Large dairy farms grow faster than small farms
New data from the USDA Economic Research Service shows that the US dairy sector has seen a gradual shift in dairy production to larger dairy farms. Research indicates that the shift in production from small dairy farms to large dairy farms reflects the growth in total factor productivity in the dairy sector as a whole.
Total factor productivity, or TFP, is a broad measure of agricultural productivity that compares total output to the total land, labor, capital, and material inputs used in agricultural production. Between 2000 and 2016, the largest dairy farms, those with more than 1,000 dairy cows, experienced a TFP growth rate of 2.993% per year. Meanwhile, TFP growth for the smallest farms, those with less than 100 dairy cows, increased at an annual rate of 0.639%.
TFP growth across all operations has been primarily driven by technological progress – growth associated with innovations in systems, processes and techniques that convert inputs into milk production – and environmental effects which have had a positive impact on food availability.