Entry, Exit, and Structural Change in Pennsylvania's Dairy Sector

Data on the number of Pennsylvania dairy farms by size category are analyzed in a Markov chain setting to determine factors affecting entry, exit, expansion, and contraction within the sector. Milk prices, milk price volatility, land prices, policy, and cow productivity all impact structural change in Pennsylvania's dairy sector. Stochastic simulation analysis suggests that the number of dairy farms in Pennsylvania will likely fall by only 2.0 percent to 2.5 percent annually over the next 20 years, indicating that dairy farming in Pennsylvania is likely to be a significant enterprise for the state in the foreseeable future.

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