A Dairy Destination

South Dakota's dairy industry is booming thanks to adept planning and a growing number of processors, including Agropur, Bel Brands USA, and more.

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When consumers think about big cheese-producing states, the first to come to mind is probably Wisconsin, thanks to those cheesehead hats, and then California. But South Dakota actually has the fastest-growing dairy industry of any U.S. state. The state has approximately 122,000 dairy cows, but that number is set to grow to 140,000 in another year, says Bryan Sanderson, business development director for South Dakota’s Department of Agriculture.

“We have 197 dairy operations in place,” Sanderson said. “And we are predominantly a cheese processing state.”

There are a total of nine milk plants in the state, including one fluid milk processing plant operated by Dean Foods, and a plant at South Dakota State University (SDSU). The remainder process cheese.

“Ten million pounds of milk is processed per day in the state, but that will grow to 15 million pounds per day in the next year,” Sanderson said.

Why the growth? In part, the success can be attributed to state policies put in place 20 years ago to build the dairy industry.

“In the early 2000s, Governor (Mike) Rounds, now Senator Rounds, recruited in the state to grow our dairy herd,” said Aaron Schiebe, deputy commissioner of the South Dakota Governor’s Office of Economic Development.

Studies done by SDSU revealed the economic impact of one dairy cow in the state is $26,000. That number takes into consideration the costs associated with everything from producing feed for the cow to vet care to trucking the finished product. “The value-add from a dairy cow is significantly more than from any other agriculture product,” Schiebe said.

And the state is a good fit for the dairy industry.

“We have good feed costs, less than it would be in other areas, so the input costs are lower than it would be in other areas. We have cool weather, which is good for the cows,” said Schiebe. “We are well positioned as a state.”

And a number of dairy processors would agree, such as Bel Brands USA, which built a new cheese processing plant in South Dakota in 2014. Additionally, Valley Queen and Agropur recently announced they are expanding their existing South Dakota cheese processing facilities.

“Agropur could’ve expanded its plant in Iowa or built a greenfield site somewhere else, but it chose to expand in Lake Norden,” Schiebe said.

Part of the reason for this, explains Schiebe, is because of the state’s investment in human capital. SDSU is leading the effort to research dairy production with its small-scale dairy plant. The university, in response to the industry’s need, is looking at merging agricultural engineering curriculum with dairy science. The program is now attracting students from a number of outside states, including California and Michigan.

While SDSU is trying to train the next generation of dairy workers, there is a labor shortage in the industry. However, there are projects under way to address the problem, including a robotic milk system that has the capability to milk 3,000 cows.

Other plants have had success in recruiting immigrant labor, including refugees from the Karen ethnic group of Myanmar. Families have been legally immigrating to the areas of Huron and Aberdeen, South Dakota since the mid-2000s, and have been recently opening new Asian businesses, interjecting new culture and life into the towns.

In terms of the dairy industry’s future in the state, Sanderson said it probably won’t see any major spurt, but instead will continue to grow steadily, particularly meeting consumer demand for more artisanal cheese production.

Agropur

With a total of 39 plants — 28 in Canada and 11 in the U.S. — Agropur is one of North America’s leading dairy processors.

Ten years ago, the Canadian-based company made a decision to grow its business, particularly in the U.S. market. Part of that effort led to the 2014 purchase of the former DAVISCO cheese plant in Lake Norden, South Dakota. “We saw that if we didn’t grow, someone else would,” said Tim Czmowski, vice president of operations for Agropur.

Agropur’s plant in Lake Norden, South Dakota currently employs 225 people, but will add 125 employees after its expansion project is completed. Photo courtesy of Agropur.Agropur’s plant in Lake Norden, South Dakota currently employs 225 people, but will add 125 employees after its expansion project is completed. Photo courtesy of Agropur. The cheese processing line at Agropur’s Lake Norden, South Dakota plant. Photo courtesy of Agropur.The cheese processing line at Agropur’s Lake Norden, South Dakota plant. Photo courtesy of Agropur. Agropur’s Lake Norden plant currently processes 3.3 million pounds of milk per day, but will have the capacity to process over nine million pounds of milk per day after its expansion is completed. Photo courtesy of Agropur.Agropur’s Lake Norden plant currently processes 3.3 million pounds of milk per day, but will have the capacity to process over nine million pounds of milk per day after its expansion is completed. Photo courtesy of Agropur.

Agropur wanted to boost its production and had originally designated its plant in Hull, Iowa for an expansion. But after the acquisition of the Lake Norden plant, the focus was shifted to South Dakota.

Since then, the company has been working to grow its milk supply in the state. The original plant processed 3.3 million pounds of milk per day, but the expansion plans called for adding six million more pounds of milk per day. “We’ve done a lot of recruiting of dairy farmers,” said Czmowski. “The goal of cheese processing is to be within a 50-mile radius of your supplier farms, but we’ll probably be at the 80-mile mark.”

Currently, the plant adds an estimated $500 million to the state’s annual economy. But after the expansion, the annual revenue is expected to reach $1.5 billion. “And 85 percent of our revenue goes out in checks to milk producers,” said Czmowski. “This project is a big deal for this region.”

The expansion is expected to cost approximately a $250 million, and ranks as the largest project for Agropur, an 80-year-old company. It also ranks as one of the largest private investments in South Dakota’s history.

Construction began in early 2017 and the expansion is expected to be completed in March 2019. However, Czmowski said the plant will ramp up its cheese production over the next two years to reach its 9.3 million pounds of daily milk processing capacity.

The plant employs 225 people, but will add 125 employees when the expansion is finished. Since the town is home to approximately 400 people, Agropur is a major employer. But the anticipated additional workforce is a rather small amount when considering the expansion will be tripling the plant’s capacity. “We will be employing the efficiencies of automation,” said Czmowski.

The plant currently makes 15 different types of cheese, but the expansion is focused on producing more soft Italian cheeses, such as provolone and mozzarella. However, the design of the new space is prioritizing flexibility to meet the company’s needs many years down the road, and that might include more specialized products packaged in different sizes.

“We have purchased houses across the street for a larger employee parking lot,” said Czmowski. “We have put in a water treatment plant that produces treated water with the quality close to drinking water.”

The plant has added four more milk receiving bays to the four originally in place. The milk received is stored in silos and sent to the standardization room to make sure it has the correct customer specifications in terms of protein, fat and other factors.

“That determines the price and the yield,” Czmowski said. “If you don’t hit the standards, then you have to undergrade.”

To make mozzarella — the product being made at the time of a recent media tour — milk is pasteurized to eliminate pathogens and then transferred to the cheese vats where 63,000 pounds of milk is made into curds and whey in each vessel. The curds are transferred to a belt system and then cut, cooled and stretched to eventually form 20-pound loaves. The loaves are then loaded onto racks and submerged in a brine tank.

When the loaves have been in the brine for a specified period of time, they are moved to the packaging room and examined by X-ray and metal detection machines. All checked loaves are vacuum-packed into air-free bags and boxed together before being palletized. Czmowski said most of the increased use of automation in the expansion will be employed in the packaging process, where approximately five operators are required to be stationed.

The whole cheese-making process at the plant, from start to finish, takes about eight hours, depending on the type of cheese that is being made, said Czmowski.

Finished pallets then go into the cooler and are stored for about 10 days, while the product undergoes a variety of food safety and quality checks. The plant has storage for approximately three weeks of product.

“It is South Dakota, so we have to be a little more self-sufficient than in other places in the event of a blizzard,” Czmowski said.

Valley Queen

Privately owned Valley Queen cheese operates only one plant, which is located in Milbank, South Dakota. The company was founded here in 1929 by two Swiss immigrants, Alfred Gonzenbach and Alfred Nef. The two were on their way to build a plant in Montana when they stopped in Milbank and stayed put.

The two Alfreds have since passed away, but their families are still very much involved in the business, which processes four million pounds of milk each day to produce 400,000 pounds of cheese. The 200,000-square-foot facility produces a few dozen types of hard cheeses, such as cheddar, Monterrey Jack and Colby. 

Privately-owned Valley Queen cheese operates only one plant, which is located in Milbank, South Dakota. Photo courtesy of Valley Queen.Privately-owned Valley Queen cheese operates only one plant, which is located in Milbank, South Dakota. Photo courtesy of Valley Queen.

Except for the cheese sold in its factory store located in the company’s new museum in Milbank, Valley Cheese does not put its own label on its products. Instead, the company produces 640-pound blocks of cheese for customers, who then pick it up and send it to converting plants for slicing or shredding and packaging.

“All the cutting equipment in those plants are set up to slice 640 pound blocks,” said Doug Wilke, CEO of Valley Queen. “So they have less trim and more efficiency in handling those sizes.”

In fact, 10,000 pounds of cheese is the minimum size order the company produces for customers.

“That would be considered a specialty product,” said Wilke.

Because Valley Queen produces cheese for customers who put their name and label on the package, the company takes food safety very seriously. It has implemented a robust environmental testing program to check for pathogens.  “We have about 17 or 18 dairy scientists in that plant constantly swabbing to understand what’s going on in our plant,” said Wilke. “It’s an added cost, but we need to protect our customers’ brands.”

Valley Queen sources its milk from 45 supplier farmers and handles its own logistics, with its own tanker trucks picking up milk whenever they are dispatched. The company feels this is a competitive advantage since it can schedule the pickups and know when the tankers full of milk will be arriving, thus reducing the need for more intake bays, as well as equipment to handle excess deliveries.

All of Valley Queen’s cheese is sold domestically, but it does sell about 50 percent of its whey protein to New Zealand. The company’s customer abroad produces skim milk powder and uses the whey for standardizing the product.

Valley Queen decided a year-and-a-half ago to invest $50 million in expanding its plant, which will boost its milk processing capability to more than five million pounds per day. Included in the project is new cheese-making equipment, dry processing equipment, upgrades to its boiler and utilities, a new wastewater treatment system and more milk storage capacity.

“With the plant expansion, we are expecting to need another 15,000 cows,” said Wilke. “We determined we won’t need new dairies because our existing ones will be able to fill the need within the next four years.”

Until then, Wilke said more milk is getting pushed into South Dakota from eastern states like Michigan.  

The company already employs 250 people, but with the expansion, expects to add about 10 percent more workers. “We are planning to increase robotics in our packaging area to do jobs that involve heavy lifting,” said Wilke.

The expansion is expected to be completed by the second quarter in 2019, with a start-up date in May or June of that year.

Bel Brands USA

Bel Brands USA, owned by French company the Bel Group, produces the iconic red wax-wrapped Mini Babybels in its plant located in Brookings, South Dakota. The facility, which is a quarter of a mile long at 170,000 square feet, employs approximately 280 people to make 1.7 million Mini Babybels each day. In fact, if the pieces of the semi-soft cheese rounds produced each day were lined up, they would stretch for 40 miles.

Six different flavors are produced in the Brookings plant: Original, Light, Gouda, White Cheddar, Sharp Original and Mozzarella. However, only one flavor is produced each day for 20 hours, and then the plant is shut down for cleaning the remainder of the day.

Bel Brands USA’s state-of-the-art plant was built in Brookings, South Dakota in 2014. Photo courtesy of Bel Brands USA.Bel Brands USA’s state-of-the-art plant was built in Brookings, South Dakota in 2014. Photo courtesy of Bel Brands USA. Bel Brands USA, owned by French company the Bel Group, produces the iconic red wax-wrapped Mini Babybels in its plant located in Brookings, South Dakota. Photo courtesy of Bel Brands.Bel Brands USA, owned by French company the Bel Group, produces the iconic red wax-wrapped Mini Babybels in its plant located in Brookings, South Dakota. Photo courtesy of Bel Brands.

The plant primarily sources its milk from two dairy farms — owned by Land O’ Lakes and Dairy Farmers of America — that are within 20 miles, and receives 10-12 semi-loads (approximately 450,000 pounds) of milk each day. All milk received is tested to ensure it meets the plant’s standards, and is then transferred to one of the facility’s five refrigerated silos. The entire Mini Babybel production process takes roughly 32 hours, which spans from the time milk is received to the cheese being packaged. The whey that is produced from the plant’s cheese production is sold to Agropur.

The plant currently operates one line, but the facility’s design can accommodate a second line, if necessary. The current production capability of the facility is 12,000 tons of cheese. The Mini Babybels produced are shipped throughout the US, Mexico and Canada. The company also has a partnership with Disney, and the little red-waxed cheeses are predominately featured in Disney’s Toy Story Land.

Finished product does not leave until it clears all the quality and safety checks, which can take roughly three or four days. The facility has room in its cooler to store six or seven days of finished product. The approved cheese then is shipped to one of two distribution centers.

The Bel Brands facility currently runs a number of corporate social responsibility programs. Two of its efforts are focused on cutting the plant’s consumption of resources. One is water usage, which has been cut in half. And the other is electric consumption, particularly in its compressed air usage.

As for community relations efforts, the plant has a partnership with Advance, a non-profit organization helping adults with disabilities. Advance brings people into the plant each day for a few hours to help take the red wax off defect pieces of cheese, so that the wax can be recycled and reused. The company also holds raffles and donates the proceeds to a local animal shelter, and also donates cheese to surrounding food banks.

Bel Brands USA has two other plants — one located in Leitchfield, Kentucky and another in Little Chute, Wisconsin. The company also has corporate offices in Chicago.

Before the Brookings plant was built in the spring of 2012 and opened in July 2014, other Midwest locations were considered. Ultimately, the company decided on South Dakota for a number of reasons, chiefly the ample milk supply as well as the partnership with SDSU, also located in Brookings.

“The university offers cheese-making classes for Bel employees,” said Jeff Kjenstad, human resources supervisor for Bel Brands USA. “And the faculty helps with any challenges we face at Bel.”

SDSU

Throughout the interviews with South Dakotan cheese processors, each one mentioned the help their company receives from SDSU, whether it be from faculty assistance or in filling workforce needs.

The land-grant university has had a dairy science department since the early 1900s. SDSU has recently combined dairy and food science together into one department, but the program has not taken the focus off of dairy. “We built a state-of-the-art dairy plant in 2011 to look to the future and to partner further with the dairy industry,” said Vikram Mistry, professor and head of SDSU’s Dairy and Food Science Department.

South Dakota has approximately 122,000 dairy cows, but that number is set to grow to 140,000 in another year, says Bryan Sanderson, business development director for South Dakota’s Department of Agriculture.South Dakota has approximately 122,000 dairy cows, but that number is set to grow to 140,000 in another year, says Bryan Sanderson, business development director for South Dakota’s Department of Agriculture.

The student body currently has 120 undergrads and 30 graduate students that hail from 15 states. This year the freshman class was the largest Mistry has ever seen.

“We have 100 percent job placement of our students,” Mistry said. “It’s not uncommon for seniors in our program to have three to five job offers before they graduate.”

The dairy plant on campus is one of the main reasons the students are seen as attractive job applicants to dairy companies, said Mistry. The facility allows students to get hands-on training experience, and dairy processors, like Bel Brands USA and Valley Queen, often rent out space in the plant to test out new equipment or develop new products.

“The students have an opportunity to work with these companies and help them develop products,” said Mistry.

SDSU’s plant has different rooms to keep each processing step separated from one other, just as it would be in a commercial plant. A processing room, where milk is received from the university’s own dairy farm, has pasteurization and separation equipment. A freezer for finished ice cream is located in an adjacent room, as is the ice cream production room. Ice cream produced in the facility is sold at the university’s Dairy Bar.

“The plant is inspected by the state the same way a commercial plant is inspected,” said Mistry, adding that students must comply with the industry’s food safety standards.

The processing room in the dairy plant on the South Dakota State University campus. Photo by Debra Schug.The processing room in the dairy plant on the South Dakota State University campus. Photo by Debra Schug. The dry processing room in the dairy plant on the South Dakota State University campus. Photo by Debra Schug.The dry processing room in the dairy plant on the South Dakota State University campus. Photo by Debra Schug.

In the control room, the plant uses Wonderware software to control all equipment. Students can learn to observe the process and make adjustments.

“The difference between us and the commercial production plant is we encourage students to go into the processing room and take equipment apart,” Mistry said. “If a pump isn’t working, they can go in there and find out why.”

Dry processing equipment, including a spray dryer and a fluid bed, are contained in another room. This equipment is used for not only training purposes, but also for the industry to research and develop its own dry products involving milk, whey, buttermilk and even pea protein.

SDSU has just begun plans on building a state-of-the-art dairy farm, which will be designed to meet the needs of future dairy farms. The department is looking at ways it can employ robotics and sensors on dairy farms and other equipment that might be needed in 20 years. Mistry said he would like the new dairy farm to be built and operating in the next five years.

Debra Schug is a contributing writer for Food Manufacturing.

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