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Profits, Costs, and the Changing Structure of Dairy Farming

Author

Listed:
  • MacDonald, James M.
  • O'Donoghue, Erik J.
  • McBride, William D.
  • Nehring, Richard F.
  • Sandretto, Carmen L.
  • Mosheim, Roberto

Abstract

U.S. dairy production is consolidating into fewer but larger farms. This report uses data from several USDA surveys to detail that consolidation and to analyze the financial drivers of consolidation. Specifically, larger farms realize lower production costs. Although small dairy farms realize higher revenue per hundredweight of milk sold, the cost advantages of larger size allow large farms to be profitable, on average, even while most small farms are unable to earn enough to replace their capital. Further survey evidence, as well as the financial data, suggest that consolidation is likely to continue.

Suggested Citation

  • MacDonald, James M. & O'Donoghue, Erik J. & McBride, William D. & Nehring, Richard F. & Sandretto, Carmen L. & Mosheim, Roberto, 2007. "Profits, Costs, and the Changing Structure of Dairy Farming," Economic Research Report 6704, United States Department of Agriculture, Economic Research Service.
  • Handle: RePEc:ags:uersrr:6704
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    File URL: http://purl.umn.edu/6704
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    References listed on IDEAS

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    1. Tauer, Loren W. & Mishra, Ashok K., 2006. "Can the small dairy farm remain competitive in US agriculture?," Food Policy, Elsevier, vol. 31(5), pages 458-468, October.
    2. McBride, William D. & Greene, Catherine R., 2007. "A Comparison of Conventional and Organic Milk Production Systems in the U.S," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9680, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Gollehon, Noel R. & Caswell, Margriet & Ribaudo, Marc & Kellogg, Robert L. & Lander, Charles & Letson, David, 2000. "Confined Animal Production And Manure Nutrients," 2000 Annual Meeting, June 29-July 1, 2000, Vancouver, British Columbia 36382, Western Agricultural Economics Association.
    4. Ribaudo, Marc & Kaplan, Jonathan D. & Christensen, Lee A. & Gollehon, Noel R. & Johansson, Robert C. & Breneman, Vincent E. & Aillery, Marcel P. & Agapoff, Jean & Peters, Mark, 2003. "Manure Management For Water Quality Costs To Animal Feeding Operations Of Applying Manure Nutrients To Land," Agricultural Economics Reports 33911, United States Department of Agriculture, Economic Research Service.
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    Citations

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    Cited by:

    1. McBride, William D. & Greene, Catherine R., 2009. "Characteristics, Costs, and Issues for Organic Dairy Farming," Economic Research Report 55952, United States Department of Agriculture, Economic Research Service.
    2. Richard J. Volpe & Timothy A. Park & Fengxia Dong & Helen H. Jensen, 2016. "Somatic cell counts in dairy marketing: quantile regression for count data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 43(2), pages 331-358.
    3. O'Hara, Jeffrey K. & Benson, Matthew, 2017. "Local Food Production and Farm to School Expenditures," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252669, Southern Agricultural Economics Association.
    4. MacDonald, James M., 2011. "Why Are Farms Getting Larger? The Case Of The U.S," 51st Annual Conference, Halle, Germany, September 28-30, 2011 115361, German Association of Agricultural Economists (GEWISOLA).
    5. Peter Slade & Getu Hailu, 2016. "Efficiency and regulation: a comparison of dairy farms in Ontario and New York State," Journal of Productivity Analysis, Springer, vol. 45(1), pages 103-115, February.
    6. Key, Nigel D. & Sneeringer, Stacy & Marquardt, David, 2014. "Climate Change, Heat Stress, and U.S. Dairy Production," Economic Research Report 186731, United States Department of Agriculture, Economic Research Service.
    7. Rodrigues, Jonathan & Baker, Gregory A., 2012. "Grameen Danone Foods Limited (GDF)," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 15(1).
    8. Nehring, Richard & Sauer, Johannes & Gillespie, Jeffrey & Hallahan, Charlie, 2016. "United States and European Union Dairy Farms: Where Is the Competitive Edge?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 19(B).
    9. Wang, Qingbin & Thompson, Ethan & Parsons, Robert, 2015. "Preferences for Farmstead, Artisan, and Other Cheese Attributes: Evidence from a Conjoint Study in the Northeast United States," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 18(2).
    10. Wolf, Christopher A. & Tonsor, Glynn T., 2013. "Dairy Farmer Policy Preferences," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), August.
    11. Ifft, Jennifer & Patrick, Kevin & Novini, Amirdara, 2014. "Debt Use By U.S Farm Businesses, 1992-2011," Economic Information Bulletin 165912, United States Department of Agriculture, Economic Research Service.
    12. Key, Nigel D. & Sneeringer, Stacy E., 2011. "Carbon Emissions, Renewable Electricity and Profits: Comparing Alternative Policies to Promote Anaerobic Digesters on Dairies," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103440, Agricultural and Applied Economics Association.
    13. repec:oup:revage:v:31:y:2009:i:2:p:284-302. is not listed on IDEAS
    14. Wenjie Wang & Chuanrong Zhang & Jenica M. Allen & Weidong Li & Mark A. Boyer & Kathleen Segerson & John A. Silander, 2016. "Analysis and Prediction of Land Use Changes Related to Invasive Species and Major Driving Forces in the State of Connecticut," Land, MDPI, Open Access Journal, vol. 5(3), pages 1-22, July.
    15. Sneeringer, Stacy E. & Hogle, Regina, 2008. "Variation in Environmental Regulations in California and Effects on Dairy Location," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
    16. Mayen, Carlos D. & Balagtas, Joseph Valdes & Alexander, Corinne E., 2009. "Vertical Economies of Scope for Organic and Conventional Dairy Farms in the United States," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49409, Agricultural and Applied Economics Association.
    17. Lips, Markus, 2014. "Calculating full costs for Swiss dairy farms in the mountain region using a maximum entropy approach for joint-cost allocation," International Journal of Agricultural Management, Institute of Agricultural Management;International Farm Management Association, vol. 3(3), April.
    18. Nehring, Richard F. & Vialou, Alexandre & Erickson, Kenneth W. & Sandretto, Carmen L., 2008. "Assessing Economic and Environmental Impacts of Ethanol Production on Fertilizer Use in Corn Production," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6736, Southern Agricultural Economics Association.
    19. Bor, Özgür, 4. "Economics of Dairy Farming in Turkey," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(4).
    20. Monge, Juan J. & Bryant, Henry L. & Gan, Jianbang & Richardson, James W., 2016. "Land use and general equilibrium implications of a forest-based carbon sequestration policy in the United States," Ecological Economics, Elsevier, vol. 127(C), pages 102-120.
    21. An, Henry, 2008. "The Adoption and Disadoption of Recombinant Bovine Somatotropin in the U.S. Dairy Industry," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6278, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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