Profits, Costs, and the Changing Structure of Dairy Farming

41 Pages Posted: 18 Jan 2008

See all articles by James M. MacDonald

James M. MacDonald

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

William D. McBride

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Erik O'Donoghue

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Richard F. Nehring

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Carmen Sandretto

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Roberto Mosheim

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Date Written: September 1, 2007

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.

Keywords: Dairy farming, economies of scale, economies of size,dairy farm structure, milk costs

Suggested Citation

MacDonald, James M. and McBride, William D. and O'Donoghue, Erik and Nehring, Richard F. and Sandretto, Carmen and Mosheim, Roberto, Profits, Costs, and the Changing Structure of Dairy Farming (September 1, 2007). USDA-ERS Economic Research Report No. 47 . Available at SSRN: https://ssrn.com/abstract=1084458 or http://dx.doi.org/10.2139/ssrn.1084458

James M. MacDonald (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5610 (Phone)

William D. McBride

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5577 (Phone)

Erik O'Donoghue

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5585 (Phone)

Richard F. Nehring

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

Washington, DC 20250
United States

Carmen Sandretto

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States

Roberto Mosheim

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5365 (Phone)

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