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 for free click here.
Farm Journal has released its State of the Dairy Industry 2024 Report. It surveyed 210 dairy producers throughout the U.S. More than two-thirds reported five years of profitability, and more than half have a growth mindset with plans to expand in the next five years.
The study shows the business of dairy farming won’t get any easier in the next three to five years due to a host of variables. That is why consolidation has continued at a breathtaking pace and dairy farmers need to be proactive.
The latest USDA Census of Ag showed around 24,000 dairy operations in 2022, down 39% from 2017 and 50% from 2012. And Ever.Ag Insights president Phil Plourd, says extrapolating that trend to 2027 takes operations down another 20 to 25-percent.
Dairies with 2,500 plus cows now account for more than 50% of operations. And over 60% of the milk comes from dairies 1000 head or more.
“What it says is that for the dairy producers that are still here, you know, it’s a dogfight, it is a street fight, in terms of figuring out ways to stay relevant, to get more productive to stay ahead of the curve to manage risk better, because it’s never been an easy business. It’s not going to be an easy business anytime soon.”
Dairy producers surveyed indicate the biggest challenges for the future are the pay price for milk, ag labor and the cost of inputs.
Plourd adds, “We’ve had a couple of years here of relatively elevated feed prices. We certainly know that labor is more expensive. Just to general inflation, right around operations.”
To overcome those challenges, Plourd says maximizing productivity presents a better chance of profitability.
“The investment needs to continue genomics, genetics, making the best productivity, this is we can around breeding, and then feeding and then housing and just you know, it’s sort of the investment in productivity has to be there, because productivity is profit at the end of the day, right??
He says dairy producers also need to proactively deploy risk management tools. Producers maximizing Dairy Margin Coverage received close to $150,000 in 2023.
“DMC can go a long way to providing real meaningful protection to a farms profitability.” says Plourd. “And the cost of it is you know, it’s sort of a no brainer in terms of what it takes to get involved with DMC. So, at a minimum, that’s a nice safety net for up to 200 cow producers.
For 200 plus cow operations, Plourd says Dairy Revenue Protection paid out more than $500 million in net indemnities in 2023 and it’s the key for staying in business.
“It’s a great product because you’re basically at subsidized put options, you know, at a very, very high level. That’s what we’re dealing with. And so, you’re able to protect downside and keep the upside net of what it costs you for the insurance.”
Beyond that, he says the dairy industry is becoming increasingly dependent on exports and farmers are losing out with the lack of a robust trade agenda.
“I just think from a political perspective, I think that that farmers generally need to keep beating the drum with their legislators and representatives that you know, ag trade is really, really important to the American farmer. And there’s a whole world of opportunity out there.”
He also recommends cashing in on climate opportunities, leveraging data and technology and investing in protein innovation.
