The size of the average dairy farm is growing as consolidation drives greater concentration of production across many different regions with significant dairy production.
A USDA study found that the midpoint size of dairy herds in the U.S. has grown from 80 cows in 1987 to 1,300 cows in 2017, a trend that demonstrates a steady pace of consolidation which “far exceeds the pace of consolidation seen in most of U.S. agriculture.”
The study by USDA's Economic Research Service states that by 2017, nearly 2,000 of the 54,599 farms with milk cows had herds of at least 1,000 cows. On the other end of the spectrum, 30,373 of these farms had herds ranging from 10 to 199 cows, but the number of these small commercial dairies has fallen from 47,873 in 2007, and from 146,685 in 1987.
“There are powerful cost incentives behind farm consolidation,” the report states. “Larger dairy farms have substantially lower costs of production, on average, than smaller farms. The cost advantage appears to extend across a wide range of larger sizes, on farms with 2,000 cows realizing lower costs than farms with 1,000 cows, which in turn realize lower costs than farms with 500 cows.”
In particular, farms may choose to incorporate for tax purposes. That way, they can limit the amount of liability they may face or transfer the farm between generations. Nearly half of dairy farms with at least 1,000 cows have registered as limited liability corporations, the report stated.
In 2018, California led the nation in the number of dairy cows with 1.734 million. Wisconsin and Idaho followed with 1.274 million and 609,000, respectively.
The decline in small commercial dairy farms is mostly concentrated in Minnesota, New York, Pennsylvania and Wisconsin, but also is occurring in several states in the Northeast and Midwest, the report says. These states have traditionally had smaller operations that relied on family labor, grazing in pastures and combining milk and feed production on the farm. There were 35,153 dairy farms in these states, but only 20% of the farms in these states had herds of 1,000 cows or more.
The report states that between 2002 and 2019, the number of licensed dairy herds fell by more than 50%. This rate of decline accelerated between 2018 and 2019, despite a growth in milk production.
While more farms have consolidated and grown larger herds, many of these farms are still relatively small family businesses.
“While a dairy farm with $15 million in sales counts as a very large farm, it is not a particularly large business, as there are tens of thousands of U.S. businesses with higher sales,” the report stated.
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Over 90% of farms with 1,000 to 1,999 cows were family farms, as well as almost 88% farms with 2,000 or more cows. The Economic Research Service defines a family farm as being more than half owned by the principal operator and people related to the operator.
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