Pace Of US Dairy Farm Consolidation Far Exceeds Rest Of US Agriculture

The pace of consolidation of US dairy farms “far exceeds the pace of consolidation seen in most of US agriculture,” according to a new study from USDA’s Economic Research Service (ERS).

Consolidation in US Dairy Farming was written by James M. MacDonald, Jonathan Law, and Roberto Mosheim. The study relied on farm-level records drawn from two USDA sources: the Census of Agriculture and the Agricultural Resource Management Survey (ARMS).

In 1987, half of all cows in the US were in herds of 80 or more, and half were in herds of 80 or fewer. Since then, the midpoint has risen consistently, and by 2017, the midpoint was 1,300 cows.

The number of US dairy farms has been shrinking, even as milk production continues to increase, the study noted. There were 74,100 licensed dairy herds in the US in 2002; the number of licensed herds fell to 34,187 by 2019.

The number of licensed dairy herds fell in each year between 2002 and 2017, at an average annual rate of 4 percent. However, that rate of decline accelerated in 2018 and 2019, the study pointed out. The number of licensed dairy herds fell by 2,731 farms in 2018 alone, or 6.8 percent of the 2017 total, and then fell another 8.8 percent in 2019 as the total fell by 3,281 farms.

Fewer Farms Have Milk Cows
Structural change was occurring before 2002, when USDA’s National Agricultural Statistics Service (NASS) began publishing estimates of the number of licensed dairy herds.

For a longer timespan, the number of farms with milk cows, as reported in the Census of Agriculture, can be tracked. This number has been declining for many years, from over 333,000 in 1978 to 54,599 in 2017.

However, there is an important difference between the two sources, the study noted. The number of farms with milk cows, as reported in the census, exceeds the number of licensed dairy herds. For example, the most recent census reported 54,599 farms with milk cows in 2017, while NASS reported 40,199 licensed dairy herds. The difference lies in farms that produce milk for their own consumption but do not sell milk. These farms tend to own just one or two cows.

The distinction matters when assessing structural change, the study explained. The financial pressures facing small commercial dairy farmers — those who sell milk, and for whom dairy production provides a livelihood — do not necessarily apply to operations that produce milk only for home consumption.

Developments among these very small noncommercial producers affect the census series, as can be seen when tracking the number of farms with at least 10 cows. From 1978 through 2007, the number of farms with any cows substantially exceeded the number of farms with at least 10 cows, and also clearly declines more rapidly, according to the study.

This is because farms with fewer than 10 cows exited at a relatively rapid rate (7.5 percent) per year over the period, as many farm families stopped producing milk for
their own consumption.

After 2007, however, the trend reversed, and the number of herds with one to nine cows began to rise, reflecting a modest increase in the number of farmers who keep cows for their own consumption.

Focusing just on farms with at least 10 cows, which corresponds closely to farms that sell milk, the census series declines at an average annual rate of 4.2 percent from 1978 through 2017, and at 4.1 percent annually from 2002 to 2017, closely matching the 4.0 percent annual rate of decline of licensed dairy herds over 2002 to 2017.

The number of commercial dairy farms has been declining for many years, at a persistent average rate of just about 4 percent per year. Given this persistent long trend of decline, “there is good reason to expect continued exit in the future,” the study stated.

Cows Shift To Largest Farms
With fewer dairy farms, average farm size has increased, measured either by milk production or herd size, the study noted. The average number of cows per herd, according to census estimates, increased from ...

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