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MegaMilk: Charting Consolidation in the U.S. Dairy Industry

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MegaMilk: Charting Consolidation in the U.S. Dairy Industry

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MegaMilk: Charting the Consolidation of the Dairy Industry

Today’s dairy industry looks very different to how it did just 30 years ago.

Milk production in the U.S. has increased by a whopping 50% over that time frame—yet, the total number of dairy farms has dropped by three-quarters.

Fewer and larger farms now have the lion’s share of all U.S milk cow inventory. While they have the ability to produce more competitively priced dairy products and provide more value to consumers, it is causing financial devastation for small farmers.

The graphic above uses data from the USDA to chart the rapid consolidation of the American dairy industry between 1992 and 2017.

The End of the Small Dairy Farmer?

In the U.S., the dairy industry is one of the fastest consolidating industries in comparison to almost all other agricultural sectors.

Between 1992 and 2017, small commercial farms with 10-99 cows saw an average decline of 70%. These farms accounted for 48.5% share of all U.S. milk cows in 1992. In 2017, that number stood at just 12.2%.

Over time, small farm production has been replaced by that of bigger and more consolidated “megafarms”—a move that can be attributed to the many benefits that scale brings, such as lower costs of production and the potential to compete in the international market.

Share of U.S. milk cow inventory (by year)
Herd size199219972002200720122017
1-9 milk cows0.9%0.7%0.6%0.4%0.4%0.4%
10-49 milk cows19.5%13.8%9.2%6.8%5.9%3.6%
50-99 milk cows29%24.5%19.1%13.8%11.1%8.6%
100-199 milk cows19%18%15.4%12.8%10.6%9.4%
200-499 milk cows13.7%15.3%14.7%13.8%12%12%
500-999 milk cows8%10.2%12.2%12.5%11.3%10.7%
>999 milk cows9.9%17.5%28.8%39.9%48.7%55.2%
Total 100%100%100%100%100%100%

The Need For a Survival Strategy

While small dairy farmers simply cannot keep up with larger farms encroaching on their turf, they also have fluctuations in dairy prices to contend with. Milk prices fell in 2018, narrowing the gap between milk prices and feed costs so much that another wave of farm closures ensued.

To make matters worse, many small dairy farmers are close to retirement age, and according to the USDA, exits are more likely if the farm operator is 60 or older.

Despite the hardship facing small dairy farmers, analysts suggest that consumer backlash against large-scale production could present opportunities for small dairy farmers to create premium artisanal products. However, such initiatives would be entirely dependent on the state of the economy and where consumer’s values lie.

The Wider Implications

With milk production shifting to larger farms, a range of both direct and indirect impacts are being felt across the country.

For example, milk production is now predominantly focused in fewer states such as California and Wisconsin, which together accounted for almost 33% of all U.S. milk production in 2018.

In larger farms, the herds are typically confined to tight spaces— rather than grazing in pastures—making animal welfare an issue for many of these farms. Concern over waste contamination and air pollution also brings the environmental sustainability of larger farms into question as they come under more pressure to reduce their impact on the planet.

Changing Tastes

Looking beyond the production of milk, changing consumer preferences could result in the most transformative effects on both large and small scale dairy farmers.

While rising populations are increasing the demand for dairy, per capita milk consumption declined by 24% between 2000 and 2017 in the United States. Consequently, the largest dairy producer in the country, Dean Foods, filed for bankruptcy in 2019, followed by another major milk producer, Borden Dairy, just two months later.

Experts claim that changing consumer preferences, along with competition from other beverage categories, are responsible for 90% of the total dairy decline.

No Country for Old Farms

The confluence of changing economics and an aging population of farmers has brought the U.S. dairy farming industry to a tipping point, and the near future is likely to bring a fresh wave of dairy farm closures.

I don’t see anything that would give them hope at this point. The best advice I can give to these folks, dairy farmers, is to sell out as fast as you can.

– Joe Schroeder, Farm Aid

As smaller farms continue to disappear from America’s rural landscape, the impacts of consolidation will not only affect dairy farmers, but entire rural communities too.

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Agriculture

The Fertilizer Market: 4 Things Investors Need to Know in 2023

What factors are impacting the fertilizer market in 2023? Here are four trends driving global fertilizer demand.

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Graphic showing the top importing and exporting countries for fertilizer
The following content is sponsored by Brazil Potash
Fertilizer market and what investors need to know in 2023

4 Things Investors Need to Know About the Fertilizer Market in 2023

Food security is of crucial importance many reasons—from ensuring both political and social stability, to supporting the health of the global economy.

You may be surprised to learn that fertilizer plays a crucial role in food security by enhancing the quantity and quality of harvests. In short, fertilizers can make food more affordable and accessible.

The above infographic sponsored by Brazil Potash digs into four major trends currently impacting the demand of fertilizer. Let’s break them down here.

1. Feeding 10 Billion People by 2050

The world’s population is increasing rapidly and is expected to reach nearly 10 billion by 2050. This growth is particularly strong in developing countries where food security is already strained.

As the population grows, more crops are needed to support global food systems. Increasing crop production is essential and the fertilizer market is a critical ingredient in improving crop yields.

2. Less Farmland

After around 10,000 to 12,000 years of reshaping land for agriculture, the amount of arable land on earth is declining.

Based on the agricultural expansion predicted to take place between 2010 and 2050, an estimated 593 million hectares of agricultural land—nearly twice the size of India—will be needed.

With little room left to grow, fertilizers will take on an increasingly critical role in boosting crop production.

3. The World Needs More Fertilizer

The global fertilizer market was valued at $163.2 billion in 2021 and is expected to reach $203.5 billion by 2027, growing at a CAGR of 3.9% during period of 2022-2027.

As population growth continues to drive demand for increased crop production, investment in fertilizer production is essential to meet this growing demand.

4. The Global Fertilizer Supply Chain

Supply chain disruptions in the fertilizer market puts global food security at risk.

Farmers’ ability to access a consistent and affordable fertilizer supply directly affects crop yields, production, and food prices. 

Increasing the supply of domestically produced fertilizer in countries heavily reliant on imports will support low-cost, sustainable, in-market fertilizer for farmers who need it.

Let’s break down the top five fertilizer-exporting countries based on value, according to Statista.

Country Value of Fertilizer Exports, 2021
🇷🇺 Russia$12.49B
🇨🇳 China$11.47B
🇨🇦 Canada$6.61B
🇲🇦 Morocco$5.71B
🇺🇸 United States$4.05B

On the other hand, here are the top five fertilizer-importing countries, based on value from the same source.

Country Value of Fertilizer Imports, 2021
🇧🇷 Brazil$15.16B
🇺🇸 United States$10.29B
🇮🇳 India$9.12B
🇫🇷 France$2.8B
🇨🇳 China$2.77B

Russia currently dominates the fertilizer market as the largest exporter based on dollar value at approximately $12.49 billion dollars, while Brazil is the largest importer of fertilizer based on an import value of approximately $15.2 billion dollars.

Investing in Brazil

Large agricultural producers that rely heavily on fertilizer imports, such as Brazil, would benefit from a local supply that farmers can easily and affordably access to improve crop production.

Fertilizer company Brazil Potash is engaged in the extraction and processing of local potash ore to increase yields and strengthen crop growth in Brazil.

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Interested in learning more? Click here to learn about how you can invest in the fertilizer market with Brazil Potash.

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