Dairy Farm Numbers Could Fall 50% by 2030
Although it’s scary to think about, the decline in dairy farms is a sad reality. In 2003, there were just over 70,000 licensed dairy farms in the country. In 2018, that number fell below 40,000 for the first time in history, which represents a loss of 30,000 farms in just 15 years. Over the last decade, the U.S. has lost nearly 1,900 farms on average every year. The smallest loss was in 2015, which followed record high milk prices in 2014, when only 1,275 farms left in the business. The largest loss happened in 2013 when just over 2,300 dairy farms closed. Farmers faced ongoing challenges in 2018, and if that trend continues, there will be approximately 20,000 dairy farms remaining in the U.S. by 2030. This affects the entire dairy industry and how it will proceed.
Despite the decline in the number of farms, milk production continues to steadily increase 1-2% per year. This increase is attributable to more productive cows due to advancements in genetics, feeding, health, and other factors impacting cow comfort. The number of cows has remained relatively constant between 9.1 to 9.4 million cows since 2006 despite the decreasing number of dairy farms. The average herd size grew from 100 cows in 1998 to 234 cows in 2017. With continued cow productivity and fewer dairy farms, the average dairy farm will have over 400 cows by 2030.
However, the average is deceiving because there will likely be very few 400-cow dairies. The conventional dairy farm sector looks like the current organic dairy farm sector with most farms being small, but most of the milk is produced by a few very large farms. In 2012, dairy farms with over 1,000 cows produced half the milk in the U.S. It was estimated that two-thirds of dairy farms with over 1,000 farms produced majority of the milk supply in 2018. Based on these numbers, 80% of the milk in the U.S. could be produced by 2,500 farms by the year 2030.
These large farms are increasingly geographically concentrated. In 2014, one-third of the nation’s dairy cows were located in 25 counties, which is an increase from 20% over the previous 20 years. The top dairy states will likely expand their share to the entire U.S. while other states and regions continue to decline. This will also impact dairy processing and distribution. Can plants in declining milk sheds survive? Where and how will milk move to deficit areas? From a sustainability standpoint, will raw milk, with a high percent water content, be trucked hundreds of miles or will milk be concentrated before hauling? These and other long-term strategic questions need to be addressed by dairy processors and farmers before even larger issues occur.
Can or should the downtrend in dairy farm numbers be stopped? The decline in dairy farm numbers mirrors what’s more broadly happening in farming — the trend towards fewer, larger farms that capture economies of scale, which results in lower cost of production. This drive toward more efficient farming in the U.S. has resulted in a cheap, abundant, and safe food supply. However, it’s come at the cost of losing farms in a ripple effect for rural communities. A large part of the trend is demographic, which will be difficult to change.
According to the latest Ag Census in 2012, the average age of U.S. farmers has grown by nearly eight years over the past 30 years. The average age has gone from 50.5 to 58.3 years. In 2012, there were nearly 20,000 dairy farms where the operator was 55 or older. At some point, those farms will go out of business unless there’s another generation willing to take over. There are many kids from small farms who choose to stay in agriculture but not in production agriculture on the home farm. Where will the next generation of farmers come from? The dairy industry needs to focus on making dairy farming and working at dairy companies more appealing to young people who are looking for a career.
Government policy has been consistently used to try to save small family farms. However, there has been little, if any, noticeable changes in the dairy farms trying to survive as a result of these policies. Two new dairy risk management programs offer hope in slowing the loss of dairy farms: Dairy Margin Coverage and Dairy Revenue Protection. The new and improved Dairy Margin Coverage program in the farm bill will provide a low-cost safety net, and it targets small to mid-size farms. The new Dairy Revenue Protection program is better suited for larger farms, and it offers subsidized premiums for insurance against lower prices. Time will tell if these programs help dairy farms of all sizes stay in business.
How Does This Effect the Overall Industry
Finally, what does the loss of dairy farms mean to the overall industry structure? Large farms might not need dairy cooperatives or federal orders to market their milk if they could have their own plants or direct relationships with processors. Federal orders could become less relevant as the share of milk going to export markets exceeds the amount used for Class I and large farms that increasingly depend on supplying global customers. Fewer dairy farmers could also mean less influence in government policy and regulations.
If the downtrend in dairy farm numbers can be slowed down, it requires a different mindset in how dairy farms and processors operate. The U.S. system needs to shift from a supply-centric focus to producing what customers/consumers want in the U.S. and around the world. Dairy processing plants need to be flexible in order to make a changing variety of value-added products in comparison to static commodities. The U.S. dairy industry can be profitable and sustainable for farms and processors of all sizes. However, it requires a new way of working across the value chain, which will likely not be a quick or easy task.
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Source: CheeseMarketNews.com
