New Mexico saw an increase in the number of farms with milk and/or dairy sales between 2002 to 2007, but then subsequent decreases in 2012 and 2017 . Overall, there was a decrease in farms with herd sizes between 200-999 milk cows. Figure 3.8 show the relative decrease in farms with milk and/or milk sales in New York and the decrease in the share of dairies with 1-199 milk cow herd size. There was an increase in the number of farms with a herd size greater than 1,000 milk cows. Figure 3.9 shows a decrease in the number of dairies with milk and/or dairy sales with significant decrease in the share of farms with a 1-199 milk cow herd size between 2002 to 2017 in Texas. There was also an increase in the number of farms with herd sizes greater 1,000 milk cows. Figure 3.10 shows that between 2002 and 2017 Texas farms with a herd size greater than 1,000 milk cows saw a significant increase in the share of milk or dairy sales revenue, from about 40% in 2002 to almost 90% in 2017. The majority of Wisconsin farms have a small herd size, although there has been a decrease from 2002 to 2017. There has been an increase in the number of farms with larger milk cow herd sizes . Figure 3.12 shows that the majority of milk and/or dairy revenue in Wisconsin used to come from farms with smaller milk cow herd size but has shifted overtime towards farms with larger milk cow herd sizes. The size distribution of farms in the U.S. has been a topic of economic research and discussion for decades. Changes in farm size along with reductions in farm numbers have raised concerns based on it the possible impact on rural communities, particularly movement out of certain regions leading to a possible decrease of employment opportunities in that region. Moreover, accurate and descriptive analysis of farm size is often used to inform agricultural policy and discussion, particularly in the dairy industry. In both industry discussion and policy-based decision-making, surrounding farm size, cannabis dryer the trend of consolidation is central to the discussion on the future of the dairy industry. Some suggest that the trend of farm size is characterized by consolidation with an increase in large farms, and fewer small farms remaining.

One assumption is centered around the idea of the disappearing middle, mid-sized farms, in agriculture with some arguing that the farm size distribution can be considered bimodal. This language can be vague and detailed analysis by state is needed for a clear characterization of farm size. Wolf and Sumner find that the argument of U.S. farms being bimodal is not the case for the dairy industry in 1989 and 1993. This thesis research aims to expand on this finding by discussing correlations related to farm size changes, kernel density plots of herd size and using parametric statistical density functions to characterize the herd size by state, utilizing recent Census of Agriculture data. The COA is a representative sample of all farms in the United States. This is individual farm level data across six states and four years which is a unique sample for research studies. This research looks at individual farm-level characteristics including farm size and operator characteristics and discuss the shifts across time and states. The trend of dairy consolidation in the United States has been characterized by a decrease in the number of dairies with the number of milk cows remaining relatively stable . Using the COA data, the number of milk cows on a commercial dairy has remained relatively stable with most states seeing slight increases in the number of milk cows, except New York . Whereas the number of commercial dairies has decreased significantly across all six states, except New Mexico which only decreased slightly . California and Idaho both had about a 36-37% decrease in the number of commercial dairies, while in New York, Texas, and Wisconsin the number of commercial dairies decrease by about 50%. Farm size distribution remains a prevalent agricultural policy issue, as characterization of the dairy industry’s farm size is used to inform legislation and often characterizes colloquial discussion about the state of the industry. This is in part due to firm size growth’s correlation with innovation and technology, as well as the firm’s ability to capture economies of scale. Although dairy farm size can be characterized for the U.S. overall, there are important distinctions by state, as the dairy farm size distributions differ greatly by state.

Macdonald et al. detail that larger dairy farms are able to capture economies of scale, more so than smaller dairies, resulting in a lower average milk production cost. However, the article does go on to specify that the distribution of dairy farm size differs greatly by state based on the specific financial and economic environment of the dairy industry in that state. Alternatively, some dairy farms lower the average milk production costs by capturing the economies of scope, i.e., diversification of sales. This could be characterized as raising and selling replacement dairy heifers, or other agricultural products such as grain to maintain economic viability. Finally, I consider the relationship that farm operator characteristics may have with farm size and the decision of a farm to exit. In Chapter Five, I detail a specific line of analysis related to the influence of female farm operators on farm size, but in this chapter, I will discuss the influence that the age of the farm operator may have on the farm size. Dairy farm size changes in response to these and other factors is important in considering future trends in farm size and their impact on milk production in the U.S. and the future structure of the dairy industry. This chapter aims to characterize the herd size distributions of the U.S. dairy industry, present evidence on the characteristics of the farm size distributions, and then finally discuss the correlation between farm level characteristics and farm size. This chapter will be structured as follows: a brief overview of previous literature on firm and farm size, a discussion about farm size distribution estimation, and then the results and discussion. Economic research and discussion have produced several theories on firm size and firm growth to characterize industries and the economy. This section will briefly review important studies related to firm size more generally and then will move on to research specific to the study of farm size and the economics of dairy farm size and size distributions. The study of firm size by economists can be best discussed chronologically, as much of the research builds off one another or finds results inconsistent with previously held theories. In 1931, Gibrat postulated what has come to be known as Gibrat’s Law that a firm’s growth rate is independent of its size.

This would mean that the growth rate of an individual firm over a particular time period should not be influenced by its original size. Ijiri et al. , using the foundation built by Gibrat’s Law, finds that firms that grew over 10% in the subsequent period are more likely to see above industry average growth, due to continued benefits of innovation that occurred in the subsequent periods. Viner theorizes that firm size distribution is based on the industry environment and that individual firms have a U-shaped average cost curve and will function at the minimum of this curve. He goes on to specify that firm entries and exits are determined by the quantity demanded by the market. Lucas used these previous works to build a new theory about the size distribution of firms in an industry that looks at size distribution as a solution for output maximization with a given set of production factors and managers with varied human capital levels. This model predicts the size distribution of firms based on the managerial ability of laborers and then subsequent resource allocation. Jovanovic finds that smaller firms will tend to have higher growth rates than larger firms, but that these smaller firms are more likely to exit the industry than the larger firms. Evans discusses growth relative to a firms age, finding that a firm’s growth can be tied to the age of the firm itself and that older firms have a slower growth rate. This theory is hypothesized to remain true for dairy farms. Stemming from foundation of Gibrat’s law, which claims that the firm size distribution follows a lognormal distribution, drying weed there has been significant literature on the size distribution of firms that looks at fitting parametric distributions to actual firm size data. Kondo, Lewis, and Stella evaluate recent non-farm panel data from the U.S. Census Bureau and find that the current U.S. firm size data best fits with a lognormal distribution, but there are differences in goodness of fit by industry. Akhundjanov and Toda use the original data, in Gibrat’s original paper, find that a Pareto distribution better characterizes the empirical size distributions. The distribution of firm size remains a fundamental part of research firm growth patterns and the literature on firm size has been directly applied to research on the growth rate of farms and farm size changes in different agricultural industries. Two common parametric distribution used in farm size distribution analysis are lognormal and exponential. Allanson evaluates farm size trends in England and Wales finding that the lognormal distribution fits farm size measures relatively well across time. Whereas Boxely uses an exponential distribution to evaluate farm size data from the Agricultural Census and finds that from 1935-1964 farm size shifted to the right, but that at the state level farm size does tend to follow the exponential distribution with some regularity. Before going any further in the analysis, it is important to outline the concept of farm size for this analysis.

Farm size measures across the whole agricultural industry tend to leave out key details that give better and more accurate accounts of the size of the farm for the commodity/industry. For example, when looking at the size of U.S. farms overall measuring the size of the farm based on acreage will lead to inaccurate or confusing results. The acreage needed to generate the same revenue for corn versus dairy milk or strawberries is substantially different. However, looking at the dairy industry specifically, many different characteristics shape a dairy’s economic footprint on the market, and therefore, defining how to characterize dairy farm size is fundamental to discussing changes in the dairy market. One can characterize the size of a dairy by the number of milk cows, or herd size, as one measure of dairy firm size. However, other characteristics such as the quantity of milk produced, the value of production, and value-added on the farm could also be considered as farm size measures . Different farm size measures allow us to answer different agricultural economic questions. While analyzing the dairy industry it is relevant to consider herd size, the milk and/or dairy sale revenue of the firm, and the total value of production, as we have already discussed in Chapter 2. Previous research on dairy farm size documents strong trends toward consolidation in the U.S. with a decrease of about 50% of all registered U.S. dairies from 2002 to 2019 . These trends in consolidation have differed by location with historically dairy producing regions seeing a large share of exits, these states were historically made up of smaller and mid-size dairies. MacDonald et al. detail the cost differences between larger and smaller dairies with cost advantages for larger dairies that drive the investment decision to increase herd size. This research suggested that there would continue to be a steady decline in the number of smaller and mid-size dairies and that the trend of consolidation would likely continue. This trend has raised research questions about what factors influence the distribution of farm size and the decisions of some farms to exit the industry. A common, albeit incorrect, assumption about the size distribution of the U.S. dairy industry is that it is bimodal. This assumption comes from news reporting and political commentary that there is a “declining” middle of farms in the U.S. and that there is this dichotomy between small, sometimes organic, farms and larger farms.