Economic multipliers make it possible to calculate the effect of the dairy industry on the economic activity of South Dakota. Alvaro Garcia, South Dakota Cooperative Extension Dairy Specialist, said that a 2004 report from the University of Wisconsin Dairy Marketing and Risk Management Program addressed the economic dairy multipliers of each state and the U.S. as a whole. Information for this report was obtained from the U.S. Bureau of Economic Analysis, USDA/NASS, and the National Milk Producers Federation. “Under the current economic conditions and with unemployment for the U.S. close to 10 percent, it is important to quantify how much each additional dollar generated by the dairy industry impacts job generation,” Garcia said. “Nationally, employment multipliers calculate the number of jobs created by increasing dairy sales by $1 million. We can use the formula to evaluate how South Dakota’s dairy industry feeds employment.”
Garcia said the employment multiplier attributed to dairy is greater for South Dakota with 25.6 new jobs per $1 million in sales compared with neighboring dairy states such as Minnesota.
“The multiplier in Minnesota is slightly lower than ours, it stands at 23.6. So in terms of production, every time we add 100 dairy cows to the state, we increase milk production by 2 million pounds and milk sales by $300,000, resulting in approximately 8 new jobs” said Garcia. “The 1.89 billion pounds of milk produced during 2009 resulted in $261 million in cash receipts and 6,685 jobs generated.”
Garcia added that often, when the terms jobs and dairies are used in the same sentence, it is logical to think of those directly related to the farm.
“But money generated by dairy farms has a large impact on other local businesses as well. The economic impact of the nearly 95,000 dairy cows in the state in 2009 was estimated in close to $1.5 billion,” Garcia said. “Of this figure, 68 percent goes to dairy processing and manufacturing, 15 percent for dairy farm products, 7 percent for services, 4 percent for wholesale and retail trade, and the rest goes for financials, agriculture, utilities, transportation, raw materials, and construction.”
South Dakota dairy cow numbers have dropped to 91,000 for the third quarter of 2010. Garcia said that while cow numbers dropped by nearly 4 percent, it is notable that production only decreased by 1.7 percent overall.
“We saw a decrease from 481 million pounds in the third quarter of 2009 to 473 million pounds in that of 2010,” he said. “The base milk price was nearly $3 higher this quarter compared to a year ago, and although some producers are still barely breaking even this year, they still have a slightly higher effect on job generation.”
Garcia said current statistics not only show how important dairy production is for South Dakota’s economy on a per capita basis, but also how losing dairies will decrease overall household income and have a negative impact on direct and indirect jobs. PD
—From South Dakota Sate University Ag News release