How Consolidation is Reshaping the Future of the U.S. Dairy Industry

The senior dairy analyst with Terrain says the expansion of large-scale dairy farms is changing the structure of the industry. Ben Laine says there are fewer farms but more milk is being produced per farm and overall in the U.S.

“If you can milk more cows and spread out your overhead costs across a larger herd, you tend to have a lower cost per hundred weight of milk production,” he says. “It’s a way to manage your costs. A lot of farms have seen pretty big benefit to doing that in order to protect themselves from volatility.” He also says it’s impacting the market.

“We might see a couple more years of high prices followed by longer troughs and lower prices because those large farms aren’t responding to the month-to-month milk price,” he says. “As a result, the broader U.S. milk supply is not as responsive to milk price movements as it has been in the past.”

Laine says producers will likely need to find new ways to add value and improve efficiency to continue to stay profitable in the future.

EDITOR’S TAKE:

Is consolidation in dairy production a good thing or a bad thing? It may help the individual operator spread their cost and offer some protection against volatility, and that is a good thing. However, if the adjustments in production are not made in a timely manner and the overall market becomes flooded with milk driving prices down, that would be a bad thing. Controlling output and optimizing new product innovation are keys to longer-term success in the dairy industry.

One key to your long-term success is customer satisfaction. Do you know what your ag customer values most in their truck dealer? If not, then perhaps a quick, brief survey would be in order. Or better yet, get out and visit with those ag customers face-to-face, and have that conversation with them directly. Be sure to have a list of all the products and services that you as a CAD member have to offer so you can get the conversation started.