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October 2020, Volume 26, Number 4

US Ag, Dairy

Net farm income, which averaged $90 billion a year between 2000 and 2019 and peaked at $138 billion in 2013, is projected to be $103 billion in 2020. Net farm income includes net cash receipts from farm sales and $37 billion in government payments to farmers, making government farm aid in 2020 about 36 percent of net farm income, the highest since aid’s 41 percent share of farm income in 2001. Farm equity, mostly the value of farm land, was $2.8 trillion in 2020.

Corn and soybean farmers are expected to have record harvests in 2020, with average corn yields of 178 bushels an acre and average soybean yields of 52 bushels an acre. Farmers hoped that the phase one trade agreement with China in January 2020 would raise prices, but instead corn and soybean prices fell.

Farmers buy more than $40 billion worth of seed, chemicals and other inputs each year, usually from physical farm supply stores based on advice from the stores and the sales representatives of major input producers. Farmers Business Network wants to create an Amazon-style online marketplace for farm seeds and chemicals, with farmers paying $700 a year to compare prices and performance. However, many seed and chemical companies refuse to supply FBN with their products.

Dairies. Dairy cows are being concentrated on fewer and larger farms. The Census of Agriculture reported that the midpoint 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. Over 2,000 US dairies had 1,000 or more cows, and they had over half of US dairy cows. The number of dairies fell sharply in Minnesota, New York, Pennsylvania and Wisconsin.

The 189 US dairies with 5,000 or more cows in 2017 included 1.5 million or a sixth of all US dairy cows; some of these large dairies have more than 25,000 cows in a series of pods with cow barns, feed bunkers, and milking facilities. In 2018, California with 1.7 million cows produced 40 billion pounds of milk; followed by Wisconsin with 1.3 million cows and 31 billion pounds of milk; Idaho and New York, each with 600,000 cows and 15 billion pounds of milk each; and Texas with 535,000 cows and 13 billion pounds of milk.

There are economies of scale in dairies; larger farms have lower costs per unit of milk produced. Costs decline in larger dairies that hire workers to care for and milk cows. Most large farms milk cows three times a day.

Over half of US milk is marketed by dairy cooperatives, but coop-branded milk is losing market share to lower-cost private-label milk. Private-label milk in the year ending in July 2020 accounted for 57 percent of refrigerated milk sold, followed by nine percent for Dean Foods and eight percent for HP Hood. Dean Foods filed for bankruptcy protection in November 2019 and was bought by Dairy Farmers of America, the largest US dairy cooperative, in May 2020.

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