The USDA is Conducting a Check Up on the Financial Health of America's Dairy Industry

Three thousand randomly selected dairy farmers – including 800 with organic dairy operations”“across 28 states will be interviewed. The information collected is for the final phase of the 2016 Agricultural Resource Management Survey (ARMS), an annual report by NASS and USDA’s Economic Research Service. The survey gathers in-depth information on things like production practices, income, expenses, assets, debt and a farms’ operational characteristics, according to Sue King, NASS public affairs director.

“Because of the breadth of information collected, many federal policies and programs that affect U.S. farmers and farm families use the information from ARMS,” King tells Modern Farmer in an email. “Our sister agency, the Economic Research Service, uses the ARMS information extensively for their economic analysis of the well-being of agriculture and farm families.”

One big question that the USDA wants to ascertain from the data is how the new Dairy Margin Protection Program, introduced in the Agricultural Act of 2014, is working. The program, which aims to help dairy producers when milk prices drop and feed prices are high through low-cost insurance, was launched by the USDA in 2015.

Each year, the ARMS survey focuses on different commodities chosen on a rotating basis. The last time ARMS studied the dairy industry was in 2010, though organic dairy farming wasn’t included in that research. Considering that dairy has been one of the fastest growing segments of organic agriculture, the USDA wants to determine if the organic dairy industry is still expanding and parse out “the characteristics of dairy farms and farm operators choosing organic production,” says King.

The data will also be used to study the economy of scale in the dairy industry. Kings says that based on data from the 2010 ARMS, dairies with less than 50 cows had production costs twice that of dairies with 1,000 cows or more. “This cost-size relationship means that large dairies account for an increasing share of milk production and small dairies are going out of business, often as small producers reach retirement,” she says.

The USDA plans to examine how some small dairy operations have remained profitable in this competitive industry. One option many smaller operations have turned to is organic milk production. The USDA wants to look at why this is, and how it affects profits, she says.

The information will be collected between January and April. After it’s gathered, the NASS and ERS will review and analyze the data. A summary of the information, the Farm Production Expenditures report, will be published in August followed by an in-depth report towards the end of the year.

“Gaining a better understanding of the economic forces affecting dairy farms of various type and size will help to shape future dairy policy,” says King.

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