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Hired Labor in US Dairies

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June 21, 2021

Mammals feed their young milk until they can digest solid food; humans are almost unique among mammals in continuing to drink milk as adults. The US produces the most milk from dairy cows, followed by India, China, Brazil, and Germany.

The US had 9.3 million dairy cows in 2019 that produced an average 23,400 pounds of milk, for total milk production of 218.4 billion pounds. There are dairy cows in all states including Alaska and Hawaii, but almost a third are in two states. California had 1.7 million or 18 percent of US dairy cows in 2019, and Wisconsin 1.3 million or 14 percent.

Milk production has been stable in California over the past decade, declined in the southeastern states, but rose over 50 percent in CO, KS, and TX. Seven states produce more than 10 billion pounds of milk a year, CA, WI, ID, NY, TX, MI, PA. Growth in milk production was fastest in Texas over the past decade.

CA and WI produced a third of the 223 billion pounds of US milk in 2020


https://www.fb.org/market-intel/usda-report-u.s.-dairy-farm-numbers-continue-to-decline

Dairies. The Census of Agriculture (COA) reported that the US had 54,600 dairy farms with 9.5 million cows in 2017. Over the past several decades, dairy cows have been concentrated on fewer and larger farms. The 2017 COA reported that:

  • 189 dairies had 5,000 or more cows and a total of almost 1.6 million or 17 percent of US dairy cows
  • 525 dairies had 2,500 to 4,999 cows and a total of almost 1.8 million or 19 percent
  • 1,239 dairies had 1,000 to 2,499 cows and a total of 1.9 million or 20 percent

This means that 1,953 large dairies, less than four percent of all US dairies, each had 1,000 or more cows and collectively accounted for 56 percent of US dairy cows and 56 percent of the $36.6 billion in farm-level milk sales in 2017. By contrast, 2,151 dairies, each with sales of less than $50,000, accounted for 0.2 percent of US milk sales. Some of these small dairies could be teens with 4-H dairy projects and retirees with a few cows.

Concentration. Dairy cows are being concentrated on fewer and larger dairies, as indicated by the growing share of US milk from farms with 2,000 or more cows (green), and the declining share of milk from farms with less than 100 cows (brown and purple).

Most US milk was from herds with 1,000 or more cows in 2016


Source: MacDonald, et al, 2020

Low milk prices in 2018 and 2019 accelerated the decline in the number of US dairies. Over half of the 70,375 US dairies in 2003 were gone by 2020, when the US had 31,657 licensed dairies. The gap between the COA’s 54,600 dairies in 2017 and the 31,700 licensed dairies in 2020 mostly reflects the fact that many small dairies are not licensed.

The number of licensed US dairies fell by over half since 2003, and fell 9% in 2019


Source: https://www.fb.org/market-intel/usda-report-u.s.-dairy-farm-numbers-continue-to-decline

The major reason for fewer and larger dairies is economies of scale, which means that the cost of producing 100 pounds of milk falls as herd size increases. The cost of producing milk is lowest for dairy herds with 2,000 or more cows. Note that costs of producing milk on dairies with fewer than 1,000 cows in 2016 exceeded returns from milk sales.

The cost of producing milk declines as herd size increases


Source: MacDonald, et al, 2020

Hired Labor. The COA groups farms by their North American Industry Classification System, and dairy farms are in NAICS 11212. Some 23,175 US dairies reported $3.9 billion in expenses for hired farm labor, including 3,587 dairies with $250,000 or more in labor expenses. Labor represented an average 12 percent of production expenses on dairy farms.

The Quarterly Census of Employment and Wages provides data on dairy farm employment and wages paid to dairy employees. QCEW data are drawn from unemployment insurance payroll tax data. Farm employers who employ 10 or more workers in each of 20 weeks of a quarter, or who paid $20,000 or more in quarterly wages, in the current or previous year must enroll in their state’s unemployment insurance system. Some states including California and Washington require practically all farm employers to enroll.

When paying UI taxes, employers report employees on the payroll for the period that includes the 12th of each month and all earnings for all workers during the quarter. The QCEW data show that 7,005 US dairy establishments hired an average 106,840 workers and paid them an average $724 a week in 2019, for a total wage bill of $4 billion. The number of dairy establishments and average employment have been rising as US dairy farms become fewer and larger.

QCEW total dairy wages of $4 billion in 2019 are similar to COA dairy labor expenses of $3.9 billion in 2017, but only a third of the COA dairies that reported labor expenses were also registered with state UI systems. This could reflect family dairies being organized as corporations and paying family members salaries, but not enrolling them in state UI systems.

Larger dairies hire more labor: 95 percent of farms with 2,000 or more cows had expenses for hired labor. The cost of hired labor per 100 pounds of milk produced peaked at $2.30 per hundredweight on farms with 1,000 to 1,999 cows, making hired labor costs 12.4 percent of gross returns of $18.49 per hundredweight of milk. Hired labor costs were $1.75 per hundredweight on farms with 2,000 or more cows, making hired labor costs 10 percent of gross returns of $17.54 per hundredweight of milk produced. Larger dairies obtain more milk for each hour worked, that is, they have greater labor productivity.

Hired labor costs rise with herd size until 2,000 cows, and then fall for larger dairies

Milk costs and returns by herd size and class, 2016
Herd size (milk cows)
Item 10–49 50–99 100–199 200–499 500–999 1,000–1,999 >1,999
Dollars per cwt
Gross returns 19.53 18.53 18.39 18.78 19.00 18.49 17.54
Milk returns 16.88 16.53 16.48 16.75 16.93 16.37 15.67
Other returns 2.65 2.00 1.91 2.03 2.07 2.12 1.97
Operating costs
Total feed costs 10.03 9.95 9.55 8.85 8.80 8.97 9.20
Purchased 4.44 5.01 4.94 5.66 6.54 7.18 7.61
Homegrown 5.19 4.80 4.52 3.13 2.23 1.78 1.59
Grazed 0.40 0.14 0.10 0.07 0.03 0.01 0.00
Other operating costs 4.32 4.00 3.77 3.50 2.94 2.71 2.32
Total operating costs 14.36 13.95 13.32 12.35 11.74 11.68 11.52
Gross minus operating 5.17 4.58 5.07 6.43 7.26 6.81 6.02
Allocated overhead
Hired labor 0.40 0.61 1.28 2.08 2.18 2.30 1.75
Unpaid labor 12.78 7.53 3.84 1.45 0.69 0.30 0.10
Capital recovery 4.72 4.47 4.23 4.11 3.82 3.60 3.37
Other overhead costs 1.30 1.21 1.01 0.86 0.70 0.66 0.41
Total allocated costs 19.18 13.81 10.35 8.49 7.39 6.86 5.64
Total costs 33.54 27.77 23.68 20.85 19.13 18.54 17.16
Net returns -14.01 -9.24 -5.29 -2.07 -0.13 -0.05 0.38
Note. cwt = hundredweight. Conventional producers only.
Source: USDA, Economic Research Service and USDA, National Agricultural Statistics Service, Agricultural Resource Management Survey, 2016 Dairy Version.

Source: MacDonald, et al, 2020

As herd size increases, the importance of unpaid family labor declines and the importance of hired labor increases. For example, on farms with under 50 cows, unpaid labor accounts for 97 percent of total labor costs, while on farms with 2,000 or more cows, unpaid labor accounts for five percent of total labor costs. Note that small dairies self-report their hours worked, and USDA estimates the value of unpaid diary family time by using education, age, and other personal characteristics to estimate that family workers would have earned $20 to $30 an hour, more than what hired workers on dairies are typically paid, if they had worked.

The share of hired labor in total labor costs rises with herd size

Mean hours, costs, and wages by herd size
Herd size (milk cows) Labor costs, milk production ($/cwt) Imputed wage for unpaid labor($/hour) Annual hours, paid & unpaid, whole farm Annual hours, principal operator
Total Unpaid Whole farm Dairy enterprise
10–49 $13.18 $12.78 $21.74 6,166 3,522 2,387
50–99 $8.14 $7.53 $22.18 8,207 3,977 2,762
100–199 $5.12 $3.84 $23.16 11,903 3,879 2,701
200–499 $3.53 $1.45 $23.71 22,460 3,683 2,428
500–999 $2.87 $0.69 $25.03 34,805 3,427 2,560
1,000–1,999 $2.60 $0.30 $25.09 64,962 3,103 2,526
>1,999 $1.85 $0.10 $25.81 101,477 2,916 2,553
Note: cwt = hundredweight.
Source: USDA, Economic Research Service (ERS) using accounts on milk cost of production from ERS and USDA, National Agricultural Statistics Service, Agricultural Resource Management Survey, 2016 Dairy Version.

Source: MacDonald, et al, 2020

The midpoint US dairy herd size was 1,300 in 2017, meaning that half of the 9.4 million US dairy cows were on farms with 1,300 or more cows and half were on dairies with fewer than 1,300 cows.

Texas A&M. Researchers at Texas A&M sent 5,000 surveys to dairy farms in 2014 and received 1,000 usable responses to study immigrant workers in US dairies. A third of the responding dairies had 1,000 or more cows, including a sixth that had 2,000 or more cows.

The researchers estimated that there were 150,400 employees on US dairies in 2013, including three-fourths who were employed full time. Over half or 77,000 US dairy employees were born outside the US, so that a typical dairy with 5.1 employees had 2.6 foreign-born and 2.5 US born employees. The Texas A&M researchers reported that immigrant workers are more likely than US-born workers to be full-time employees.

Texas A&M survey found 51% immigrant workers on US dairies in 2013

Dependence on hired workers increases with the number of cows. Two-thirds of the respondents had fewer than 1,000 cows, which may explain why only a third of the responding farms reported hiring immigrant workers. The farms with immigrant workers were larger, which is reflected in the fact that they produced almost 80 percent of US milk.

Texas A&M survey: the 1/3 of dairies with immigrant workers produced almost 80% of US milk

The Texas A&M survey asked dairies about their level of confidence in the documents provided by their employees when they were hired. Almost 39 percent of 750 respondents said they had a low-level of confidence in the documents presented, and 21 percent of 727 respondents said they were concerned about immigration enforcement.

Texas A&M survey: 39% of dairies had low confidence in employee-presented documents, and 21% were concerned about immigration enforcement

Confidence in Documents and Concern about ICE/CBP Raids and Audits
Issue of Concern Low Medium High Average Rating
Confidence in Documents of Immigrant Employees (n=750) 38.9% 32.1% 28.9% 2.8/5.0
Concern about Actions by Immigration and Customs Enforcement or Custom and Border Protection (n=727) 21.2% 21.2% 57.6% 3.6/5.0
Source: National Dairy Labor Survey, 2014

All hired workers on dairies earned an average $11.54 an hour in 2013. Immigrant workers earned slightly more, $11.69 an hour. Dairy workweeks averaged 54 hours, for weekly wages of $623. The QCEW reported that 6,862 dairy establishments had average employment of 95,500 in 2013, and paid average weekly wages of $570. The QCEW assumes a 2,080-hour work year, so annual QCEW wages of $29,582 in 2013 imply a $14.22 hourly wage.

The Texas A&M researchers estimated that eliminating half of the foreign-born workers in US dairies would reduce the number of dairy cows and raise retail milk prices, with multiplier effects due to less milk being transported, processed, and sold. Survey respondents reported 13 percent employee turnover, meaning that a dairy with an average 10 employees would issue 13 W-2 statements a year.

Marketing. Raw milk is 87 percent water, four percent fat, and nine percent skim solids. Milk is transported by truck from farms to processors in bulk tanks and bottled for fluid milk or manufactured into cheese or other dairy products.

In the US, fluid milk consumption per capita has been declining, while the consumption of cheeses, led by mozzarella and cheddar, and butter has been increasing. Americans are eating more butter per person than they did in the 1980s and 1990s, and cheese consumption per capita tripled between 1970 and 2020.

The leading US milk processors in 2019 were Nestle, Montreal-based Saputo, Dean Foods, Danone, and Kraft-Heinz. Each has many labels, and many processors bottle private-label milk for supermarkets. Over half of US milk is marketed by dairy cooperatives, that include Kansas City-based Dairy Farmers of America, Minnesota-based Land O’Lakes, and Visalia-based California Dairies.

The US dairy industry is increasingly dependent on exports. Dairy exports measured in total milk solids were record 2.1 million tons in 2020, representing a sixth of US milk production. Mexico is the largest export market for US dairy exports, followed by Southeast Asia, Canada, and China. NZ is the world’s leading exporter of dairy products, accounting for 22 percent of global dairy exports, followed by Germany, 10 percent, the Netherlands, 8.4 percent, and the US, 6.7 percent.

NASS. USDA’s monthly Milk Production report surveys farmers to obtain data on cows and milk production. The number of dairy cows and milk production have levelled off in recent years at about 9.3 million and 218 billion pounds a year. Average milk production per cow was almost 23,400 pounds in 2019.

The number of dairy cows is stable, but milk production per cow continues to increase

References

Adcock, Flynn, David Anderson, and Parr Rosson. 2015. The Economic Impacts of Immigrant Labor on US Dairy Farms. Texas A&M.

MacDonald, James, Jonathan Law, and Roberto Mosheim. 2020. Consolidation in U.S. Dairy Farming. ERS Report 274.

Nepveux, Michael. 2019. Largest Decline in U.S. Dairy Farms in 15-Plus Years in 2019.

Nepveux, Michael. 2021. USDA Report: U.S. Dairy Farm Numbers Continue to Decline.


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