Electronic Report from the Economic Research Service
Production Costs of
U.S. Dairy Operations
Sara D. Short1
In this report. . .Total costs of producing milk in 2000 ranged from an average of
$11.58 per hundredweight (cwt) of milk sold in the Fruitful Rim-West region to $18.23
per cwt in the Eastern Uplands. Milk producers in the West had a significant cost advan-
tage over producers in other regions in 2000 because their operations were much larger.
Operations with 500 or more milk cows had significantly lower total operating and own-
ership costs, indicative of the economies of size experienced by larger operations. Also,
differences in animal performance, feed efficiency, and labor efficiency were critical in
determining whether producers were in the low- or high-cost group for producing milk.
These findings were based on the 2000 Agricultural Resource Management Survey
(ARMS), the most recent national survey of milk producers.
Keywords: Milk, operation characteristics, production practices, costs of production,
Acknowledgments: The author appreciates the assistance of her colleagues William D.
McBride and Amy Goldian.
1Sara D. Short is an agricultural economist with the Resource Economics Division
of USDA’s Economic Research Service.
ii Characteristics and Production Costs of U.S. Dairy Operations/SB-974-6
Economic Research Service/USDA
Milk is produced in all 50 States. The top five milk-pro-
ducing States in 2000 were California, Wisconsin, New
York, Pennsylvania, and Minnesota (NASS, April 2002),
accounting for 53 percent of all milk produced. The
same five States topped production in 1975, but in dif-
ferent order. Wisconsin, California, New York,
Minnesota, and Pennsylvania together produced 48 per-
cent of the Nation’s milk that year. The percentage
increase for these five States between 1975 and 2000
may seem slight, but their total milk production