U Of Illinois Ag Economists Issue Report Showing Trends In The Dairy Sector

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By Jared Hutchins and Joe Janzen, Department of Agricultural and Consumer Economics, University of Illinois

US dairy production has changed substantially in the past two decades. Milk production has increased as both the number of dairy cows and the milk yield per cow in the US has grown. In this article, we break down production trends in US dairy. Production gains in the past two decades are the result of markedly different growth strategies across regions. We consider what these regional growth trends mean for future dairy production decisions.

Our analysis focuses on the fifteen states with the most dairy cows. We distinguish between “traditional” dairy states with small herd sizes and a long history of dairy production and “modern” dairy states with large herds where the dairy sector has only recently reached its current scale. While each region comprises a roughly equal share of total US milk production, traditional and modern dairy states have grown in very different ways. Most production growth in traditional dairy states comes from rising milk yield. Modern dairy states have grown production by increasing both milk yield and the total number of cows.

As US dairy cow numbers have started to level off, it is possible that there are limits on how much the total US herd can grow. Constraints on the scale of dairy production may have hit dairy farms in traditional dairy states first, leading those farms to focus on growing yield through improvement in management and genetics. This trend may play out in modern dairy states in coming years.

The Location of US Milk Production

Our data on state-level milk production comes from the USDA National Agricultural Statistics Service Milk Production survey which measures milk production, cow numbers, and milk yield by state each month. Milk production is seasonal and this seasonality varies across regions, so we present data at annual frequency. NASS also collects data on the number of dairy farms which allows us to calculate average herd size. Figure 1 highlights the location of the top 15 dairy states by number of dairy cows. States where the average herd size is less than 500 cows are shown in blue, and those with more than 500 cows per herd are in orange. The locational contrast is stark; states with small herds are entirely in the Midwest and Northeast. In contrast, dairy states in the West all have substantially larger herds with nearly all having an average herd size above 1,000 cows.

Dairy farming has a long history in the Midwest and Northeast because dairy production tended to be located in cooler climates, whereas dairy farming in relatively hot and arid states is a more recent phenomenon. For this reason, we term the small-herd, Midwest and Northeast dairy producing states in Figure 1 as “traditional” and the large-herd, Western states as “modern”.

Trends in Cow Numbers

Traditional and modern dairy states have in the past decade contributed roughly the same amount to aggregate annual US production as shown in Figure 2. Rapid production growth in modern states led their output to exceed traditional states in 2004. However, recent growth trends appear roughly similar across regions.

How are these two different milk-producing regions increasing production? Figure 3 shows the total number of dairy cows by region. Until 2008, modern dairy states were adding cows at a rapid rate even as traditional dairy states were losing them. After 2008, the growth trend in cow numbers in modern dairy states slowed considerably and, in some years, has shown small declines. However, growing numbers of cows is still a major reason for production growth in modern dairy states.

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