” redistribute the money to parts of the government that may need it to cover the costs of Dutch dairies.

For example, Roe said that the money going to the highway department would help cover the cost of more equipment on the roads.

Although the tax money is being redirected, Roe said the Dutch farmers are paying the same dollar amount and are not receiving a tax break. Likewise, he also said that depending on the counties’ or townships’ individual regulations, Tax Increment Financing is available to other businesses and farms.