Large Dairy Development in the Midwest Vreba-Hoff Dairy Development, LLC Cecilia C.M. Conway

1. Large Dairy Development in the MidwestVreba-Hoff Dairy Development, LLCCecilia C.M. Conway 2006 National Association of County Agricultural Agents Annual Meeting & Professional Improvement Conference July 24, 2006

2. Agenda • Introduction to the Vreba-Hoff Companies • Market Trends – European & US Dairy Industries • The Vreba-Hoff Project Model • Siting\Permitting\Licensing Requirements • Farm Innovations • Dairy Development Positives & Challenges • Working with State Extension Agencies • Questions

3. IntroductionVreba-Hoff Dairies • In 1997, the Van Bakel and Vander Hoff families partnered to build a 3,000 cow dairy facility in Hudson, Michigan • In 2000 the second 3,000 cow facility began operation • Interest from Uncle opened development opportunities for other farm families

4. Introduction • Vreba-Hoff Dairy Development LLC • Established in 1998 • Private, family-owned Firm • Located in Wauseon, Ohio • Assist European & American families relocate or expand their dairy businesses

5. Introduction • Vreba-Hoff Dairy Development assists with: • Sale of Real Estate Overseas (through sister company) • Identification of Possible Project Sites • Recruitment of Project Financing • Application of Necessary Permits • Coordination of Project Construction • Coordination of Family Re-settlement

6. Introduction • Since 1998 Vreba-Hoff has developed: • 2 Vreba-Hoff Owned facilities in Michigan • 7 Other facilities in Michigan • 12 facilities in Indiana • 25 facilities in Ohio • 23 facilities under construction or development • Total 62 new dairy projects • Equals over 70,000 cows

7. Michigan One New Project Under Development in Thumb Area

8. Indiana • Blue = 13 Dairies Under Development • Green =12 Dairies Operating

9. Ohio • Blue = 9 Dairies Under Development • Green =25 Dairies Operating

10. Introduction Why Focus on the Midwest • Temperate Climate • Large grain production provides a consistent supply of forages and opportunities to partner with growers • Good Infrastructure to move crops and milk DFA re-opens Adrian, Mich. dairy processing plant March 2006

11. Introduction Why Focus on the Midwest • Good access to medical, educational and social centers for the dairy producers and their families • Over 70% of population within 24 hours transport; providing a strong and accessible market for milk sales

12. Market Trends - European Dairy Industry • Why Are Dutch/ European Farmers Desiring to Relocate their Dairy Businesses?

14. Dairy Farming in The Netherlands • Country • Small Land Area • Ohio is 2.5 times larger than NL • High Population • Population is 16 million • Ohio’s population is approximately 70% of NL

15. Dairy Farming in The Netherlands • Market Conditions • Constant pressure to take agricultural land out of production for housing or industry • Price of Land in 2004 was $16,000/acre • Milk Production Limited by Quota System • Value of Milk Production Rights continues to increase • Current Milk Quota cost is $25,527 per cow

16. Dairy Farmingin The Netherlands • Future Outlook • Expansion is cost prohibitive • The cost to add one cow to an operation is about $41,000 • Number of Farms to Decline • Currently there remain 22,000 dairies left with about 4,500 evaluating the relocation of their business

17. Market Trends -United States Dairy Industry

18. There are 66,830 U.S. dairy farms. -Hoard’s March 2005

19. - 90% of farms are less than 200 cows • Average age of a farmer is approx. 58 years old • No successor available

20. The only dairy farm size growing is 500 cows+ • 60% of the cows are on farms with 200+ cows

21. Dairy Industry Trends Dairy Expansion Areas (source: Monsanto)

22. Market Trends Livestock Population by County – Milk Cows, Heifers & Cattle Source: Ohio Dept. of Agriculture • New Dairies are bringing cattle back to areas which previously held much larger livestock numbers

23. Market Trends - Ohio • Market Conditions - Ohio • Milk deficit state and imports milk from other states • Significant decrease in Ohio cows numbers: 892,000 cows in 1956266,000 cows in 2005 • Dairy receipts represents 1/3 of the total value of animal agriculture in Ohio • Ohio boasts 94 processing and receiving plants

24. Market Trends - Indiana • Market Conditions • Significant decrease in Indiana cows numbers: 140,488 cows in 1978 136,000 cows in 1999150,000 cows in 2004 • State Dairy receipts equal $230 million dollars • Indiana Ranks 2nd nationally in ice cream production

25. Market Trends – United States Dairy Industry • Market Conditions • Overall number of dairies decreasing • Trend toward larger dairies provide owner more labor flexibility and economies of scale • Increasing milk production per cow due to breeding methods such as artificial insemination and improved feed rations

26. Market Trends • Market Conditions • Production in volume helps maintain profitability during peaks and valleys of milk market price

27. The Vreba-Hoff Model

28. The Vreba-Hoff Model • Farm Designed to Promote Milk Production & Cow Comfort • Focus: Farm Management • Minimize Real Estate Investment • Partner with Local Crop Growers

29. Farm Design

30. Farm Design – the complex • Parlor and Freestalls in “H” design to move cows efficiently • Side Settling Basins to collect Sand • Concrete or earthen Lagoon structures to hold 12 months storage • Bunker area arranged to efficiently handle feed storage

31. Farm Design – Milk Production • Parlor Designed for Efficiency • Natural lighting benefits staff and animal herd • State of the art technology for monitoring dairy herd production • Each cow is milked 3 times per day

33. Farm Design -Freestall Barn • Barn Design promotes cow comfort • Feed can be accessed at all times • Adjustable side curtains to promote ventilation • Fans are utilized to cool in summer • Sand bedding keeps cows cleaner & drier • Easy monitoring of cattle

34. Farm Management - Focus on herd health, cow comfort resulting in improved production - Cost management advantages through economies of scale - Increased attention placed on environmental management - Good Cow Management directly correlates to a successful dairy operation

35. Minimize Purchase of Real Estate • Real Estate is minimized to reserve capital for herd investment and cow friendly facilities • Approximately 80 acres is required to construct a 2200 cow dairy facility

36. Partnership with Local Farmers Dairy Farmers partner with local crop farmers to produce quality feed for cattle

37. Partnership with Local Farmers Manure is a natural fertilizer Local Crop Growers reduce reliance on commercial fertilizers by using dairy manure

38. Partnership with Local Farmers • Reduction in Costs for Crop Farmers • Growers can sell directly to their local end user; keep more marketing dollars in their pocket; • Growers can eliminate costs for drying, shelling and transporting crops; • Growers can gain $120 - $160 per acre growing corn silage • Growers can reduce costs of chemical Fertilizer use and gain organic fertilizer

39. Funding of Dairies • Typical Investment Amount for 2,200-cow Dairy • Equipment $ 440,000.00 • Cows @ $2,250/cow $4,950,000.00 • Dairy Bldg. & Land $9,000,000.00 • Operating Capital $1,100,000.00 • Total Investment $15,490,000.00 • Investment per cow $ 7,040.00

40. New Project Siting & Permitting

41. New Project Siting Criteria • 80 acres relatively flat land • Well production of 35+ gallons/minute quality water • Proximity to residences • Proximity to Three-Phase Power • Proximity to class A roads • Land for crop production and manure disposal adjacent/close proximity to proposed dairy site • Contracts established with local crop growers • Setback required from Neighboring homes • Clay soils for Lagoon construction

42. Siting Criteria Sample 1500 Cow Dairy – Feed Production & Manure Disposal Land Requirements

43. Site Evaluation • Once possible site is identified • Professional Engineering Firms evaluate integrity of Site • Identify if Adequate Resources and isolation is available • Initial ground water and geological testing is initiated

44. Dairy Farm Permitting State Permits • Cow number triggers requirement for permit • Permit Application Includes • Engineered Plans by a Professional Engineer • Verification of manure disposal fields (Nutrient Management Plans) • Emergency Spill Response Plan • Notification to adjoining landowners & local officials of application submittal

45. Dairy Farm Permitting • State Permits (Ohio) • Siting Setback Requirements • 1000 ft. from residence to manure storage • 300 ft. from well to manure storage • 100 ft. from property lines to manure storage • 15 feet of low permeable soils from bottom of lagoon to aquifer

46. Dairy Farm Permitting • State Permits • Dairy Farm Siting requires special requirements in areas of • Public Water Source Wellhead protection area • Floodplains & Floodways • Wetlands • Cold water Habitats • Underground mines

47. Dairy Farm Permitting • State Permits • Require regular inspections • Operator must maintain operational records and inspection logs • State permitting entity inspects adherence to permit requirements • Licensing • Farms are required to be state licensed to ship Grade A Milk • State Licensing entity inspects farm to monitor on-farm practices

48. Dairy Farm Regulation • Federal Law • US Clean Water Act • Containment of contaminated Storm Water • Containment of Silage Leachate • Containment of Processed Water • Required Operational Storm Water Pollution Prevention Plan • Required Farm Inspections and Record Keeping

49. Dairy Farm Regulation • Local Permitting • Indiana allows zoning of agriculture at a local level • Ohio and Michigan have right-to-farm legislation (Ohio law is currently being challenged)

50. Farm Design Innovation