Gambles: What is happening in the US dairy production is the profit per cow is getting smaller. So it takes more cows to meet the expenses of the average farm family. So you have the economics of size effecting the business.
In the 1980s the average diary cow would general an annual profit of around $500. So fifty cows would clear $26K. So if you would adjust for inflation that profit per cow would need to be around $1500. The profit is around $250 per cow per year. So a 100 cow herd is only clearing around $25K. With milk prices falling and feed prices raising that could easily only be $100-150 per cow this year.
So the larger diaries have higher building/equipment cost in total but on a per cow basis they have much less than the average diary farm. Then they will usually have a lower feed cost too. Volume buying of non farm raised products is a big part of this. Then add in they can get premiums for bulk/volume delivery. So they have a lower feed cost and higher income. So they will win this battle over time.
I also think we will see vertical integration in the dairy business. There are fewer and fewer processors. There are getting to be fewer producers. The same thing happened in the hog and poultry business. You do not raise hogs or poultry without having a contract for sale. There just is not any cash sale market for either product anymore. There is less freedom for both the producer and processor. They both gain on the other side by having a more stable price and supply. Also the public is demanding a trial clear back to the producer of where/what food comes from. With the current system that is impossible in the dairy industry. Smaller producers and processors both have to commingle milk to ship it economical and have large enough batches to process. So if I am a store buying milk it could have come from hundreds or thousands of producers. That makes traceability next to impossible.
I do not like this change in all of farming. It is nothing new. Farms have been consolidation for 150 years. The 160 acre homestead could rarely support a family long term 150 year ago. So even then the farms soon where getting larger. With the equipment and technology we have to day that is going faster.
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Today's Featured Article - History of the Nuffield Tractor - by Anthony West. The Nuffield tractor story started in early 1945. The British government still reeling from the effects of the war on the economy, approached the Nuffield organization to see if they would design and build an "ALL NEW" British built wheeled tractor, suitable for both British and world farming.
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