Farm Growth, Consolidation, and Diversification: Washington Dairy Industry

The shrinking number of farms in the United States is well-documented. Between 1974 and 2002, the total number of farms in the United States declined by 21%. While this represented a large drop in the overall number of farms, the number of farms with milk cows declined much more dramatically, falling by 79% during this period (USDA/NASS, 2002). With four times as many milk cows per farm in 2002 than in 1974, it is obvious that the dairy industry has become much more concentrated. Further, the entire decline in number of farms with milk cows occurred in size categories with fewer than 500 cows. The number of farms with 500-999 milk cows grew by 36% and the number with 1,000 or more milk cows more than doubled. Changes in the State of Washington generally followed those of the Nation. The growth in the number of the largest-sized farms creates the most intrigue for economists and policymakers alike. As one of the last bastions of nearly perfectly competitive production, does this growth in farm size hint at a major change in the historically competitive nature of agricultural commodity supplies? For example, in 2002, more than 30% of milk sales came from just 1.5% of dairy farms. This situation warrants careful attention since adverse environmental effects often accompany increases in farm sizes, particularly for confined animal operations. While we know that significant changes are occurring in farm size, no one has yet identified which farms are growing or shrinking in size. Nor has anyone documented the extent of commodity diversification on farms of different size. Which farms grow? Do farms in the larger size categories actually grow the most rapidly? Or do mediumsized farms combine with other farms of comparable size to create new large organizations? Do farms in different size categories increase or decrease their levels of diversification over time? To answer these questions, we examined longitudinal data from the Census of Agriculture in 1992, 1997, and 2002 for dairy farms in Washington. This is an important industry in both the state and Nation. In the United States, dairy products rank second among all agricultural commodities in value of production (USDA/NASS, 2006a). Washington ranks 10 th in the nation in milk production and first in milk production per cow, while the value of milk production in the state also ranks it second in importance among all agricultural commodities (USDA/NASS, 2006b). The state’s dairy industry is highly concentrated, but geographically divided. More than half the milk cows are located in two counties; Whatcom on the west of the Cascades and Yakima on the east. The demographics are changing with rapid movement of cows to the east side of the Cascades. Cow numbers in Yakima County grew by more than 30% between 1997 and 2002, while those in Whatcom County declined.