The USDA Census of Agriculture provides a breakdown of dairy operations by size in key milk-producing states. In 2017, 55% of the U.S. dairy herd was on farms with more than 1,000 cows — up from 40% in 2007 and 17% in 1997. By 2022, that number grew even larger, jumping to 65% of cows. On the other hand, the percentage of cows on smaller farms (fewer than 100 cows) has dropped from 39% in 1997 to 21% in 2007 to 13% in 2017, and was just 7% in 2022.

The Ag Census is taken every five years. The recently released 2022 census reveals there were 24,082 dairy operations with off-farm milk sales, down from 39,303 in 2017. These herds are producing 5% more milk from 9.4 million cows, a number which remained nearly unchanged from 2017.

According to Rabobank, less than 25% of the U.S. milk supply was produced on farms with fewer than 500 cows, but these farms accounted for more than 80% of dairy operations at 20,631.

More large dairies

In 2017, USDA reported 714 dairy farms with more than 2,500 cows. By far, California had the highest number of large dairies, totaling 198, follow by Texas with 72, New Mexico with 69 and Idaho with 62. By 2022, the number of dairies with more than 2,500 cows had climbed to 834, an increase of 17% with 120 additional farms.

California had the strongest growth with an additional 57 big dairies, bringing the total to 255 in the state. New York added 16 large dairies, while Wisconsin built 14 large operations in the five-year period. Texas was still second behind California in overall number of large farms with 83, up 11 from 2017. However, New Mexico lost eight big dairies while Idaho had four fewer large operations.

Milk supply more concentrated

Though fewer in number, larger operations continue to account for an increasing share of the U.S. milk supply. According to Rabobank, 68% of U.S. milk in 2022 was produced on dairy farms with 1,000 or more cows, which comprise 8% of the total number of farms. This number has risen since 2017, when 60% of the nation’s milk was produced on 5% of operations, and from 2012, when 55% of the milk originated from 4% of dairy farms.

Rabobank estimates that more than 46% of the U.S. milk supply is produced on the largest 3% of operations with more than 2,500 cows.

Dairy operations with fewer than 500 cows represented 86% of total farms but produced just 22% of the milk.

Cost of production

The move to larger farms remains mostly driven by economies of scale, with larger operations able to achieve a lower cost of production, higher margins and greater profitability. According to USDA cost of milk production data, the largest operations (more than 2,000 cows each) in 2022 showed the lowest cost of production, a trend consistent with recent yearly data reported by USDA.

Dairy operations with more than 2,000 cows showed total costs at $23.06 per cwt in 2022, sharply lower than smaller dairies’ costs. A dairy farm with 100 to 199 cows had costs nearly $10 per cwt more at $32.83 per cwt. Most of the difference is driven by larger farms’ ability to spread fixed costs over more cows, maximizing scale and capitalizing on efficiencies.

Milk production trends

During the past decade, the U.S. consistently increased milk production nationally, producing 25.3 billion pounds more milk in 2023 than 2013. However, of the top 24 milk-producing states, only 16 increased production during this period.

By a wide margin, the largest growth occurred in Texas, producing an additional 7 billion pounds of milk from 195,000 more cows compared to 10 years ago. While 2023 saw a slight setback in Texas’ milk output, growth is expected in the next few years, solidifying Texas’ position as a top five milk-producing state.

Of all states, Wisconsin experienced the largest decrease in licensed dairy operations between 2017 and 2022, losing 2,740 farms. States with a similar production style experienced the same trend, with declines of 1,570 farms in Pennsylvania, 1,260 in New York and 1,175 in Minnesota. Among large Western dairy states, California reported 275 fewer operations, followed by Idaho with 100 fewer farms, and Texas with 80 fewer farms.

Rabobank believes growth in the number of big dairies will continue, but smaller farms will continue to exist in sizable numbers — especially those practicing diversified agriculture and those that have kept debt levels low.