A Few Decades of Change in Milk Production

A Few Decades of Change in Milk ProductionMark Stephenson, Ph.D.Director of Dairy Policy AnalysisMark Stephenson, Ph.D.Director of Dairy Policy Analysis

A Tale of Three StatesA Tale of Three StatesMillions of Pounds of MilkMillions of Pounds of Milk

Retail ConsolidationRetail Consolidation

• Major retailers consolidating– Kroger– Albertsons– Safeway– Ahold

• Walmart factor, club stores

• Large food service buyersFewer buyers force change on suppliers

• Major retailers consolidating– Kroger– Albertsons– Safeway– Ahold

• Walmart factor, club stores

• Large food service buyersFewer buyers force change on suppliers

U.S. Number of Dairy Plants

Cooperative Numbers

Cooperative Share by Region

CooperativesCooperatives• Top 10 -Top 10 -19941994

– AMPI (15.7) B. lbs.)AMPI (15.7) B. lbs.)

– Mid-America (8.9)Mid-America (8.9)

– Cal Milk Prod (6.1)Cal Milk Prod (6.1)

– Farmers Union (5.5)Farmers Union (5.5)

– Dairygold (5.0)Dairygold (5.0)

– Land ‘O Lakes (4.0)Land ‘O Lakes (4.0)

– MMI (3.8)MMI (3.8)

– Dairymen Inc (3.6)Dairymen Inc (3.6)

– Atlantic (3.6)Atlantic (3.6)

– DCCA (3.5)DCCA (3.5)

• Top 50 -- 111 B lbsTop 50 -- 111 B lbs

• Top 10 -Top 10 -20122012– DFA (39 B. lbs.)DFA (39 B. lbs.)

– Cal. Dairies (16.8)Cal. Dairies (16.8)

– Land ‘O Lakes (13)Land ‘O Lakes (13)

– Northwest Dairy (7.9)Northwest Dairy (7.9)

– Dairylea (6.3)Dairylea (6.3)

– Family Dairies (5.9)Family Dairies (5.9)

– AMPI (5.8)AMPI (5.8)

– Foremost (5.7)Foremost (5.7)

– Manitowac (5.1)Manitowac (5.1)

– Select (4.2)Select (4.2)

• Top 50 -- 154 B lbs.Top 50 -- 154 B lbs.

Milk per CowMilk per Cow

Milk per cowMilk per cow

Milk per cow has grown 281 lbs per cow per Milk per cow has grown 281 lbs per cow per year—roughly 2% per year.year—roughly 2% per year.

About half of yield efficiencies is attributable About half of yield efficiencies is attributable to genetic gains and half to managementto genetic gains and half to management

Population growth has been roughly 1% per Population growth has been roughly 1% per year.year.

Yield growth has outpaced demandYield growth has outpaced demandImplies fewer cows are neededImplies fewer cows are needed

Number of Cows

Cow LossCow Loss

Most farms have not reduced cow numbersMost farms have not reduced cow numbersIndeed, new technologies, like the bulk Indeed, new technologies, like the bulk tank, artificial insemination, TMRs and rBST tank, artificial insemination, TMRs and rBST have encouraged farms to explore returns have encouraged farms to explore returns to scale.to scale.

We have been losing farms to adapt to We have been losing farms to adapt to increased efficienciesincreased efficiencies

Number of Dairy FarmsNumber of Dairy Farms

Production Growth is in Production Growth is in the Large Herdsthe Large Herds

Change in Milk DensityChange in Milk Density

Times, They are a Changin

Different Business Models

“Traditional” Dairy Farm

Own enough land to grow forages house and milk cows and spread manure.

Smaller average number of cows per farm.

Somewhat larger average milk price.

Lower variable costs—higher fixed costs of production.

“Western-Style” Dairy Farm

Own enough land to store feed and house and milk cows.

Larger average number of cows per farm.

Somewhat smaller average milk price.

Higher variable costs—lower fixed costs of production.

Three Kinds of Growth

Stable cows but increases in milk per cow

Moderate, maybe lumpy, growth in cow numbers on existing farms

Explosive growth with new dairy operations