New data from USDA’s Economic Research Service shows the U.S. dairy sector has experienced a gradual shift in milk production toward larger dairy operations. The research indicates that the shift in production from small dairy herd-size farms to large dairy herd-size farms mirrors total factor productivity growth across the dairy sector. Total factor productivity, or TFP, is a broad measure of agricultural productivity that compares the total output to the total land, labor, capital, and material inputs used in farm production. Between 2000 and 2016, the largest dairy operations, those with more than 1,000 milk cows, experienced a TFP growth rate of 2.993 percent per year. Meanwhile, TFP growth for the smallest operations, those with fewer than 100 milk cows, increased at an annual rate of 0.639 percent. TFP growth across all operations was primarily driven by technological progress—growth associated with innovations in systems, processes, and techniques that convert inputs into milk output—and environmental effects that positively impacted feed availability.
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