Economic Impact of Dairy Expansion in Churchill County through Value Chain Analysis
AdvisorHarris, Thomas R.
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Currently, Dairy Farmers of America (DFA) is constructing a state of the art dry milk facility in Fallon, Nevada, which is located approximately 60 miles east of Reno in Churchill County. This plant will be the first of its kind in the Western Hemisphere, and will utilize new evaporation technology similar to that which is being used in New Zealand to create a high quality whole milk powder (WMP) for export to foreign markets. Real income for families in many foreign countries is on the rise, and as a result the demand for higher quality goods, such as dairy, is increasing. The WMP produced from this facility has a shelf life of approximately three years, which far exceeds the shelf life of most dairy products. It will be used in a variety of capacities, including single serving drink packets, infant formula supplements, and various meal supplements. Numerous factors, such as climate and quality control, limit some of these countries (like China) from producing high quality dairy products in sufficient quantities to meet their growing demand. Thus they are forced to import from established dairy markets, such as Europe, Argentina, New Zealand and the United States. Although the US is one of the world's largest and most efficient dairy producers, yielding the most fluid milk per cow of any country, they have yet to make an impact on the WMP world market. New Zealand has been on the forefront of producing and exporting WMP to the Far East; pioneering the use of today's evaporation technology and establishing the world WMP market. DFA is consistently looking for new markets/outlets for member dairies, and ultimately decided upon entering the growing world market for WMP. DFA members, along with local governments, economic authorities and the State of Nevada, worked together to bring the DFA plant to Churchill County. With its high concentration of dairies, close proximity to the Port of Oakland and friendly business environment, the region appears to be a good fit for the new operation.This paper focuses on the introduction of the DFA plant as a new industry into the local economy of rural Churchill County. Currently, there is no other dairy plant like it in the area, and thus 90% of the milk produced is exported out of state. The new plant will have the capacity to consume more than double the amount of fluid milk currently produced in Churchill County, not including existing clientele. This kind of expansion is expected to bring growth to many facets of the local economy; providing opportunities for workers and businesses. Value chain analysis is used to analyze the implications of this new dairy industry on the local dairy supply chain, identifying value flows as well as potential opportunities and deficiencies. Next, utilizing the software program IMPLAN, an input/output model is applied to the local economy to estimate the output effects resulting from the introduction of the new milk plant to Churchill County. Results show potential opportunities and weaknesses in various parts of the supply chain, as well as numerous impacts to many direct and indirect suppliers.