The sad story of dairy's decline: Problem is obvious, solutions are not
All farmers and livestock producers are important. All the crops and animals they raise are important. That said, there's something special about the dairy industry, especially the people who operate dairy farms. Their skill and dedication reflect what's best and noblest in production agriculture.
So the ongoing slump in the U.S. dairy industry is distressing. Beset with a multi-year stretch of poor milk prices and limited profitability, far too many dairy producers have shut down or are in imminent danger of doing so. From 2017 to 2018 alone, 6.5 percent of U.S. dairy farms went out of business, according to U.S. Department of Agriculture statistics.
That's a big economic hit to the communities, often small, rural ones, where they operate. It's a huge emotional loss for families who put so much of themselves, sometimes over several generations, into their dairy business.
The fundamental problem is obvious: There's too much milk. The supply exceeds demand, which inevitably holds down prices.
On the supply side, the United States has more cows (the surviving dairy farms are getting bigger), which on average produce more milk. In 2006, the 9.1 million U.S. dairy cows produced an average of 19,951 pounds per cow. In 2018, the 9.4 million U.S. dairy cows produced an average of 23,149 pounds per cow.
In contrast to rising per-cow production, per-capita demand has been shrinking for decades. Americans on average now drink about 18 gallons of milk annually, down from about 30 gallons per year in the 1970s. Increased competition from alternatives — energy drinks are a good example — account for part of it. So does less-than-enthusiastic assessments of milk from some of today's nutritionists.
But exports helped to offset lessened sales at home. U.S. dairy farmers, once focused almost exclusively on domestic demand, benefitted for years from soaring incomes and demand for milk in developing countries. The value of U.S. dairy product exports more than quadruped from 2004 to 2014, according to a 2016 USDA report.
One more example of how important exports have become: In 1996, exports accounted for 3.6 percent of U.S. dairy production. In 2018, exports accounted for 15.8 percent of American output, according to statistics from the U.S. Dairy Export Council.
With Americans on average drinking less milk, maintaining and expanding dairy exports becomes increasingly important. But current trade policies have had the opposite effect, sharply reducing dairy exports to Mexico and China. A September 2018 study from Texas A&M University found that, depending on what happens with exports to China and Mexico, U.S. dairy farmers could lose $2.07 billion to $13.87 billion over the next five years.
Supporters of President Donald Trump point to the current trade policies and say they offer "short-term pain, long-term gain." Maybe, but so far the pain vastly exceeds the gain.
If we're serious about helping dairy farmers overcome these tough economic times, we need sensible trade policies that allow and encourage foreign consumers to buy U.S. dairy products.
Other solutions to the dairy industry's plight aren't so obvious.
U.S. dairy policy is incredibly complicated, a mind-boggling brew of regulations that virtually nobody understands fully. Perhaps revamping and simplifying dairy policy is the place to start.
This much is clear: Policymakers, the dairy industry and the general public — at the federal, state and local levels — need to look long, hard and thoughtfully at what can be done to help dairy producers survive in the short term and thrive in the long term.
And we're optimistic they can thrive. Technology and automation offer more and new options that hold promise for dairy farmers, including relatively small family operations in the Upper Midwest.
The U.S. dairy industry has a proud past and, we think, a bright future. But the present — the here and now — is concerning. All of us, both in and out of agriculture, need to work to change that.