Profits, Costs, and the Changing Structure of Dairy Farming

by James M. MacDonald, Erik O'Donoghue, William D. McBride, Richard Nehring, Carmen Sandretto, and Roberto Mosheim

U.S. dairy production is consolidating into fewer but larger farms. This report uses data from several USDA surveys to detail that consolidation and to analyze the financial drivers of consolidation. Specifically, larger farms realize lower production costs. Although small dairy farms realize higher revenue per hundredweight of milk sold, the cost advantages of larger size allow large farms to be profitable, on average, even while most small farms are unable to earn enough to replace their capital. Further survey evidence, as well as the financial data, suggest that consolidation is likely to continue.

Keywords: Farms, dairy, costs, production, cows, milk prices, structural change, labor, cost advantages, dairy enterprises, dairies, milk, large dairy farms, agricultural productivity, consolidation, farm structure, economies of scale, economies of size, dairy farm

In this publication...

• Entire Report
• Report summary
• Abstract, Acknowledgments, Contents, and Summary
• Introduction
• Changes in the Size and Location of U.S. Dairy Farms
• Scale Economies and Structure in Dairy Farming: Background
• What Can ARMS Tell Us About Scale Economies in Dairy Farming?
• What Do Econometric Estimates Tell Us?
• Using Investment Data To Supplement Cost Estimates
• Effects of Structural Change: Manure and Excess Nutrients
• Conclusions
• References
• Appendix: Data Sources