The Evolution Of The Dairy Industry
The Consolidation in U.S. Dairy Farming report, published by the U.S. Department of Agriculture in July 2020, describes the dairy industry’s long-term transition away from many farms with fewer cows each, towards fewer farms with many cows each. Since the 1980s, small family-style farms have rapidly given way to much larger, more intensive operations — also known as factory farms — that produce more milk with lower production costs at the expense of animal and environmental welfare. Though smaller farms are hindered by low profits and an aging farmer population, government subsidies and factory-style farming have kept the industry afloat.
The number of licensed commercial dairy farms in the U.S. has been steadily decreasing for several decades. From 2002 to 2017, the number of dairy farms decreased at a rate of about 4% per year. Since 2017 this rate has accelerated, with a 6.8% reduction between 2017-2018 and an additional 8.8% reduction between 2019-2020. At the same time, total milk production in the U.S. has grown. Between 1987-2017, the total number of U.S. dairy farms decreased by approximately 75% while total milk production increased by approximately 50%. Meanwhile, dairy herd sizes have grown tremendously. In 1987, the median number of cows per dairy farm was 80. Thirty years later this median rose to 1,300, meaning that in 2017, 50% of dairy cows lived in herds with 1,300 or fewer cows and the other 50% lived in herds with 1,300 or more cows. In fact, some intensive dairy farms today have significantly larger herds consisting of 25,000+ cows.
The report also provides details on regional trends. Dairy production has become more concentrated in specific geographic locations, with just 21 states handling over 90% of U.S. milk production. Of these 21 states, 10 are Western states (e.g. California, Colorado) and 11 are Eastern states (including the Midwest and Northeast; e.g. Illinois, New York). Moreover, just two states — California and Wisconsin — accounted for a third of U.S. milk production in 2018. Western states tend to have larger, more intensive dairy operations compared to Eastern states. As dairy operations have become more intensive on the whole, the share of dairy produced by the West has likewise increased. As of 2017, 48% of U.S. dairy was produced in the Western states, compared to 46% in the Eastern states and just 7% in other parts of the U.S.
The intensifying geographic concentration of dairy means that manure is concentrated into smaller areas, leading to greater water and air contamination in local communities. Furthermore, intensive dairy operations tend to be more mechanized and worse for animal welfare. Compared to farms with 10-49 dairy cows, intensive dairy operations with 2,000+ cows are more likely to: milk their cows three times daily (61.5% vs. 0.0%); use artificial insemination (95.1% vs. 64.3%); use computerized milking systems (41.3% vs. 0.3%); and use computerized feed delivery systems (67.8% vs. 0.4%). Furthermore, 96.1% of farms with herd sizes of at least 2,000 cows confine them in barns and lots, rather than allowing them to graze on grass outdoors. In fact, as of 2016, 80% of all U.S. dairy cows were raised without the opportunity to graze on grass, regardless of the farm’s herd size.
As with any business, the dairy industry is shaped by national and international economic factors. Over time, fluctuations in milk prices have become more dramatic. Fluctuations can be caused by changes in foreign demand for U.S. dairy products, changes to foreign dairy policies, and/or changes in U.S. incomes and population size. Larger farms tend to use mechanized, factory-style processes to maximize profit. As a result, larger farms tend to earn larger net returns compared to smaller farms, making larger farms less vulnerable to unstable milk prices. Among small dairy farms, low net returns are more common than not. For example, in 2016, 84% of farms with 10-49 cows and 76% of farms with 50-99 cows failed to earn enough revenue to cover cash expenses and the opportunity costs of their own labor.
Despite the widespread lack of profits in smaller farms, many dairy farms are slow to close down. Farms can continue operating as long as they are able to pay for immediate expenses, even if they cannot pay off their initial investments or afford regular maintenance of their equipment. Some farms supplement their income by allowing visitors (agrotourism) or selling calves and heifers. Many dairy farms also benefit from federal subsidies, including the Bipartisan Budget Act of 2018 and the 2018 Agriculture Improvement Act. However, dairy farmers are an aging population, with the average age rising from 49 in 2000 to 54 in 2016. As current dairy farmers near retirement, more small dairy farm closures are on the horizon.
In sum, the dairy industry has changed considerably in the 21st century. Larger, more profitable factory-style farms featuring more cows, mechanized procedures, and no grazing are edging out smaller dairy farms. It is interesting to note that this report does not mention consumer pressures from the rise of plant-based milk or social pressure from animal rights advocates as drivers of dairy farm closures. Rather, the causes of dairy consolidation are largely attributed to other economic factors, especially the greater profitability of intensive large-scale dairy farms. Similarly, the data focuses on conventional, non-organic dairy farms.
Animal advocacy organizations may choose to adapt their strategies based on this information. For example, they can lobby to shift federal dairy subsidies towards plant-based alternatives or cultivated dairy made without cows. They may also consider building bridges with small farmers, who are already facing economic pressure from dairy consolidation, by helping them transition to careers outside of animal agriculture. Finally, the image of family farms with small herds of cows lazily grazing on grass does not reflect modern dairy operations. By making the public aware of this, advocates can push for policy support to limit herd sizes, mandate grazing opportunities, and other efforts to prevent further intensification.