Dairy farms in the US are consolidating at a faster rate today than any other agricultural commodity. And it isn’t only happening on the farm itself. A recent BULLVINE article addressed consolidations in dairy sire lineups. “Many of the smaller A.I. units have been purchased by larger genetic players and the rate of change has accelerated considerably. (see Stud Wars May ’21 – Attack of the Clones). Obviously consolidation is not a new phenomenon in a single aspect of the dairy industry. But, in the interest of what is most desirable, let’s look at dairy farms from the perspective of size.
AMERICAN DAIRY SIZES AND PRODUCTION
There are many ways to gather actual statistics about the current size of dairy farms and how many cattle each herd sector is milking. These statistics have been reported by USDA 2019?
- In 1987 the average US herd size was 80 milk cows.
- In 2017 the midpoint in herd size had reached 1300 cows
- Currently US herds of 1000 and more cows represent 58% of US dairy cows
- US herds 1000+ cows produce 62% of total national production.
- Between 2002 and 2019 more than half the licensed US dairy herds exited the industry.
- Herds over 2000 milk cows have the highest on average net returns
In simplest terms, less than 6% of dairy farms are milking almost 60% of the total number of cows. At the top end of the scale, the average herd size is more than 3,000 cows. The total number of cattle is not getting smaller even as the total number of farms is dropping dramatically.
REDEFINING the ACCEPTABLE ROOTS of LARGE AND REDEFINING WHAT IS SMALL
What is large? What is small? Grandma’s small dairy farm worked sunrise to sunset providing for a specific group of people … the farm family. Today’s dairy farm with the goal of supporting a family also works 24/7 but now must provide money for food, clothing, school fees, sports fees not only for the immediate family but also to provide milk products for 100 people. No matter what they physical size of the dairy is cash flow must be found for feed, labor, housing and replacements. Even beyond size, location and infrastructure could also be a limiting factor. When deciding whether to sell or consolidate, real estate values could be a major determining factor. Are generations of investment going to be reduced to nothing through mortgage payments or will it be cashed in for retirement? What door closes first? Labor? Cash flow? Feed? Animal health?
GLOBAL PROJECTIONS ALSO COME IN MANY SIZES
Wherever you are reading this from, you can most likely point to trends which are defined by fewer dairy farms of larger sizes. Even in North America it is unrealistic to say that one situation applies in exactly the same way to the USA, Canada and Mexico. South America, Asia and Europe are going through the same reshaping process. The basic point is that dairy industry consolidation is global and complicated. Causes, effects, sizes and methods cannot be simplified into one easily explained phenomenon such as milk prices or national supply and demand.
FAMILY FARM OR FACTORY FARM?
We are aware of the discussions about differences between historically revered family farms and factory farms which are reviled by many. Are the two mutually exclusive?
We could dismiss those who uphold historical family farms because we recognize that their position is driven by handed down memories and not actual facts or experience. We all value our historical roots. What is becoming a hurdle is that there are new perspectives on the value of “large”. If everything large is put into one basket, we find large entertainment, large populations and large politics all jostling together and impacting our positive or negative experience of our life choices. Large farms gather from the negative
DOES SIZE ALONE INVALIDATE FAMILY FARMS?
Can we factually determine at what size a family farm becomes a factory farm? If large families require larger dairy operations, does the term family farm not apply? If the owners of a large dairy do not have multiple family generations sharing management is that dairy, regardless of size, a factory farm?
Modern dairy provides the opportunity to move beyond labels and stories. The challenge is to move toward well-considered value-added food production while avoiding misguided milk production massing.
WHAT DO FUTURE DAIRY FARMS LOOK LIKE? THE PROS & CONS OF CONSOLIDATION
When considering the pros and cons of dairy consolidation there is not a clear winner. The oft repeated conclusion is that successful large, consolidated farms will be more efficient in terms of producing milks solids. They will achieve this by carefully incorporating generations of dairy knowledge, by themselves or others, into active present-day decision making. Is dairy muscle memory an absolute requirement for dairy success?
You might ask, “Does every consolidated dairy farm have more than one generation of farming experience? Do any have five generations?” These are interesting questions, but the answers don’t, by themselves, impact the success or failure of consolidated dairy farms. Mutual respect, teamwork and diversity of generations and workers does make a difference. New players have the opportunity to access and enact successful processes. Most important is knowing on a dairy farm to dairy farm basis what the limiting factors are.
LABOR SHORTAGE HITS DAIRY REGARDLESS OF SIZE
When small farms give in or give up, what drives the final decision? In many cases, it comes down to people – specifically the people needed to do the work. Dairy isn’t alone in facing the devastating impact that happens when it is impossible to find accessible and effective labour. Choices between the family business and the future success of the next generation are difficult if not impossible to choose between. Demanding work schedules and physically demanding jobs mean that fewer people are choosing dairy work. Add to this that there is limited access to educational opportunities for farm workers. At a basic level, it may come down to individual preferences for living near larger urban communities with greater access to infrastructure such as Internet access, health services, entertainment, schools, and shopping.
However, jumping to farm consolidation does not automatically provide the solution to labor problems. Housing, health care, education and transportation problems continue to loom large. Additionally, are the problems of local and federal regulations regarding immigration and, as the pandemic has highlighted, no dairy farm can operate in isolation from the health and welfare of the local community.
SEEN AND UNFORESEEN CONSOLIDATION CHALLENGES
Problems of law, labor, land, water, and energy can be foreseen, negotiated, and planned for. However, unforeseen forces also can impact consolidation plans. Something as simple as the price of lumber, which has been rising exponentially, has an effect on implementing or maintaining consolidation effectiveness. Also largely unforeseen are the extreme disruptions from freezing, floods, drought and fires. The dairy industry has daily reliance on nature and environment in order to meet the demands of consumers and to improve sustainability of its production ecosystems. No matter what size your dairy operation is, you must be able to produce 24/7.
MIRED IN MILK, MONEY, AND POLITICS
And so, we realize that consolidation does not boil down to a simple “either” “or” decision. It is all to easy to get mired in milk, money and politics. When does the cash cow of dairying become the barn lane cash out? If only it was as easy as the slogan, “Buy American.” Unfortunately, dairying like thousands of other industries, does not exist in a vacuum. Until every single product, nutrient, health product or piece of equipment is produced in the US. there is need for three things: global partnerships; consumers and money.
Even imagining a perfect world where these inputs are being handled, the cash implications of dairy overproduction are very real right now and must also be addressed. Too much milk affects every producer. Even in countries with supply management, the political ramifications in trade discussions, consumer rights and agricultural negotiations changes money margins on the farm and can be used as a political pawn. For example, it is recognized that supply management protects producers. What isn’t often talked about is the way supply management may protect exit from the dairy industry, but also the way it inhibits entry. Politically decision makers also walk a fine line between determining dairy industry relevance based on too big, too small, or too independent. While focused on elections and re-elections an entire industry could evolve into shrinking relevance.
DIGITAL APPLICATIONS AND CONSOLIDATION – Grow or Go?
Regardless of the size of the dairy operation, effective production relies on veterinarians, nutritionists, and agronomists to name just three sources outside the on-farm team. Today we need developers of digital applications to integrate data points. Effective dairy management absolutely requires the ability to visualize the best way to improve decision making. Without new applications, dairies face years of in-fighting over the same problems. The opportunity provided by digital applications is that of creating outstanding dairy solutions to what have been oft-repeated problems. Will we fight for the status quo until the last puff of paper and pencil files spell “Closed”? At some point, the larger dairies begin to question why they must carry all the technology and research and development. Is there mutual benefit? Regardless of size is it possible to navigate change faster, while being more inclusive
EFFECTIVE INDUSTRY OR DREAM ENVIRONMENT WANTED BY CONSUMERS
Effective is possible in many sizes. But the key to effectiveness does not rely on size alone. An informed consumer has been shown to be able to make food choices outside of personal experience with the production process. Growth industries built on an intimate purchasing experience such as is found within focused sales locations selling predominantly one beverage – think coffee or smoothies – highlights that the product not the size of the company, can be embraced by the consumer. The question is, “Why do consumers feel they know how the dairy industry should be run. Their long past memories influence what they think it should look like. And driving all of these is the question of “What convinces people to make a beverage choice?”
COMMUNICATIONS & MEDIA – “Look who’s Talking”
We are well beyond the time or place where a simple answer can be summed up in a few words. But open conversations will get us to a new dairy future. And this brings us to dairy communications and the media. We need ag communicators to reach out and make real connections with the new generation of consumers. Continued viability means that the dairy industry needs robust support from consumers and, therefore, dairy must tell the dairy product story with provable facts and transparency. Consumers need information which is based on integrity and real industry skill and development. We cannot stay locked in dated dairy – whether it is our own dairy or wrapped up in consumer long-ago memories. Equally worrisome is the danger of simply changing everything to something new and different. Designer Dairy may be successful, but it must be built on healthy, competitive, and sustainable products.
BULLVINE BOTTOM LINE – Where does it end?
The dairy industry of the future will not succeed if decisions are solely based on size. The dairy industry of the future will not succeed, if decisions are based solely on sentimentality. In dairy consolidation, the whole is greater than the sum of its many dairy parts. A relevant dairy farm must be actively engaged with suppliers, professionals, local communities and consumers. It is time to decide if dairy industry totals are temporarily readjusting or being permanently left behind.