Globally, the family Dairy Farm is in trouble

By: "Farm Tender" News
Regenerative Ag & Carbon Farming News
May 07, 2019
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By Glen Herud - Founder Happy Cow Milk Co.

Globally, the family dairy farm is in trouble. As New Zealand's pre-eminent expert in not making a profit from a small scale dairy farm. I’m perfectly qualified to explain the dramatic demise of the family dairy farm globally.

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57% of US dairy farms closed down in the period between 2000 & 2014. That's 59,826 individual dairy farmers that went out of business.

This trend is not confined to just the USA either. Over the same period, dairy herds reduced by 63% in Denmark, 36% in France, 43% in Germany, 63% in Italy, 76% in Spain, 46% in UK & 51% in Australia.

This is not an indication of the demise of dairy, at least not just yet. All that's happening is the smaller farms are closing and the remaining farms are getting much bigger.

The rules of economics are becoming apparent to the worlds dairy farmers.

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In 2000 the average herd in the USA was 88 cows. In 2014 it had risen to 204 cows per farm. Each cow is now producing 22% more milk and global milk production has actually increased by around 5%.

But USDA figures paint a bleak picture of the financial viability of US dairy farmers. Farms with less than 200 cows lose $0.25 nzd/litre. They stay afloat because the farmer is not paying themselves a market rate & they rely on unpaid family members to run the farm.

Herds ranging in size from 200-1,999 cows are just breaking even.

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The only profitable herds are those over 2,000 cows with a small profit of $0.015 nzd/litre.

The root cause of all this is farmers have a perishable product that needs to be processed in a timely fashion. Once a cow is producing milk the farmer needs to do something with the milk. They can’t store the milk or stop milking the cow & wait until prices improve.

This makes farmers very reliant on the milk processors and retailers. The rules of business are that the party with the power squeezes everyone else's margins.

It's worth noting, these figures include co-op farmers too, so co-ops don’t necessarily change the power dynamics.

Over time each sector of the supply chain has made gradual incremental improvements to efficiency.

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They’ve followed the well know rules of economics & business and embraced economies of scale. If you get bigger you get more efficient.

That's the problem.

Consumer research is clear. People really do not like factory farming and that's what “bigger and more efficient” actually means; factory farming.

In one survey, researchers asked urban consumers what did the ideal dairy farm look like and they concluded.

“Respondents sighted the ideal dairy farm should be organic, small, operated by family farmers, and committed to contributing to their community”

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But as the USDA numbers show, these types of farms lose money.

From a US consumers perspective, a profitable 2,000 cow dairy farm is in the “dairy is scary” category.

If the only way dairy farming can be profitable is via a method that most consumers find abhorrent, you don’t need to be Ezekiel to see how dairy will be considered in 20 years time.

That's why its never been a better time to be a small scale dairy farmer.

The consumers of the world are more aware than ever and are crying out for authentic & transparent products.

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A farmer with 80 cows can use farming methods a 2,000 cow farm can’t. A farmer with 80 cows is more than happy to be transparent. The owners of a 2,000 cow farm shudder at the thought of transparency.

All the evidence indicates that being small is a disadvantage and goes against the rules of economics and business.

But as Paul Arden says, If you can’t solve a problem its because you’re playing by the rules.