Editor’s Note: This is one article in a series that is included in the 2024 Farm Journal’s State of the Dairy Industry report. The full 16-page report will appear in the May/June issues of Dairy Herd Management and Milk Business Quarterly and will be published in this space over the next several weeks. To download the full report click here.
Here’s a decidedly unbold prediction: The basics of dairy farming won’t get markedly easier in the next three to five years. It’s always been a tough space, and it’s going to stay that way because of a long list of crazy variables that won’t change. I’m talking about animal biology, cows that insist on giving milk seven days a week, weather, perishability, price volatility, government regulation and fickle consumers.
Because it’s hard, we’ve seen consolidation continue at a breathtaking pace. USDA’s latest Census of Agriculture, covering 2022, offered another dose of sobering statistics. According to the report, we had 24,082 dairy operations with milk cows in 2022, down 39% from 2017 and down 51% when compared to 2012. Extrapolating the trend to 2027 takes us down to somewhere between 18,000 and 19,000 farms – another 20% to 25% reduction.
Maybe the trend slows some. But whether its accurate doesn’t change the reality that producers looking to be in the business in three to five years need to be battle ready.
Here are a few thoughts on what being prepared might involve from a farm or industry perspective:
- Proactively deploying risk management tools. Dairy Revenue Protection insurance policies paid out more than $500 million in net indemnities in 2023. Producers maximizing Dairy Margin Coverage utilization received something close to $150,000. Make sure you don’t get caught naked in a corn market rally. Insurance products and other risk management tools won’t always pay, but the name of the game is making it through the margin droughts that inevitably materialize.
- Maximizing productivity. Higher productivity means a better chance of profitability. I suspect producers seeking every leverage point will fare better than others.
- Cashing in on as many climate opportunities as possible. No one really knows what will emerge in the months and years ahead, and some things won’t be possible for every operation. But we will likely see ways to get paid at least a little for participating in various programs, and maybe a lot from some.
- Leverage data and technology. Farmers have increasing access to tools that help them better understand and manage their business. It’s one area where things are getting easier. Get into the numbers. Act on what they are suggesting.
- Urging leaders to aggressively pursue trade opportunities. The U.S. dairy industry is in a great position to increase exports. New Zealand output isn’t likely to get much bigger. European farms will struggle to produce more in the face of ever tighter environmental restrictions. We will continue to see more middle-class consumers and Westernized diets around the globe — more people looking for good sources of protein like dairy. But U.S. agricultural interests must apply major and constant pressure on Washington to stay engaged on trade.
- Championing investments in protein innovation. Dairy proteins have a bigger place to play domestically and internationally.
U.S. dairy producers have no fear when it comes to innovation, productivity, and sheer grit. The world will demand more dairy products. The U.S. is ready to deliver — even if it’s not easy.
Phil Plourd is president of Ever.Ag Insights. The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources to be reliable; however, no independent verification has been made. The information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag Insights and is intended for informational purposes. Past performance is not indicative of future results.
