Producers face numerous challenges, from labor to rising input costs to tight margins. However, regulatory pressure is likely at the top of the list. In states such as California, the dairy industry has been impacted by overtime labor rules, rigorous permitting processes, and the shortage of water, which has led to cows migrating toward the center of the country.

According to Roland Fumasi, the head of RaboResearch Food & Agribusiness for North America, "That’s where the dairy processing capacity expansion is primarily happening, and that’s where the cows are heading. It’s being driven partially by all the water challenges in the west." This has led to opportunities not available in other regions, with South Dakota showing impressive growth in terms of dairy cattle.

Evan Grong, sales manager for Valley Queen, says three main factors attract producers to South Dakota: access to feed production, abundant groundwater, and dairy processing investments. Currently, the state has 150 permitted class A farms, and the number of cows has risen from fewer than 80,000 in the early 2000s to around 200,000 right now.

Dairy producer David Lemstra moved his family and 4,000 cows from central California to South Dakota three years ago. The Lemstras milk their cows near the Sioux Falls area and ship to Agropur. Lemstra believes South Dakota is set up as a business-friendly state, and he was attracted by the state's regulatory environment, access to feed, and dairy processing investments. Lemstra says California's long-term drought and poorly managed state resources were other factors that contributed to his decision to move.

Labor is another challenge dairy producers face in California, but Lemstra discovered the labor situation in South Dakota to be much better. "Some of the locals say labor is very hard, but they don’t know how hard it can potentially get," he says. "Out here, there are employees who want to work on farms." A big adjustment for Lemstra and his family has been getting used to milking cows in South Dakota’s varying temperatures. However, they have agreements with local farmers to grow feed for their dairy, which has helped ease the transition.

Regulatory pressure is one of the biggest challenges facing producers, and South Dakota is attracting producers because of its business-friendly environment, access to feed production, abundant groundwater, and dairy processing investments. Although there are challenges associated with moving to a new state, including adjusting to varying temperatures and learning about the local regulations, the South Dakota, Iowa, and Minnesota dairy community is a fun and tight-knit community.