Do the Largest Firms Grow the Fastest? The Case of U.S. Dairies

Do the Largest Firms Grow the Fastest?

The Case of U.S. Dairies

In recent decades, the U.S. dairy sector has been undergoing significant structural
changes. These changes include industry consolidation, size and geographic
concentration of agricultural production, contractual and integrated production schemes,
and increasing numbers of large operations.

Similar statements could be made about most agricultural industries, but the changes
have been particularly acute in the dairy industry. While the number of U.S. farms
declined by 21% between 1974 and 2002, the number of farms with milk cows declined
by an astounding 79% (USDA, 2002). This rapid drop in number of dairies would be
remarkable in its own right, but it is part of a continuing trend. The number of dairies
declined by 71% in the preceding decade (Matulich, 1978). They dropped another 15%
in the three years following the last Census of Agriculture (USDA, 2003, 2006). Thus,
there were only 5% as many farms with milk cows in 2005 as in 1964.

With 60% as many milk cows on farms, the dairy industry has become much more
concentrated. In fact, between 1974 and 2002, all of the decline in number of farms with
milk cows was in size categories with fewer than 500 cows. The number of farms with
500-999 milk cows grew by 36% and the number with 1,000 or more milk cows more
than doubled.

Consolidation is also occurring at the cooperative level. Dairy cooperatives, which
currently process 86% of the milk produced and represent 67% of all dairy operations,
declined in number from 265 in 1992 to 196 in 2002, a 26% drop in one decade
(Liebrand, 2005).

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