Friday, January 7, 2022
CapitalPress.com 5
Opportunity knocks for U.S. dairy exports
in milk production,” he said.
In the short term, limited sup-
ply growth typically supports prices
and provides opportunities for the
U.S. to become a larger participant
in export markets, said Sara Dor-
land, managing partner of Ceres
Dairy Risk Management.
“Longer term, though, I would
take a look at those artifi cial con-
straints we put on production,” she
said.
Domestically, dairy coopera-
tives are managing milk supply
with base plans that have substan-
tial penalties for additional produc-
tion. Cost of investment to expand
is much higher than it was in past
periods of tight milk supply, but
also the penalty for overproduction
is a substantial stick that’s keeping
dairy producers from doing what
they would have historically, she
said.
“I think you’ve got folks look-
ing at things a little bit diff erently.
That’s not to say that I don’t expect
By CAROL RYAN DUMAS
Capital Press
The tightening global milk sup-
ply and environmental restrictions
in some countries are providing
more opportunity for U.S. dairy
exports, but supply-chain issues
and high farm costs will continue to
present hurdles.
The doors are open for more
opportunity, but reliability is going
to be key, said Patti Smith, CEO of
Dairy America.
The U.S. has to be able to show
its ability to get product to countries
and be able to compete with Oceana
and Europe, she said during the lat-
est “Dairy Download” podcast.
The U.S. dairy industry has been
in the position before to become a
bigger player in the export market
due to problems in global milk sup-
plies, said Mike McCully, owner
of the McCully Group, a dairy and
food consulting fi rm.
“I think we’re there again,” he said.
Sierra Dawn McClain/Capital Press
Overseas restrictions on dairies will present opportunities for the
U.S. dairy industry to increase exports.
But the supply-chain challenge
is a new dynamic this time, he said.
Another new dynamic is envi-
ronmental restrictions in some
competing countries. Europe, New
Zealand and other countries are
making big pledges to reduce car-
bon, greenhouse gases and meth-
ane, and dairy operators might have
to cut back on cows and milk pro-
duction, he said.
“Practically, that’s a new limit
in those countries we haven’t seen
before. So you kind of get back
to the U.S. really being the main
region that has the ability to expand
Labor issues to persist in dairy industry
By CAROL RYAN DUMAS
Capital Press
Worries about the sup-
ply chain, labor and infl a-
tion will remain in 2022, but
the new year is also likely
to bring the dairy industry
new challenges, according
to insiders.
“When we look at sup-
ply chain, I think the focus
will go onto reliability and
infrastructure verses conges-
tion,” said Patti Smith, CEO
of DairyAmerica, the largest
skim milk powder supplier in
the world.
The overarching chal-
lenge in the dairy supply
chain is labor, she said during
the latest “Dairy Download”
podcast.
“Labor impacts every sin-
gle other aspect and compo-
nent of it. … It’s not going
away, and it’s not something
that’s a quick fi x,” she said.
Sara Dorland, managing
partner at Ceres Dairy Risk
Management, said labor is
the thing folks in the industry
fret about most.
“I think it’s going to be a
challenge for the entire sup-
ply chain,” she said.
Mike McCully, owner
of the McCully Group sup-
ply-chain consulting fi rm,
said he doesn’t know if labor
or energy cost is worse for
the industry.
Higher energy prices will
play into every part of the
economy. If there’s more
upside in those prices, it’ll
aff ect the cost of everything
in the dairy supply chain, he
said.
DairyAmerica is keeping
a close eye on the reliabil-
ity of the supply chain and
how it can navigate the chal-
lenges, Smith said.
Some of the issues relate
to how the company can tran-
sition its business if need be,
such as not being able to get
product on a ship or not being
able to use a certain port, she
said.
But there is also the issue
of a tighter global milk sup-
Idaho Power requests new resources
to meet peak demand in summer
By BRAD CARLSON
Capital Press
Capital Press File
More challenges await the U.S. dairy industry in 2022,
experts say.
ply and the eff ect on global
suppliers, she said.
“We’re watching what
the global market is doing
and where we can play, what
doors are being opened,” she
said.
It comes back to reliabil-
ity and the ability to execute
within the supply chain but
also which markets might
off er opportunities, she said.
“It’s really about being
agile and navigating that new
world,” she said.
Ceres has been watch-
ing China because when
that nation begins to con-
sume more dairy products
the world snaps to and begins
supplying it, Dorland said.
“It creates huge oppor-
tunities for U.S. exporters,
especially into other areas
… where some of the folks
that are supplying China may
back out of,” she said.
China is also important
because when its imports
slow, no other region can
absorb that change. What
happens in China dramat-
ically infl uences the U.S.
domestic market, she said.
Ceres is also watching the
weather and the prevailing
La Nina, which can have a
dramatic eff ect on New Zea-
land’s dairy production and
a profound impact on milk
prices, she said.
The McCully Group has
its eye on supply and also
how hoarding by food com-
panies over the last sev-
eral months will play out,
McCully said.
It’s also keeping an eye on
geopolitical issues, with the
collapse of the China Ever-
grande real estate group, Rus-
sian troops on the Ukraine
border and the tension
between China and Taiwan.
Those things could cause a
lot of markets to crater, and
dairy would be pulled into
the vortex, he said.
dairy producers to add cows if pos-
sible. I just don’t know that we see
the rapid deployment of cows and
barns that we’ve seen over the last
few times” of tight global supply,
she said.
With milk prices expected to be
more than $20 per hundredweight,
those production caps will eventu-
ally come off , McCully said.
“Farmers, at least in some parts
of the country, that want to expand
will put more pressure on their pro-
cessors — whether it’s the cooper-
atives or private processors — to
expand,” he said.
In addition, several plants are
going to be constructed or consid-
ered. Four cheese plants in Texas
and Kansas are planned that will
process roughly the equivalent of
the milk of 250,000 cows, he said.
“That’s pretty signifi cant, and
that’s coming at us over the next
three to fi ve years. … I think we
will see growth, it’s just going to
take a while,” he said.
Idaho Power Co. wants
to acquire enough electricity
to meet higher summer peak
demand as the state’s popula-
tion grows.
The utility in its new
request to the state Public
Utilities Commission said it
will accept proposals for all
types of additional sources of
electricity to meet the higher
peak summer demand,
including renewables and
battery storage.
However, Tom Arkoosh,
a Boise lawyer, said the plan
discourages
development
of small hydroelectric proj-
ects under the Public Utility
Regulatory Policies Act, or
PURPA.
He represents IdaHy-
dro, whose members operate
more than 30 small hydro-
power plants that qualify
to sell electricity to a utility
under the 1978 federal law.
Members include irrigation
districts, canal companies,
farmers and ranchers.
Idaho Power in its Dec. 30
request says it forecasts addi-
tional summer peak capacity
needs starting next year and
running through 2026, when
the major Boardman, Ore.,
to Hemingway, Idaho, trans-
mission line is expected to
start operating.
“We anticipate sustained
load growth that will require
new resources to meet peak
summer demand and main-
tain system reliability,” the
company said.
Idaho Power in its Dec. 3
application to proceed told
the commission its proposed
acquisitions are “necessary
and required in a dynamic
energy landscape in order to
continue to provide reliable
and adequate electric ser-
vice to customers starting in
the summer of 2023 and into
the future.”
The company said in
its paperwork it identifi ed
a defi cit that starts in June
2023.
Under PURPA, utili-
ties must buy qualifying
small hydroelectric facil-
ities’ power at a special
rate. The state-approved
rate refl ects what the util-
ity would otherwise pay to
buy or develop new power
sources.
“The importance of the
capacity defi ciency date to
PURPA project develop-
ment is economics,” IdaHy-
dro’s Arkoosh told Capital
Press.
He said the hydroelec-
tric projects receive sepa-
rate payments for energy
delivered and for available
capacity put online. The
utility does not make added
capacity payments until it
reaches the fi rst capacity-de-
fi ciency date.
The capacity payments
would spur new develop-
ment while a lower, ener-
gy-only rate would not,
Arkoosh said.
“My clients advise that
with a capacity defi ciency
date of next year, new small
hydros would become eco-
nomically feasible and
would be developed,” he
said.
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