By Lynn Olthof and Kevin Dhuyvetter
Dairy herds with less than 500 cows face economic challenges due to their relative lack of scale. While many such farms remain profitable, difficult decisions emerge when key facilities like a milking parlor become worn out and re-investment is needed. In these situations, smaller dairy farms often face a dilemma: shift to niche marketing or expand the farm. New MSU research explores the most profitable strategies for expansion and has generated a tool for commercial farms to use for their own planning.
Over the last 20 years, there has been steady consolidation within the U.S. dairy industry, resulting in about 40,000 fewer dairy herds in 2023 than 20 years prior (Figure 1). This decline in total herd numbers has been primarily driven by a steep decline in dairy herds that milk less than 200 cows. Many herds within that size range have had to make the difficult decision to either expand to remain competitive, find an industry niche or exit the dairy business altogether. The primary drivers forcing these decisions are the economies of scale disadvantages faced by small dairy producers as the industry has evolved.
As herd size increases, net returns per pound increase while total costs per pound decrease, with fixed costs being spread across a greater number of cows. While the small dairies (< 200 cows) have rapidly declined, the industry has an increasing number of herds milking more than 1,000 cows. Despite the decline in U.S. dairy herds, milk production has increased from about 170 billion pounds of milk in 2003 to over 220 billion pounds in 2023.
Source : msu.edu