Large Dairy Farms Had Positive Net Returns 10 of Last 14 Years

August 19, 2020

Jim Dickrell

Analysis by USDA’s Research Service (ERS) shows large dairy farms, those with 1,000 cows or more, had positive net returns in 10 of the last 14 years.

“In every year between 2005 and 2018, average net returns increased with herd size and returns for herds of 1,000 head or more exceeded those for all other herd sizes,” say ERS economists in their report, “Consolidation in U.S. Dairy Farming.”

“While net returns fluctuate from year to year, farms with 1,000 head or more generated positive net returns of $1.12/cwt on average between 2005 and 2018,” say the ERS economists. In contrast, the smallest herd sizes (50-99 head and 100-199) never covered their total costs and thus had negative net returns over the same period.

The difference is the cost of making milk, with large farms have a tremendous advantage. The biggest driver is labor costs, with smaller farms struggling to cover unpaid family labor contributions.

“While some farms in each size class realize positive net returns, these class averages indicate that most small and midsize farms face persistent financial pressures,” say the economists. This, in turn, has led a structural shift in the U.S. dairy industry, with more and more cows being concentrated on large dairy operations.

milkbusiness.com