Writer: Marlene Fritz (208/364-4010 in Boise)
Source: Wilson Gray (208/736-3622 in Twin Falls)

TWIN FALLS, Idaho–How big is the average Idaho dairy? Go ahead, guess. Would you say a thousand cows, two thousand cows, three thousand cows?

Better pare that down–way down. According to Wilson Gray, University of Idaho agricultural economist in Twin Falls, the average size of Idaho’s 950 or so dairies is about 320 cows.

Those thousand-cow-plus dairies that are soaking up headlines represent just 7.3 percent of all Idaho dairy herds, although they do comprise about 46 percent of the state’s cows. A full two-thirds of Idaho dairy producers milk 200 or fewer cows, but their milking strings tally up to only 13 percent of the state’s dairy herd.

"Yes, we’re losing smaller dairymen," says Gray, "but the historical average is that we’ve been losing about 1 percent of all kinds of farms each year since the 1920s and the rate hasn’t changed very much."

Gray says smaller dairies "can compete and some are. You can certainly make a living with a couple of hundred cows–and for some people that’s what they want to do. But it takes a lot more hours and commitment on the part of the operator. That’s one reason you don’t see a lot of new people taking over these smaller dairies from families."

The owner-operator of a smaller dairy often serves as the herdsman, relief milker, animal health provider and financial manager. "On a larger dairy, those functions might be distributed over 20 employees and the owner is more of a people manager than a cow manager," Gray says. Consequently, unless someone in the family really wants to farm, retiring owner-operators typically sell their cows to another dairy.

Indeed, new dairies as a rule tend to be larger. Gray believes that’s primarily because the average profit per cow has stayed a relatively flat $200 for more than two decades. That average net income fluctuates wildly–by 40 to 50 percent or more from year to year–but it has not trended upward over time.

Gray cites national statistics developed by the accounting and consulting firm of Moore Stephens Frazer and Torbett. The firm’s figures indicate that, while milk production increased 47 percent between 1973-74 and 1997-98, feed costs rose 81 percent, offsetting economies of scale. In 1980, the all-milk price was $13.05 per 100 gallons; since then, it has averaged $12.34.

"If average net income per cow has remained constant, one method to increase cash flow for an operation is to milk more cows," Gray says. "This is most likely a major driving force for the herd size increase experienced in Idaho as elsewhere, and will probably remain so in the future."

More income allows producers to support additional family members. It provides a cushion when milk prices dry up–another powerful incentive for expansion. And a larger herd allows operators to spread fixed costs across more land and more animals and to negotiate more aggressively for higher-volume feed prices and veterinary fees.

As Western states continue to slice for themselves a larger share of the nation’s cheese manufacturing, processing capacity in Idaho has also undergone several rounds of sharp growth. "The very good milk prices of 1998 and into 1999 have fueled dairy expansion as well," says Gray.

Still, he cautions, "not all large herds are profitable, and herd expansion does not always lead to improved profitability."

Just south of Twin Falls, dairy producer Mike Quesnell says he has "dairied now for over 30 years, and a small dairy has been very good to me." But last year, his son Matthew returned to the farm after earning his master’s degree in animal science at Washington State University, and now the Quesnells are very cautiously and deliberately planning an expansion. Adding at least 75 cows–and quite possibly more–appears imperative.

"There’s no doubt about it: you’ve got to find ways to pay the labor for one more person," says Mike Quesnell. "Traditionally, that has come from increased production per cow, or possibly the owner-operator and his family members doing a lot of the work. That’s how small family operations have been able to compete with the larger operations, but that has become more and more difficult. Eventually, you get the point where economies of scale are just very important.

"If you’re making 50 cents a cow a day, would you rather have a hundred cows or would you rather have a thousand?"

Identifying the right target size goes beyond pinpointing maximum profitability, says Matthew Quesnell. Not only are a farm’s current facilities, financial situation and access to capital critical components in an expansion strategy, but the family must decide what size farm it will be comfortable with.

"Maybe it looks best on paper to be at 1,500 cows," says the younger Quesnell. "But that may not be the lifestyle you want."