Dairy's Great Consolidation: What's Behind the Loss of 15,000 Farms
thebullvine.com
thebullvine.com
Large operations are killing the ability for small farms to adopt a co-op dairy model as processors are demanding 70% of value add.
Read the article.
FTA:
"Here’s another force reshaping the industry that has nothing to do with immigration: processor consolidation. According to industry analysis, just three major cooperatives—Dairy Farmers of America, Land O’Lakes, and California Dairies—now handle over 80% of the nation’s milk marketing.
These processors need massive, consistent volumes. New processing plants require millions of pounds of milk per day to operate efficiently. From a logistical standpoint, it’s far more efficient to contract with a dozen 5,000-cow dairies than 500 smaller operations.
I was at a dairy conference in Wisconsin last year where a DFA representative candidly admitted: “We’re building plants that need 4-5 million pounds per day. We can’t deal with 200 small farms—we need 10 large ones.”
This “processor pull” creates powerful incentives for farm-level consolidation. I’ve seen it happen firsthand in regions where a new mega-processing plant opens—suddenly, there’s pressure on every farm in the area to either scale up or get squeezed out"
> The data flips the conventional assumption on its head. Large farms that employ the most immigrant workers are actually paying higher cash wages, not lower ones. Recent analysis shows median wages for dairy workers increased 33.7% between 2019 and 2022, far outpacing the national median wage increase of 7.4%. These wage increases are happening primarily on the large-scale operations that dominate milk production.
Hypothetically sure, if it was a free market. But if dairies are closing because a handful of large processors have destroyed any chance for cooperative or localized models which have a similar cost (as the article itself shows), then that hyperconsolidation is oligopolic
If you are fine with payment processing consolidating amongst two players or English language search engines consolidating amongst 3-4 players, then arguing in favor of consolidation irrespective of industry makes sense. Otherwise, it's fairly hypocritical.
In action, a cooperative model with no consolidation amongst processors does outcompete the hyperconsolidated North American model [0]
What this implies is that oligopolic control of the American dairy industry at the processor level is not market efficient.
Also, processors do not own cattle - they just process and distribute milk. As such, oligopolic control at this level leads to processors being able to set input prices with little competition. Like I said above, if you are fine with this model for ag, then you should be fine with this in the tech industry as well.
> Humans don’t require bovine milk, it is not a necessity nutritionally
Milk absolutely is a critical source of multiple nutrients [1] and is a critical component for most cooking and foodstuff in the US. Even the creatine in protein supplements is synthesized from diary. Furthermore, 84% of Americans consume dairy or products with dairy inputs [2].
A retort like the above is very much a "let them (not) eat cake" style response.
Furthermore, 15 years ago, people were saying the same thing about automotive and legacy ICs. Yet look at what happened during COVID and after.
[0] - https://www.thebullvine.com/dairy-industry/from-extinction-t...
[1] - https://nutritionsource.hsph.harvard.edu/dairy/
[2] - https://www.mckinsey.com/industries/agriculture/our-insights...