3.1 Missouri's Milk Deficit
Missouri produced 3.012 billion pounds of milk in 1970 and 3.040 billion pounds of milk in 19908. Missouri production then decreased to 2.258 billion pounds of milk in 2000. However, consumer population in Missouri grew from 4,677,623 in 1970 to 5,595,211 in 20009. Missouri milk production and dairy product consumption were in balance in 1990. Since 1993, milk production levels have resulted in an increasing milk deficit, now exceeding one billion pounds annually, closure of dairy processing plants, fewer dairy farmers, and a declining dairy infrastructure10. This changing relationship is shown in Figure 1. Milk products consumed but not produced in Missouri have added transportation and storage costs. Production costs in other areas must offset these additional handling costs to achieve economic justification. Clearly, an opportunity exists for Missouri to meet its own consumption needs if milk can be competitively produced and processed.
Figure 1. Missouri's New Milk Deficit
The decline in milk production is manifested as a decline in dairy's share of Missouri cash farm receipts. Figure 2 shows this relationship for the period 1970 - 2000. Dairy's share of total cash farm receipts has been as high as 11% in 1983, but dropped to a record low of 6% in 2000.11
Figure 2. Dairy Share of Missouri's Cash Farm Receipts
Declining raw milk production results in reduced demand and ultimately deterioration of the local dairy product-processing infrastructure. Consequently, as milk production has moved out of Missouri, modern processing plants have been built in those states with expanding milk supplies. In a region with declining milk supplies, milk processing facilities are used until the economic savings from depreciating assets and the increased maintenance costs of the older facilities is greater than the returns expected from constructing and maintaining a new plant in the area with a greater milk supply. Table 1 lists Missouri dairy processing facilities that have closed since 198812.
Table 1. Missouri Dairy Product Manufacturing Plants Closed Since 1988
3.2 Commercial Dairy Farms
The National Agricultural Statistics Service reports the numbers of farms with dairy cows in each state annually. This statistic is the best available information for comparing dairy trends between states. Since these statistics include farms with family milk cows, commercial dairy farm numbers in Missouri can be more closely estimated by the number of permits and certifications to sell milk. The number of commercial dairy operations in Missouri that sell permitted "Grade A" milk and certified "Grade B" milk is shown in Figure 3.
Figure 3. Number of Commercial Dairy Operations in Missouri13
3.3 Farm Production Trends
Four major trends have emerged on Missouri dairy farms during the last 25 years:
Figure 4 shows the relationship between these major trends. Between 1975 and 2000 the number of farms with dairy cows in Missouri decreased from 11,000 to 3,900 (65 % decline). During this period, the number of dairy cows decreased from 302,000 to 154,000 (49 % decline). Milk production per cow increased from 9,404 pounds per cow to 14,662 pounds per cow (56 % increase). Total milk production decreased from 2,989,000 pounds to 2,258,000 (24% decline).
Figure 4. Missouri Dairy Production Trends as a percent of 197514
Most of the same trends within Missouri, detailed later in this audit, have occurred in states surrounding Missouri as well as the rest of the United States during the past 25 years.
3.4 Missouri's Top 10 Counties
An analysis of production shifts reveals those counties that presently have large numbers of dairy cows also had large numbers of cows 50 years ago. Most other Missouri counties have reduced dairy cow numbers as shown in Figure 5a. Figure 5b shows the distribution of the dairy industry across the state15 The top 10 dairy production counties contained half of Missouri's dairy cows in 2000. Dairy cow numbers grew rapidly in many of these counties during the 1970's and 1980's only to decline in the 1990's. Cow numbers in the 10 top Missouri counties are shown in Figure 6.
The top 10 dairy counties in Missouri have a system of dairy production that is slightly different than production systems used in most other corn-belt states. Dairy farms in these Missouri counties are typically pasture based, with minimal capital investments for cow housing and other production facilities. An older dairy parlor may be the only specialized dairy structure on the farm allowing investment per cow to be lower than the average corn-belt state.
Figure 5a . Dairy Cow Numbers as a Percentage of 1950 Dairy Cow Population by County in Missouri
Figure 5b. Changes in Missouri December Milk Production in the Past 20 Years15
The forage base typically consists of fescue pasture usually supplemented with other pasture and grass or legume hay although some or all of the hay may be purchased. Pastures often serve as housing, outdoor loafing, and feeding areas rather than as a major feed source for the cows. The lack of high-quality forage often limits milk production even though purchased concentrates are often fed at relatively high levels. Many Missouri herds produce below the national averages due to poor forage quality.
Figure 6. Dairy Cow Numbers in the Top Ten Missouri Counties from 1950 to 2000
Dairy farmers in these Missouri counties expanded or began dairy production to more efficiently use their labor during the 1970s and 80s. Profit margins provided acceptable returns to invested capital and labor. Producers had minimal capital investments and the ability to purchase reasonably priced feedstuffs during this time of good milk prices. Profitable dairy production was available on these farms. Milk revenue decreased with the reduction of government price supports in the 1990s and profit margin per cow declined while production costs remained unchanged.
The reduction of profit margins has resulted in the closing of many dairy production operations resulting in a large number of non-operational dairy facilities in many Missouri counties. Other dairy operations have responded to the reduction of profit margins by expanding cow numbers or by increasing milk production per cow. Both strategies have been successful for some dairy operations depending on their circumstances.
Milk production in most regions of Missouri has declined. The remaining dairy operations are often producing near the capacity of the dairy facilities and natural resource base for applying manure nutrients. Expansion of these dairy production operations requires access to capital. Decreased profit margins have restricted access to capital as the debt service capacity of many dairy farms has declined.
The challenge to Missouri's dairy industry and especially dairy production operations located in the Ozark Region, is to increase the overall adoption rate of dairy production technologies and management strategies increasing efficiency and profitability. A milk production increase in Missouri is essential before the dairy processing industry infrastructure experiences further deterioration.
3.5 Comparative Trend Analysis
The most significant national trend is the growth of the dairy industry in the western states. Figure 7 shows a color-coded map of the United States that identifies where dairy cows have entered or exited. Each red dot indicates a location where the population of dairy cows has declined by 1,000 head over the five-year span between the 1992 and 1997. Blue dots depict areas where the population has increased by 1,000 head. The areas inside the outlined black boundaries contain blue dots representing growing dairy areas.
Figure 7. Change in Inventory of Dairy Cows from 1992 to 199717
California, Idaho, and New Mexico have recently expanded dairy production and have attracted large numbers of dairy cows. Dairy cow numbers have increased in many western states while the Midwest and eastern United States have experienced declining cow populations. Dairy cows are leaving traditional dairy areas; however, dairy growth pockets have appeared in Florida, Pennsylvania, New York, Michigan, Minnesota, South Dakota, Nebraska, Iowa, and Kansas.
3.6 Twenty-five Year Trends
Twenty-five year dairy industry data comparing Missouri dairy farm numbers, dairy cow numbers, milk production per cow, and total milk production to similar data from surrounding states, United States' averages and western growth states is summarized in below in Figure 8. Surrounding states included are Arkansas, Tennessee, Kentucky, Illinois, Iowa, Nebraska, Kansas, and Oklahoma. Western growth states include California, Idaho, and New Mexico.
3.6.1 Dairy Farm Numbers
Figure 8 shows the number of Missouri dairy farms declined at a slightly faster rate than dairy farms in the United States during the last 25 years. Missouri dairy farms declined at a slightly slower rate in the 1980s than dairy farms the United States. In the early 1990s, Missouri dairy farms declined at about the same overall rate as those in the United States and surrounding states. However, this data shows an increase in the rate of decline for a short period in the early 1990s in Missouri compared to other series shown. Western growth states are presently experiencing a decline in dairy farms at a rate similar to Missouri.
Figure 8. Change in Dairy Farm Numbers in the United States
Missouri had 21,000 farms with dairy cows, more than any surrounding state except Kentucky, in 1975. The number of Missouri farms with dairy cows decreased to 3,900 by the year 2000. Missouri presently has more farms with dairy cows than any surrounding state shown. The number of farms with dairy cows in Missouri and surrounding states are presented in Table 2.
Table 2. Number of Farms with Dairy Cows18
|1975||1980||1985||1990||1995||2000||2000 as %|
3.6.2 Dairy Cows Numbers
The number of dairy cows in Missouri declined at a more rapid rate than either the U.S. average or the average of surrounding states during the late 1970's and early 1980's. Since that time, the number of dairy cows in Missouri has declined at about the same rate as surrounding states. Changes in the number of dairy cows and growth of the dairy industry in the west are shown in Figure 9.
While the number of dairy farms in the western growth states has declined as seen in Figure 8, the total number of dairy cows has grown in the western states as shown in Figure 9. Table 3 shows the annual average inventory of dairy cows for Missouri and surrounding states from 1975 through 2000.
Figure 9. Change in Dairy Cow Numbers Since 1975
Table 3. Annual Average Number of Dairy Cows19
3.6.3 Milk Production per Cow
Milk production per cow continues to be a measure indicating the poor industry performance of the Missouri dairy industry. The U.S. average milk production per cow has increased 313 pounds per cow per year since 1975. Average milk production per cow has increased only 210 pounds per cow per year in Missouri during this period. This production deficit equates to $15 per cow per year in reduced income compared to the national average baseline. Dairy producers in many other states realize about $400 per cow additional income per year given their relative average production compared to Missouri. This income reduction can be the economic difference between profit and loss on many Missouri dairy farms. Should Missouri producers be able to recapture this income from underproduction, net profit is estimated to be $300 per cow after implementation of milk production improvements and increased import costs. Missouri's milk production per cow declined in the early 1990s when compared to other states and regions. Figure 10 and Table 4 show how milk production per cow in Missouri has compared to other states and regions since 1975.
Figure 10. Milk Production per Cow Since 1975
Table 4. Milk Production per Cow for Missouri and Surrounding States20
|1975||1980||1985||1990||1995||2000||2000 as a %|
3.6.4 Total Milk Production Total milk production in the United States has increased by almost 50% during the past 25 years. A slow compound growth in demand from population growth and slight increases in per capita consumption of dairy products has consequently allowed some industry growth. Western growth states have increased total milk production to 350% of 1975 levels. California milk production and later production in other western states grew rapidly as herd size and milk production per cow both increased. Total milk production in Missouri did not grow at the rate of the western states or the U.S. average, but remained competitive with surrounding states until the early 1990's. Figure 11 and Table 5 present total milk production data for these regions.
Figure 11. Total Milk Production Since 1975
Table 5. Total Milk Production in Missouri and Surrounding States (In Millions of Pounds of Milk) 21
|1975||1980||1985||1990||1995||2000||2000 as a %|
8 USDA National Agricultural Statistics Service, Agricultural Statistics, various issues.
9 Office of Social and Economic Data Analysis, University of Missouri, Columbia.
10 Deficit calculated using national per capita consumption from NASS, multiplied by population to get total consumption and using milk production statistics published by USDA, NASS.
11 Economic Research Service, USDA.
12 Central Order Federal Milk Marketing Administrator.
13 Commercial dairy statistics are as of December of each year, except 2001, which is as of October as reported by the Missouri State Milk Board.
14 USDA, NASS, Agricultural Statistics, various issues.
15 Dairy Cow numbers by county were queried from the Missouri Agriculture Statistics Service database via the Center for Agricultural, Resource, and Environmental Systems, CARES, UMC.
16 December Federal Order Shipments Since 1981, by NASS region, Source: Milk Marketing Administratorís Office, Kansas City.
17 1997 Census in Agriculture.
18 USDA, NASS.
19 USDA, NASS.
20 USDA, NASS.
21 USDA, NASS.