Fewer Farms, More Milk: The Changing Structure and Costs of U.S. Dairy Farming

Since the 1930s, total U.S. milk production has increased, while the number of U.S. dairy farms has declined. Over the past few decades, fewer, larger farms have produced more milk. Researchers at USDA, Economic Research Service took a close look at the drivers behind the shift using the dairy version of the USDA, Agricultural Resource Management Survey (ARMS) and the USDA, National Agricultural Statistics Service’s (NASS) Census of Agriculture data. They found that the structural change toward larger farms occurred alongside dairy farms’ increased use of advanced technologies and management practices. As dairy farms have increasingly adopted advanced farming practices and grown larger, milk cow productivity has increased, and these larger dairy farms have incurred lower costs of milk per unit produced. However, some farms of all sizes are still finding ways to cover their costs.

Milk Production Has Increased, While Dairy Farm Numbers Have Decreased

U.S. milk production increased by 32 percent from 170.8 billion pounds in 2004 to 225.9 billion pounds in 2024. Part of the increase in production can be attributed to increased U.S. milk cow productivity—the average number of pounds of milk produced per cow in a year. Output increased by 28 percent from 18,960 pounds per cow in 2004 to 24,178 pounds in 2024. However, most of the increased milk production per farm is attributed to increasing farm size, as measured by dairy cows per farm. From 2002 to 2022, the number of dairy farms with fewer than 1,000 cows per farm decreased while the number of farms with 1,000 or more cows increased by 60 percent. Meanwhile, the size of the farms has increased. USDA’s ARMS data showed that U.S. dairy farms increased in size from an average of 112 cows in 2000 to 283 cows in 2021. While the average farm size grew, the number of licensed U.S. dairy herds decreased by 63 percent from 66,825 in 2004 to 24,811 in 2024.

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Changing Dairy Farm Practices and Technology Boost Productivity

Increasing adoption of new technologies and advanced management practices are among factors that have contributed to increasing productivity of cows on U.S. dairy farms. Between 2000 and 2021, advances in genetics, nutrition, and technology increased average milk yields per cow, and the market share of sales coming from farms using those advanced technologies and practices increased.  Some of these technologies may be “scale-dependent” and are better suited to larger farms that need to exceed a minimum size in order to feasibly adopt the technology.

Successive ARMS dairy surveys recorded the adoption rates of several technologies and management practices. These technologies include the use of computerized milking systems to gather data about each milking, while computerized feeding systems may identify individual cows and tailor their feed or regulate feeding times. Producers have adopted certain management practices, such as milking cows three or more times daily instead of the traditional twice-daily practice, or using milking parlors, which accommodate larger herds than more traditional barn milking systems. Breeding programs include practices such as artificial insemination, embryo transfer, and sexed semen. Meanwhile, use of recombinant bovine somatotropin (rbST or rbGH), a once commonly used growth hormone to boost milk production, has dropped drastically as a result of marketing concerns.

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Between 2000 and 2021, the percentage of milk sales coming from dairy farms using computerized milking systems increased from 20 to 45 percent, milking cows 3 or more times daily increased from 19 to 50 percent, use of computerized feed delivery systems increased from 22 to 52 percent, use of milking parlors rose from 70 to 88 percent, and use of advanced breeding technologies climbed from 76 to 96 percent. On the other hand, the percentage of milk sales coming from dairy farms using bovine somatotropin decreased from 35 percent in 2000 to 2 percent in 2021.

Prices, Farm Size Also Among Factors That Drive Dairy Farm Profitability

Depending on the value of the milk produced in a year and prices of milk and inputs, dairy operation revenues have not always covered the expense of milk production. Between 2000–24, feed costs were covered by the average dairy farm in all years. Operating costs, which include feed as well as labor, inputs, and services, were covered by the average dairy farm in all but 2 years, 2009 and 2012. Total operating and ownership costs (related to assets such as buildings, equipment, and insurance) were covered by the average dairy farm in 13 of the 25 years. Total economic costs, which include opportunity costs such as unpaid labor and land, were covered by the average dairy farm in only 4 years. See box at the end of this article for more information about dairy operating and ownership costs.

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Farm size is another factor that can influence costs to produce a unit of milk. Some costs, particularly capital and unpaid labor expenses, as well as the upfront costs of adopting new technologies or practices, can be spread over more output as the farm’s herd size expands. Between 2000 and 2021, total cost per unit decreased as herd size increased. In 2021, for example, the total cost to produce 100 pounds of milk was $42.71 for herds with fewer than 50 cows, while for farms with 2,000 or more cows, the cost was $19.14.

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Still, farm size is not the only thing that affects how much it costs to produce milk. High-cost and low-cost (per unit of milk sold) farms can be found in all size categories, depending on the specific technologies they use, how they manage their operations, what kind of production systems they use, how much they get for products, and what they pay for inputs. Even the environment they are working in can have an effect. Farms that do or do not cover costs can be found in all sizes.

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