America’s dairy farms are bigger in size but fewer in numbers.
According to the recently (2024) released USDA Census of Agriculture, there were 24,082 dairy farms in the U.S. in 2022, down from 39,303 dairy farms in 2017. The authoritative USDA Census of Agriculture is taken every five years. The data was collected in 2022.
What we’re seeing in dairy farming is the rapid acceleration of what’s been a long-term trend – consolidation. ‘Fewer but bigger’ is the phrase that sums up dairy farm operations today.
For example, in 2017, 55 percent of the U.S. dairy herd was on farms with more than 1,000 cows, up from 40 percent in 2007 and 17 percent in 1997. But by 2022, that number grew even larger, declining to 65 percent of dairy cows. In contrast, the percentage of cows on smaller farms (defined as dairy farms with fewer than 100 cows) has dropped from 39 percent in 1997 to 21 percent in 2007, to 13 percent in 2017, bottoming out at a mere 7 percent in 2022.
Most of this consolidation involves the acquisition of operating dairy farms by other dairy farmers or corporations and the construction of new mega-dairies, both of which is where most of the growth in dairy size has and is coming from. Some dairy farmers though have simply gone out of business for economic or other reasons and have sold their farms for non-dairy farming uses.
From a production standpoint, the mega-consolidation of dairy farms hasn’t reduced milk production though. Far from it. Today’s herds are producing around 5 percent more milk than in the past and the number of cows remains about the same at 9.4 million, according to USDA data.
What we have today are fewer but bigger dairy farms, producing as much or more milk than before with around the same number of cows as in the past.
Does Size Matter?
Should we be concerned about the consolidation in dairy farming?
First, let’s take a brief look at dairy farm growth over the last 5 years.
In 2017, the USDA Census of Agriculture reported that there were 714 dairy farms with more than 2,500 cows in the U.S. California, the leading dairy state, had the highest number of large dairies, totaling 198, followed by Texas with 72, New Mexico with 69 and Idaho with 62. However, by 2022, the number of dairies with more than 2,500 cows had climbed to 834, an increase of 17 percent with 120 additional farms.
California has had the strongest growth in dairy farm size with an additional 57 big dairies, bringing the total to 255 in the state. New York added 16 large dairies, while Wisconsin built 14 large operations in the five-year (2017-2022) period. Texas was still second behind California in overall number of large farms with 83, up 11 from 2017. However, New Mexico lost eight big dairies while Idaho had four fewer large operations.
The primary concern of this mega-consolidation is the concentration of milk supply. Because there are fewer and fewer dairy farms, the larger operations are accounting for – and that share will continue to grow – an increasing share of the U.S. Milk supply.
For example, 68 percent of U.S. milk in 2022 was produced on dairy farms with 1,000 or more cows (large operations), which comprise 8 percent of the total number of U.S. dairy farms, according to an analysis of the USDA Agriculture Census data by Rabobank. As recent as a decade ago, larger dairy farm operations produced a far smaller percentage of the nation’s milk; in 2012 55 percent of the milk came from 4 percent of U.S. dairy farms.
Rabobank estimates that more than 46 percent of the U.S. milk supply is produced on the largest 3 percent of dairy farm operations with more than 2,500 cows.
In contrast, dairy farms with fewer than 500 cows represented 86% of total farms but produced just 22% of the milk.
The trend here is clear – consolidation. Although there are still a lot of small dairy farms in the nation, nearly half the U.S. milk supply is produced on a small percentage of total dairy farm operations, all having over 2,500 cows.
The primary concern with consolidation is that fewer diaries, many of which are corporately controlled, are producing an ever increasing percentage of the U.S. milk supply. This has the potential to result in an eventual oligopoly in milk production.
Why Consolidation?
The trend to larger farms is primarily driven by economies of scale, with larger operations able to achieve a lower cost of production, higher margins and greater profitability. According to USDA cost of milk production data, the largest dairy farm operations (more than 2,000 cows each) in 2022 showed the lowest cost of production.
Dairy farm operations with 2,000-plus cows showed total costs at $23.06 per cwt in 2022, sharply lower than smaller dairies’ costs. A dairy farm with 100 to 199 cows had costs nearly $10 per cwt more at $32.83 per cwt. Most of the difference is driven by larger farms’ ability to spread fixed costs over more cows, maximizing scale and capitalizing on efficiencies.
Most smaller independent dairy farms today are struggling because they lack the economies of scale. Solutions include becoming more diversified farming operations or finding a specialized niche that allows them to successfully make a living primarily milking cows.
What’s Next?
The movement to fewer but bigger dairy farm operations will continue in the U.S. It also will vary from dairy state to dairy state, as has been the case.
According to the USDA Agriculture Census, Wisconsin, the number two dairy state after California, experienced the largest decrease in dairy farms between 2017 and 2022, losing a whopping 2,740 diaries. Pennsylvania was second, losing 1,570 farms, followed by New York (1,260) and Minnesota (1,175).
On the other hand, California, the leading dairy state, did much better, losing 275 dairy farms, as did Idaho (100 farms) and Texas (80).
In my analysis, milk production will continue to increase in the U.S., despite the continued decrease in dairy farm count due to the technological advances that have been made in the industry. The new mega-dairies have the ability to achieve massive yields of milk per-cow.
Over the past decade, the U.S. consistently increased milk production nationally, producing 25.3 billion pounds more milk in 2023 than in 2013. The largest growth occurred in Texas, producing an additional 7 billion pounds of milk from 195,000 more cows compared to 10 years ago.
California remains the leading milk-producing state. In 2023, California dairies produced around 226 billion pounds of milk, with an average of 24,117 pounds per cow, which is 30 pounds higher per-cow than in 2022.
Consumer demand for dairy products remains strong in the U.S. and exports of some products like cheese are growing. Increasing economies of scale – getting bigger – is also a trend in other segments of dairy, including processing.
For example, growing consumer demand for dairy, led by cheese, is resulting in more than $5 billion in new dairy plant investments and expansions occurring in the U.S. through 2025.
The largest of those investments are in big cheese plants. New cheese facilities in the Southwest alone are expected to process more than 20 million lbs of milk per day. Experts say that these upcoming developments mark the largest increase in cheese processing capacity ever seen in an 18-month window, and as long as cheese demand continues to grow, the country will need a new large cheese plant about every year.
Big dairy, including big cheese, needs big dairy farming, which is why the trend towards bigger but fewer dairy farms will continue on.
My Job Depends on Ag Magazine columnist and contributing editor Victor Martino is an agrifood industry consultant, entrepreneur and writer. One of his passions and current projects is working with farmers who want to develop their own branded food products. You can contact him at: victormartino415@gmail.com.
