To paraphrase Mark Twain, reports of the death of the family dairy farm have been greatly exaggerated.

Medium-sized, family dairy operations will remain central to Wisconsin dairy farming for the foreseeable future, according to Brad Barham and Douglas Jackson-Smith, co-directors of the Program on Agricultural Technology Studies at the University of Wisconsin-Madison.

During the past 40 years, the number of dairy farms in Wisconsin has decreased from more than 100,000 to about 22,000 while the average herd size has increased from 20 cows to 65 cows per farm. The average herd in California – often the model of “industrial” dairying – is about 500 cows.

“People have suggested that the dairy sector has entered a period during which very large operations with hired labor will dominate the industry at the expense of medium-sized herds operated with family labor,” says Jackson-Smith. “Our research on recent dairy expansions and the entry and exit of operators in Wisconsin indicate that over the past 10 years we have not been going through such a radical transformation.”

A healthy dairy industry is essential to Wisconsin agriculture and a vital part of the state”s rural economy. Milk sales still make up the majority of gross farm income, and dairy farmers continue to manage most of the state”s croplands. However, dairy farmers have seen their profit margins shrink as the real costs of farm inputs rose while milk prices fell. In the late 1990s, farmers received inflation-adjusted milk prices that were roughly 20 percent lower than they were in 1960 and about half of the peak price in 1979.

This cost-price squeeze has forced farmers to grow in order to survive. “The trend towards larger dairy herds and farms in Wisconsin is indisputable,” says Barham. “However, compared with the rapid transformation taking place in other livestock sectors, Wisconsin”s dairy industry has been changing slowly, with average herd size growing at about 3 percent per year over the past 40 years. This trend of 3 percent growth continued throughout the 1990s when so many of the headlines of media reports on dairy farming were focused on major expansions.”

Based on these trends, it seems much more likely that the industry is continuing to change gradually, Barham says. “Long-run trends involving incremental growth of herds and a decline in those entering dairy farming explain most changes in Wisconsin”s dairy farm structure during the 1990s.”

Contrary to public accounts, the accelerated decline in the number of Wisconsin dairy farms over the past 15 years is not the result of an increase in the number of farmers going out of business. “That number has actually been relatively constant,” says Jackson-Smith. “The real explanation is that the number of new dairy farm entrants has declined dramatically.”

The College of Agricultural and Life Sciences researchers base their conclusions on several detailed studies conducted during the past decade of the expansion behavior and plans of continuing dairy farmers, and the characteristics of those entering and leaving the industry. Those studies, summarized in their recent report — The Changing Face of Wisconsin Dairy Farms – reveal the farm-level changes behind the statewide aggregate trends in farm numbers and herd size.

Very large farms are increasingly common. This year there were roughly 60 herds large enough to require permits from the state Department of Natural Resources. However, relatively few Wisconsin dairy farmers are rapidly building large herds typical of those in California and the desert Southwest. Instead, increases in the average size of Wisconsin dairy herds are driven mostly by small and medium-sized farms adding cows incrementally to their herds rather than by the creation of very large farms.

“The expansion of most continuing farmers tends to be incremental with more getting larger than smaller,” Jackson-Smith says. “Those with 40 or 50 cows are moving to 70 or 80 over the years; those with 90 are going to 150 and those with 150 to 250.”

Over the past 20 years, an average of 1,800 to 2,000 Wisconsin farmers have closed their dairies each year. A recent study of 300 of those farmers showed that age was the most important reason for exiting the business, according to Jackson-Smith. “Most of those leaving dairy farms are retiring, not being forced out,” he says.

Because many of those exiting farming have herds with fewer than 40 cows, observers have suggested that small herds can”t compete effectively with large dairies whose size gives them advantages associated with economies of scale.

“Empirical studies of farms in the field have failed to find strong evidence in Wisconsin that large farms can systematically produce milk at a lower cost than medium-size or small farms,” Barham says. “We see tremendous variation in the cost of producing milk and the return on equity all along the spectrum of herd sizes.”

Jackson-Smith and Barham note that potentially serious labor and management problems associated with milking larger herds appear to level the playing field. While very large farms may not have advantages in the per unit cost of production, the simple fact that they milk more cows means that they do bring home larger total net farm income. In the current period of very low milk prices, what is not clear is whether the debt load many of the larger operations have taken on will be sustainable.

A PATS study of recent dairy farm entrants during the 1990s shows that they don”t typically start out with large herds. In fact, most new farms started with small or medium-sized herds, according to Jackson-Smith. “The size of new operations reflects the financial limitation farmers face in getting into the business,” he says. “Most entrants begin the old-fashioned way with herds that are smaller than the state average, and then proceed to grow their farms during their careers.”

What”s most remarkable about the entrants is their declining numbers. On average, more than 1,400 farmers began dairies each year between 1978 and 1982. With the farm crisis of the 1980s, that annual figure soon dropped to about 620 and fell further to about 340 between 1992 and 1997.

“Those starting and leaving the dairy business tend to operate smaller than average farms,” Jackson-Smith says, “and there are many more farmers leaving than entering the field. Those simple demographic trends have contributed to the growing average size of the remaining herds in the state.”

Wisconsin will probably see its share of the nation”s milk production continue to shrink relative to states in the West and South, according to Barham and Jackson-Smith. However, they say that Wisconsin and other states in the dairy belt that extends from Vermont to Minnesota will remain a major force in the U.S. dairy industry well into the future.

Looking down the road, Barham and Jackson-Smith foresee a dairy industry in Wisconsin”s future that includes:

* The continued presence of medium-sized dairies, many of which will expand gradually while experimenting with practices that increase farm profits and improve the quality of life for farm families;
* An increased number of dairy farms milking more than 200 cows with hired help; and
* Many more dairy farms that try to minimize costs by using practices such as intensive grazing, purchased feeds, and low-cost milking and housing methods, especially given the pressures that dairy farmers currently face due to historically low prices.

The UW-Madison researchers say their findings have important implications for research and extension programs. They see a bias in land-grant university programs that assume a future dominated by the largest herds. Barham and Jackson-Smith call upon researchers and extension specialists to strengthen their efforts to address the needs of the moderate-scale, slowly growing dairy farms.

“The long-term health of this state”s dairy industry and milk supply depends in large part on whether we are successful in helping the majority of moderate-scale operators be more competitive, gradually expand their operations, and adopt new practices that are environmentally safe and appropriate for their limited capital and labor resources,” says Barham.

The research was supported by state funding to the UW-Madison College of Agricultural and Life Sciences. Copies of the report, The Changing Face of Wisconsin Dairy Farms, PATS Research Report No. 7, can be obtained by contacting Nancy Carlisle at the Program on Agricultural Technology Studies, 202 Taylor Hall, 427 Lorch Street, Madison, WI 53706; (608)-265-2908 or nlcarlis@facstaff.wisc.edu