By Allison Kaika, NFU Intern
June is National Dairy Month, making it a good time to highlight the important role family dairies play in the global food system, while also reflecting on the economic difficulties that America’s dairy farmers are currently facing. The dairy farm is a cornerstone of American agriculture. Over the years, dairies have proved to be central to rural communities, providing a crucial source of income and way of life for thousands of families.
Millions of Americans, and many people across the globe, enjoy the flavor and nutritional benefits of America’s dairy products. In its many forms, dairy is an important source of vitamin D, calcium, and protein for young children, elderly adults, and everyone in between. Whether it’s a cool glass of milk, a bowl of ice cream, or a melty grilled cheese, dairy remains a staple of healthy diets.
Dairy isn’t just a healthy and delicious food group – it also contributes significantly to the American economy. Reports show that the dairy industry accounts for 1 percent of the U.S. Gross Domestic Product (GDP), generating an economic impact of $628 billion. The industry also creates nearly 3 million U.S. jobs that generate around $159 billion in wages. The significance of dairy to the rural, agricultural economy cannot be overstated.
American dairies provide a vital source of income to rural families. The overwhelming majority of dairy farms are family owned and operated, keeping earnings in rural areas and stimulating the rural economy. The average size of a dairy farm herd is around 250 cows, and farms with fewer than 200 cows account for 87 percent of all dairy farms.
But while America’s family dairy farmers continue to work hard to provide milk, jobs, and a sustainable future for their families, unmanaged milk inventories and unfair prices have made it impossible for most dairy operations to make a profit.
Since the turn of the century, the number of U.S. dairy farms has rapidly declined. From 1992 to 2018, over 94,000 family dairies closed their doors at the rate of 10 dairy farms per day. Unfortunately, this trend has continued at a steady pace. Just in the last year, 2,731 dairy farms went out of business.
Amidst the continuous decline of dairy farms, the production of milk has not slowed. In fact, as demonstrated in the graph below, in the past decade alone, milk production has increased 14.5 percent and milk production per cow has increased 13.5 percent.
Despite important advances in technology, the efficient increase in production per cow has led to an oversupply in the market. This oversaturation has, in turn, driven milk prices well below the cost of production. Without market opportunities, dairy farmers are forced to grow their operation or go out of business.
In 2018, the average national value of milk production per hundredweight was $3.10 less than total costs of production, leaving many dairy farmers without the option to continue farming. Over the past decade, the average dairy farm net income was negative in all but one year. At times, it even dropped a shocking $7.17 per hundredweight below the total cost of production.
Current profit margins for dairy farmers are obviously unsustainable. In an attempt to improve their margins, many dairy farms have increased their production size and new mega-dairies have opened. As of 2017, operations with more than 2,500 cows account for just 1.3 percent of dairy farms but claim a whopping 35.3 percent of the total value of milk production. As the industry becomes increasingly consolidated, family dairies are at an even further disadvantage in the marketplace.
National Farmers Union (NFU) has long advocated for America’s dairy farmers. As the gap in profit and cost widens and competition wanes, NFU continues to support the creation of a long-term supply management program to balance milk supply and demand. Without a management system in place, chronic oversupply will continue to depress prices.
To address these issues, NFU’s members passed a Special Order of Business at the organization’s 2019 convention. The order proposes the establishment of an incentives-based inventory management program grounded in market demand and pricing stability. To implement this program, NFU recommends instituting a farmer-led plan to establish fair milk prices based on cost of production and retail prices for dairy products.
The economic challenges faced by dairy farmers must be addressed. As America appreciates milk, yogurt, cheese, and more during dairy month, NFU also reminds our policy makers of the dire need for reform in the U.S. dairy system.
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Can milk surplus be turned into powdered milk and/or baby formula when there is too much? It can be stored and stockpiled.
yes, sure but consume this milk or milk products fresh as much as possible.
Yes it can, but if you do that it is dumped back into the market when prices improve, thus depressing the price recovery. It is best to export our surplus as best we are able. Our abrupt withdrawal from our Trade Agreements such as NAFTA and the Trans Pacific Partnership have really hurt us and have signaled to those trading partners that we are not a reliable source of dairy products.
Creating a supply Management program is a terrible idea. It is socialist beyond belief. we need to allow true supply and demand to work which is what’s happening now with the dairy production industry. Artificially propping up the dairy production industry is a very bad idea we need to allow free competition to reign the industry. Dairy Farmers need to get rid of the federal milk marketing order system which is basically a minimum price or in other words a minimum wage being paid. when everybody knows what price you’re being payed why would they want to pay more? Ask for more money based on value of the product that you’re selling. We need less government in the dairy industry not more. That is the only way it will survive.
Jackie Schmidts – Finally! You are absolutely right!!! I would like to share some thoughts/ideas with you if you are interested. email me at thymetofarm at gmail
I’m curious – would dairy farms be considered highly efficient and lean? Is data technology well-deployed to reduce waste and point out inefficiencies?
I have small dairy in Lahore Pakistan wanted to join hands with you guys to develop on commercial setup Under the leadership deer Rahim of NFU
Need to go back to the days when the dairy industry had a base for GRADE A milk.Big dairies are all run on the theory they make jobs and get the government to help build them and give them tax breaks,small dairies don,t get that. I milk cows for 56 years and on August 23 DFA quit picking my milk up because I couldn’t.t comply with European standard,which which is stricter than US D A standard..I never sold bad milk one time in 56 years,DFA don,t need milk from small producers any more,they got one in western Kansas producing a 1000000 lbs a day,but sportscaster money.
Every Industry has a supply chain. Dairy is no exception.
Instead of looking into price support mechanisms. Look at the value chain.
Maybe A new industry business model needs to be developed.
The supply/value chain needs to have Anchor Companies. Be they large farms, Big mid stream Processors, or massive downstream wholesalers.
Anchor Companies strengthen the weak links in the chain and provide support to participants in the chain.
A list of functions include credit, marketing services, farm management, farming contracts, online/realtime biddings, payment gateway, farm inputs, IOT, supply chain platform using blockchain.
I have developed this model.
Simple supply and demand,The same reason we don’t prop u covered wagon manufacturing.Move on
I would like to say that I am interested in dairy farming and can develop new market with good quality product. If any one is intrested can contact me.
This article is really interesting and leaves me wanting more. I’m writing a paper about the decline of dairy farms since the 70’s and the rise of organic farms since the 70’s and how they correspond. If anyone here would be able to help me, it would be good to use arguments and reasoning straight from dairy farmers and organic farmers. Email me if you can help. Thank you.
If you are raising big steers and feeding them for shipping, I’ve found that these guys can consume huge amounts of milk, which they never turn down. It really helps pack on the pounds more efficiently than feeds alone, and no antibiotics. This is a helluva great way to use excess milk without dumping. At least you can regain some of the loss from your milk by shipping those fattened steers ready for slaughter and get top prices. I used to do this when our cows produced more than what the bulk tank could hold, and I started bringing 5 gallon buckets to their water trough and started pouring. They literally stampeded to be the first to get the most. I shipped them to the Minneapolis/St.Paul stock yards and got top prices for my steers. They were usually bought up by buyers like Campbells, and geez, it was so long ago that I can’t remember who else bought them. Anyway, just sayin, it’s a great way to use up excess milk. You WILL get paid for your milk when you ship your steers.