Saturday, January 30, 2010

This Time is Different

(click on image to enlarge)

For some time, loss of dairy farms has been taken as normal, maybe even healthy by some.

Cows simply moved to a bigger, more “efficient” farm. Unnoticed in all this is the role real estate played in this scenario. Los Angeles real estate values and IRS tax code 1031, drove expansion of dairy farms in the West. Throughout the country banks loaned money to dairy farms, in part because of appreciating land values.

Under those conditions, the data suggests that when milk prices rise, farms got out while the getting was good. Since the beginning of 2009 the getting out has not been good. Unemployment is now double historical levels. Real estate is in the dumps. Cow prices stink. However, if and when things turn round, there will be a huge exodus. Few expansions are on the drawing, so, who will take over milk production?

This time,it really is different.


  1. I agree with you very strongly on this. I think there are a large number of farms just waiting for beef and replacement prices to get up somewhere near where they should be and they will be gone.

  2. Our tank driver says that there are so many older farmers who have already said that as soon as cow prices rebound to the point they can walk away with at least a little, they're done. With a younger generation very few and far between John poses the burning question who will take over? The seemingly "chosen few"? Are they going to be able to take up the slack? Or now with attention on the abc segment does anyone want to? DWCovert

  3. Attrition of the small farmer will continue, the larger more efficient farms will take over and eventually have basically the entire industry. You see, larger farms are simply more proficient businesses; smaller farms haul their own manure down the lane or maybe around the corner, larger farms pay thousands to have it hauled miles and miles away, smaller farmers milk their own cows with the help of family, larger farms pay several milkers and cow movers to run cows through a large factory type milking parlor. Smaller farmers often use older smaller equipment and deal locally for farm needs such as feed milling, farm and animal supplies and so on, many larger farms have semi loads of feed trucked in from far away and deny local milling companies and supply stores business. If you have a small farm, you may run a herd bull or two and spend very little to effectively get your cows bred, larger farms pay thousands upon thousands to AI techs to try to accomplish the same thing the smaller farmer does with one or two bulls, no extra time and at very little cost. Smaller farmers utilize buildings that are several decades or even centuries old, pastures that have been used for generations cow paths that are well worn from the hooves of time. But, soon many of these things will be distant memories, replaced with large throw away buildings, cattle raised on concrete from day-one that will never feel the earth under their feet, or taste the fresh green grass of spring.
    Yes, huge dairy farms are undeniably the more efficient way to dairy farm, the smart folks have been telling us this for years, how can we argue otherwise?

  4. With Canada talking about doing away with their quota system, that's where the milk is going to come from. They see it, that is why they are doing it.

  5. Large farms are not more eficient, they are just good at utilizing cheap grain, diesel, and money. Any well run small dairy can compete now because they can grow their own feed, haul feed and manure close to home, and don't have to invest in computerized parlors. Large dairies out west that were financed by high real-estate values are not likely to expand any more. The time has come for new, modest, forage-based dairies to take their place.