ROSEVILLE, CA – The dairy business in California is not getting any easier, according to a new report by the Food & Agribusiness Research (FAR) and Advisory, a wholly owned unit of Rabobank Group, which also owns California-based Rabobank N.A. Looming regulations aimed at mitigating surface and ground water contamination, and greenhouse gas emissions will spur higher operational costs and complexity.
The report, "Digesting Environmental Policy: California Dairies are Swimming in It," contends that dairies that invest in new technology and increasingly incorporate environmental management into their routine farming practices will be in the best position to sustain their businesses and potentially realize new revenue streams.
"The nation's largest milk-producing state faces real but surmountable regulatory hurdles in the coming years," said James Williamson, an analyst with Rabobank's FAR unit. "By researching and planning now, California dairy owners can consider capital investments in solutions like subsurface drip irrigation for forage and croplands, anaerobic digesters that convert methane into energy, and other options currently being explored. Along with new-era management practices, dairies can tackle compliance demands, while supporting long-term profitability goals."
FAR's extensive report addresses a number of issues including:
- Water regulations are becoming increasingly important and will impact both surface and groundwater withdrawals. Dairies that utilize subsurface drip irrigation and precision crop management can increase their forage crop yields, and potentially free up to 25 percent of dairy lands for other investments.
- The cost of green-house-reducing, energy-generating anaerobic digesters can be offset for dairies that can realize economies of scale and afford major capital expenditures. Some digester investments may even become profitable. However, if production costs continue to increase, as is expected, some dairy owners may choose to retire or consolidate their businesses.
- Dairy coalitions, especially in the Central Valley, are becoming increasingly important for managing the state's evolving, water-related regulations. For example, a working group comprised of more than 95 percent of the Central Valley's dairies are researching best-practice guidelines for protecting groundwater.
"There are real examples today of dairies sharing both the costs and revenues," said Williamson. "Sometimes, it can mean the difference between staying in business independently and leaving it altogether. The important thing is to fully appreciate the industry's current and future challenges, and know what options are available now and in the long term."
The full report is available to Rabobank clients and the news media upon request.
About Rabobank Food & Agribusiness Research and Advisory
The Rabobank Food & Agribusiness Research (FAR) and Advisory group is a global team of more than 90 analysts who monitor and evaluate global market events that affect agriculture worldwide. This international team works to collect key insights into commodity markets; conduct in-depth analysis of the factors that drive sector success or failure; and examine the megatrends that ultimately influence clients' business strategy. These analysts are internationally respected experts in sectors from protein to produce, inputs to oilseeds, and their knowledge is shared with Rabobank Group customers.
About Rabobank N.A.
Rabobank N.A. is an award-winning, full-service bank serving California communities grounded in agriculture. With more than $14 billion in assets, Rabobank provides a wide range of financial products and services for individual, business, and food and agribusiness customers. Its 102 branches, multi-function ATMs, and online and mobile banking resources empower Californians to bank when, where and how they want. Committed to service, Rabobank's more than 1,500 employees take pride in improving their communities personally and professionally. Rabobank N.A. is a nationally chartered bank, FDIC member and equal opportunity lender. Visit www.rabobankamerica.com.
The content, views and opinions in this article are based upon the report, "Digesting Environmental Policy: California Dairies are Swimming in It," produced by FAR. The information contained herein is intended for general educational purposes only and is not to be construed as legal, tax, or financial advice. Please consult with your own legal, tax or financial advisor for guidance with your own particular circumstances.
Source: Rabobank N.A.
