According to a report from Terrain, the agricultural forecasting company, the US market has had an average decline of round 5% a year since 1992, resulting in the loss of over 100,000 farms.
The US Department of Agriculture’s (USDA) Census of Agriculture in 2022 showed that half of dairy farms in the US had fewer than 100 cows yet only represented 4% of milk sales. But farms with 2,500 or more cows represented only 4% of total farms but 45% of total sales.
The Terrain report also showed that fewer farms does not mean less milk. The US dairy industry produced more than 231.7 billion pounds of milk in 2025. The figures showed a major improvement on efficiency as that is 54% more milk than in 1992 despite having 190,238 less cows on 107,900 fewer farms.
The report said the “shifting landscape” presents new risks and opportunities for producers.
The changes means that while the number of farms have fallen those that continue operating are larger as they have driven consolidation to achieve economies of scale.
Terrain said that larger farms are generally able to produce milk at a lower per-unit cost than their smaller counterparts. It quoted the USDA Economic Research Service which used a cost frontier model to estimate economies of scale. It found that a 1% increase in milk output resulted in a cost increase of less than 1%.
The report suggests that the cost of production per hundredweight of milk can be reduced by increasing total production on the farm, leading to efficiency gains.
However, the report also revealed that while there has been a jump in efficiency large farms can be less responsive to near-term price signals.
It said that as milk production becomes less concentrated among fewer, larger farms, the total US milk supply is likely to be less sensitive to price movements and margin pressure.
“By the end of the decade, I expect there to be fewer than 20,000 dairy farms in the U.S. The absolute number of farms that exit each year may begin to slow in the medium to long term, but in the near term the combination of aging farmers and high cattle prices could accelerate exits,” said Ben Laine, Terrain’s senior dairy analyst in the report.
“Because consolidation changes how milk supply responds to markets and who holds leverage along the supply chain, producers will need to prepare to adapt accordingly.”
