With large farms likely accounting for the majority of growth in the coming years, US dairy producers and processors alike should be considering the potential impact of this change. Data going back to indicates that the US dairy industry has seen a steady increase in the average size of dairy farms, as larger operations benefit from economies of scale. According to USDA data, smaller farms have higher costs per cow, and this can hurt profitability.
As a result, investments have been concentrated in larger dairies, leading to higher growth rates and further concentration of US milk production. The total number of US dairy operations has declined by 90 percent since , while the milk produced per operation has increased by 1, percent. Over the last decade, the pace of this trend has picked up speed, as price volatility, higher average prices, and industry changes have made dairy farming more challenging, but also more profitable in some cases.
This is because the profitability of larger dairy farms is driven by economies of scale, which are intrinsic benefits enjoyed by larger dairies and this will not vanish anytime soon. As such, most motivated and successful dairy owners will seek growth as part of their future strategy. At the midpoint, half of all harvested acres of the crop are on larger operations and half are on smaller. In , for example, the midpoint for corn was acres—half of all harvested corn acres was on farms that harvested at least acres of corn, and half was on farms that harvested no more than acres.
The corn midpoint increased in every census after By , it stood at acres. Four other major field crops cotton, rice, soybeans, and wheat showed a very similar pattern: the midpoint for harvested acreage more than doubled for each crop between and , and the midpoints increased persistently in each census year with the single exception of a decline in cotton in We repeated the analysis for 10 more field crops and for 40 fruit, melon, tree nut, and vegetable crops—a total of 55 crops in all.
Consolidation was nearly ubiquitous, as the midpoint increased in 53 of the 55 crops between and Consolidation was also substantial, as most of these midpoint increases were well over percent, and it was persistent, as most midpoints increased in most census years. Cropland accounted for 43 percent of all U. While cropland consolidated into larger farms between and , pasture and rangeland did not, but instead shifted away from the largest farms and ranches and toward smaller operations.
In , farms and ranches with at least 10, acres of pasture and rangeland operated more than half 51 percent of all pasture and rangeland, while those with less than 1, acres held 15 percent. By , the share operated by the largest acreage class had fallen to 44 percent, while farms and ranches with less than 1, acres of pasture and rangeland operated 22 percent.
However, that seeming stability reflects two diverging underlying trends: considerable consolidation in cropland and in crop and livestock production, set against shifts of pasture and rangeland toward smaller operations. Consolidation in livestock production follows a different pattern than that in crops. When it has occurred, it has not unfolded at a steady and persistent rate over time. Instead, livestock consolidation proceeded episodically, with periods of sharp change in the size of operations, followed by stability.
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As in our analysis of specific crops, we tracked midpoints for each livestock commodity across census years. We used a sales midpoint—based on the number of animals sold or removed during a year—for livestock feeding industries like broilers, turkeys, and fed cattle. We used midpoint herd or flock inventory values for egg layers and cows.
Some shifts have been dramatic. For example, the midpoint milk cow herd in was at 80 cows—half of U. By , the midpoint had increased more than tenfold, to cows. Similar dramatic increases occurred in egg layers and in hogs and pigs, as each industry underwent striking changes in organization and farm size. In other sectors like broilers, turkeys, and fed cattle , production shifted to larger operations by , but the shifts were not persistent, and there is little evidence of continuing consolidation in Major reorganizations of those industries occurred earlier, in the s and s, and the later shifts reflected further adjustments.
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One important sector shows little consolidation. The midpoint beef cow herd was at 89 cows in , a bit larger than the midpoint milk cow herd. By , the midpoint beef herd had increased, but only modestly, to cows.
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Beef cow herds, and the calves that they birth, typically graze on pasture and rangeland, which showed no consolidation in the period. Other livestock, such as sheep, goats, and horses, may also graze on pasture and range—but cattle are the major users of what amounts to nearly half of all U. Hence, cattle grazing, and the pasture and range that they graze on, are an important exception to the strong trend toward consolidation in agriculture.
So far, we have focused on specific livestock and commodities, and showed that acreage and production in most have consolidated into larger enterprises. However, most farms are diversified: those with crops almost always produce more than one, and while some livestock producers are specialized, most also grow some crops.
Hence, a complete picture of farm consolidation requires that we look at all products on a farm, which we do by tracking consolidation in farm sales. There is substantial consolidation in farm sales. The broad trend supports the evidence from the crop and livestock measures of a substantial shift of production to larger farms. However, note that much of the consolidation in sales occurred between and , and it appears to have slowed considerably afterwards. This finding is consistent with the slowing of consolidation shown in most livestock sectors, and also with slowing consolidation in some crops.
However, estimates of farm profits derived from ARMS indicate that larger farms continue to realize better financial returns than smaller operations, so we cannot yet conclude that the apparent slowing is more than a pause. Consolidation shows distinct patterns.
Consolidation and Concentration in the U.S. Dairy Industry
It occurred in most crop and livestock sectors, but not in grazing and pastureland and not in the beef cow-calf sector. Consolidation proceeded steadily in crops, and more episodically in livestock, but was not concentrated in any single period.
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Technological developments in agriculture allow a single farmer or farm family to manage more acres or more animals than they could in the s and s, and these developments likely play an important role in consolidation. Specifically, larger, faster, and more precise tractors, planters, sprayers, and harvesting equipment reduce the time a farmer must devote to field tasks on a given acreage, freeing a farmer to manage more acres.
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