Drought, labor concerns impacting Nevada's dairy, livestock industry

FALLON, Nev. — Dairymen and food producers from Northern Nevada received an update last week on how the agriculture business is affecting them, and the information painted mixed results.

The Nevada Dairy and Livestock Summit, co-sponsored by several local organizations including the University of Nevada Cooperative Extension, city of Fallon and Churchill Economic Development Authority, is assisting agricultural businesses and government leaders to create plans to minimize economic risk.

“There's a lot of farm distress,” said Cooperative Extension Economic Specialist Dr. Tom Harris — who is also the director of the University of Nevada, Reno Center for Economic Development —at the April 23 summit at the Fallon Convention Center.

Harris, who has provided information to area farmers for years, said at least every two weeks, a farm or dairy, specifically in the Midwest, ceases operation.

In Nevada, he said the five-year drought that ended in 2017 and reduced surface water irrigation has affected dairy operations, as have milk prices and trade policies with other countries.

He the problems with Chinese trade is impacting the agriculture sector. From 2014 to 2017, for example, he said the net farm income dropped 93 percent.

“Less money coming in means decreased spending in the community,” he said.

Another factor affecting agriculture, Harris said, is not enough people entering the business. He said adult children of farm owners are either showing no interest in continuing the farm, or if land is near a large city, they may sell. The average age of producers is 57.5 years old.

The number of ranches is also down from 1,822, and the average number of head of cattle per operation is 294. Dairies are up from 56 to 61 with 518 head per operation.

Research Analyst and Agricultural Economist Mike Helmar, with UNR's Center for Economic Development, focused on trends in international, national and Nevada agricultural prices and markets. He said tariffs have hurt.

“They do impact Nevada,” he said, adding tariffs have been geared to crops and livestock.

However, Helmar said biofuels are a bigger issue because the Chinese have increased their ethanol requirements, but are using crops that aren't grown in the United States. He said the dollar is no longer getting stronger and not helping producers by making goods more expensive.

“The exchange rate is detrimental, but it should improve,” Helmar predicted.

While cattle producers had several good years — 2014 and 2015 — he doesn't see the same from 2016-2020, with prices bottoming out in 2020.

Helmar said imports are stabilizing, and U.S. exports of beef are showing some strength. He was more guarded with dairy prices. He said 2015 was a good year for dairy prices, and then there was a crash in the market with a supply glut. During the next two years, Helmar said the market price for milk will show recovery.

“A stronger global economy boosts dairy trade,” he said. “We've seen an increase in the amount of dairy products we have exported.”

Helmar discussed the dry milk industry, which affects Fallon and its Dairy Farmers of America (DFA) plant southeast of the city. With China out of the world market, he said products from the United States are facing a strong New Zealand market, which has reduced prices.

“Hopefully, China will come back in,” he said. “It's a volatile period for the dry milk industry.”

Helmar said he would like to see more local producers supply the DFA, and the original assumption is that producers would be able to meet the demand.

“But the economy didn't help and neither did the drought,” he said. “Expansion has been difficult.”

Helmar made several other predictions. He said sheep production has dropped 4-5 percent, but because of Australia's higher prices, the sheep and wool industry in the U.S. looks “pretty decent in the future years.” He said gross returns will increase, which will then maintain good profitability.

Helmar also touched on hay prices. He said the prices will return but only moderately. The drought reduced hay and alfalfa production, and Helmar said areas in Nevada that depended on groundwater, such as Diamond Valley north of Eureka, are not growing as much alfalfa. He said the lack of groundwater hasn't affected Churchill County that much because a network of canals is used for distribution of water.

Dr. George Knapek, professor of Agricultural Economics at Texas A&M University, reiterated and re-emphasized previous points as he discussed the Impacts of world market trends and new farm bill on dairy and livestock sector in the nation and Nevada. He said the number of dairies in the United States is down but up in Nevada.

“It's been tough in dairy,” he said. “Downturn is hastening consolidation in the dairy industry.”

In 2018, Knapek said 2,700 registered dairies closed, which average 7.4 per day. Additionally, Knapek said he's seen the agricultural industry drop but not land value outside of investment. The market crash from the late 1980s still has a lingering effect.

“We're seeing a lot more financial stress, seeing more debt problem, seeing more loan default,” he pointed out, adding six of 10 ranches are experiencing financial difficulties.

Knapek said the financial position is divided into three areas with good showing less than a 25 percent chance of negative ending cash balance and less than 25 percent chance of losing real net worth. Marginal is 25 to 50 percent, and poor is greater than 50 percent.

As with Helmar, the Texas A&M professor, said exports, which include dry milk, will be a greater part of dairy. He predicts growth of AFPC (Agricultural and Food Policy Center) dairies is expected in Texas, Idaho, Washington, Colorado and Kansas.

Both dry milk and cheese should see a light increase with exports measured in billions of pounds, but butter export will remain steady without much fluctuation.