Rising costs for feed, fertilizers, labor, and other resources increasingly complicate the survival of small farms. As of 2022, industrial farms keeping at least 2,500 cows accounted for about 45% of all milk sales in the US. Consolidation occurs not only among farming operations, but also among dairy cooperatives that represent the interests of farmers. According to Civicmedia, the majority of dairy farmers sell raw milk through cooperatives. At the same time, the number of dairy cooperatives in the US decreased from over 1,900 in 1952 to 107 in 2023.
According to Food and Water Watch data, the three largest cooperatives, namely Dairy Farmers of America, Land O’Lakes, and California Dairies, ensure the sale of approximately 83% of all milk in the US. The combination of farming operations and vertical integration allows these giants to effectively withstand pressure from large retail chains. Large cooperatives act as so-called "Category Captains". The US retail sector, in particular supermarkets, is significantly consolidated, giving large retail chains significant influence over supply terms. Thanks to strong brands, they can negotiate with retail chains on equal terms, ensuring stable product sales for farmers.
According to USDA agricultural census data, between 2017 and 2022, 15,866 dairy farms ceased operations in the US. Traditional dairy states suffered particularly significant losses. In particular, in Wisconsin the number of farms decreased by 2,740, in Pennsylvania – by 1,570, and in New York – by 1,260. At the same time, the number of dairy farms with a herd of over 2,500 cows grew, and states such as Texas, Idaho, and New Mexico demonstrate significant investments in creating new production capacities. While the number of farms was decreasing, total milk production actually grew by 5%, from 215.5 billion pounds in 2017 to 226.4 billion pounds in 2022.
Consolidation of raw material volumes allows for a significant reduction in operating expenses. It makes it possible to optimize logistics and transportation of huge volumes of raw milk. In addition, farmers who are cooperative members can save on purchases of feed, fertilizers, and equipment thanks to wholesale contracts. Large dairy farms have a cost advantage compared to small farms, which is one of the key factors driving the consolidation of the American dairy industry. As a result of consolidation, capital expenditures, equipment, technologies, and regulatory compliance are distributed over significantly larger production volumes on large farms. It is also easier for a cooperative to coordinate milk flows from large consolidated farms than to organize supplies from hundreds of small farms.
According to analysis by the USDA Economic Research Service (ERS), average production costs on farms with a herd of over 2,000 cows stand at $23.06 per hundredweight, while on farms with 100-199 cows they reach $32.83 per hundredweight. For American farms with a herd of fewer than 1,000 cows, non-feed costs actually exceed feed costs. The largest cost item is not what the cow consumes, but everything else necessary for her maintenance. It is precisely here that the main pressure on smaller producers arises, stimulating consolidation.
Instead of merely reselling raw milk, cooperatives invest in their own processing capacities. Land O’Lakes became a leader in the American market for packaged butter and cheeses, and also actively diversified its business into feed and seed production. Dairy Farmers of America (DFA), after acquiring assets of the bankrupt company Dean Foods, significantly expanded its own network of milk bottling plants. California Dairies effectively processes surplus milk into skimmed milk powder and butter, which are oriented toward export.
A united economic front also allows cooperatives to protect their members' interests more effectively at the state level. A striking example was the joining of forces by DFA, Land O’Lakes, and California Dairies for joint voting on the introduction of the Federal Milk Marketing Order in California, which contributed to establishing fairer and more market-oriented base prices for local producers.
According to the MarketsandMarkets forecast, the US dairy market volume may grow to 343.7 billion US dollars by 2034. US milk production in 2026 is expected to reach approximately 234.1 billion pounds, compared to 231.4 billion pounds a year earlier. At the end of 2025, the dairy cow herd in the US reached a peak of nearly 9.575 million head. Improvements in genetics, feeding, and herd management raise milk yields per cow each year. This allows the industry to increase total production volume even under conditions of a shrinking herd. Dairy exports remain an important channel for disposing of production surpluses in the US. Exports in 2026 are expected to reach approximately 7.94 million tons. Export volumes of skimmed solids will remain roughly stable, as an increasingly large part of domestic production is reoriented toward high-protein products in demand among American consumers.
Press service of the Association of Milk Producers
based on materials from: https://www.californiadairies.com/pres
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