Traditional Wisconsin pathway into dairying takes a detour

Compared with established dairy farmers, new dairy farmers in Wisconsin are much less likely to be taking over the farm from their parents, and they’re more likely to use off-farm income to supplement their farm income, according to researchers with the Program on Agricultural Technology Studies (PATS) at the College of Agricultural and Life Sciences.

“Many recent dairy entrants in Wisconsin are able to do so because of off-farm employment and earnings. Utilizing off-farm income in order to finance entry and deal with the cash-flow problems of the early years of farming thus appears to be one of the major strategies for successful entry into dairying in recent years.” Douglas Jackson-Smith Assistant professor Urban and Regional Planning

How to obtain the report For a copy of “Entry into Wisconsin Dairying: Patterns, Processes and Policy Implications,” contact the Program on Agricultural Technology Studies at Taylor Hall, 427 Lorch Street, Madison WI 53706; phone (608) 265-2908.

Some of these findings contradict long-held assumptions about Wisconsin’s dairy farmers and how farms pass from generation to generation, according to PATS researcher Douglas Jackson-Smith. These changes have a variety of implications for Wisconsin’s agricultural policymakers.

The report identifies entry into dairying as one of the key factors in slowing or stopping farm losses. The researchers found three paths of entry. The traditional path, where the child of a dairy farmer takes over the family farm (either gradually through a partnership or all at once) proved to be the least common entry method. Most new entrants, people with farming backgrounds but whose parents no longer farm, started out on their own as single-family or individual operations. The second entry group, people with non-farm backgrounds, usually had one or two off-farm incomes to help meet cash-flow and family living requirements.

Only 18 percent of new entrants farmed land that was part of their parents’ farms, versus 62 percent of established farmers. New entrants were more likely than established farmers to run single-family or individual operations (85 percent versus 72 percent).

New entrants were less likely to have grown up on a farm and were far more likely than established farmers to have been farm hands, hired farm managers or junior operators of farms. Jackson-Smith expects this trend to continue, with a growing share of new entrants coming from non-dairy farm families. “Dairy policymakers thus need to recognize the increased role that nontraditional entrants – persons whose parents did not farm or are not currently farming, persons whose farming experience is more as a farmhand or hired manager than as a child of a dairy farming family, and persons who do not have family resources to ‘bring to the table’ – are playing in Wisconsin dairying,” Jackson-Smith says.

Less than 12 percent of new dairy farmers were in their early 20s; 45 percent were 25 to 34 years old, and 33 percent were 35 to 44 years old. This suggests that people may be entering dairying later in life than in previous decades, according to Jackson-Smith.

Nearly half of new entrants derived most of their income from off-farm sources, while only 8 percent of established dairy farmers said that most of their income came from off the farm. New operators were much more likely to work off the farm than established dairy farmers (34 percent versus 15 percent); spouses of new entrants were only slightly more likely to work off-farm (40 percent versus 35 percent). Among new entrants, 48 percent said most of their income came from off-farm, compared with just 8 percent of established dairy farmers.

“Many recent dairy entrants in Wisconsin are able to do so because of off-farm employment and earnings,” Jackson-Smith says. “Utilizing off-farm income in order to finance entry and deal with the cash-flow problems of the early years of farming thus appears to be one of the major strategies for successful entry into dairying in recent years.”

Cash flow was the biggest obstacle to the entry process. More than half of the recent entrants cited “maintaining adequate cash flow for the first few years” as a serious obstacle. Less than one-third said acquiring equity to finance entry was a problem, and 21 percent reported problems getting loans once they had some equity.

Recent entrants tended to have smaller herds than established farmers (averaging 44 cows versus 66 cows); only 8 percent of new entrants had herds of 75 cows or more, compared with 24 percent of established farmers. Recent entrants intend to expand gradually and expect to have an average of 68 cows by the year 2000. Wisconsin policymakers need to recognize that programs and new technologies being developed to enhance entry into dairying must be designed with the moderate-scale farm in mind, Jackson-Smith says.

Rolling herd averages were 16,539 pounds for new entrants, compared with 18,269 for established farmers. New entrants averaged 175 rented plus owned acres, versus 350 rented plus owned acres for established dairy farmers.

Recent entrants were more likely to use stanchion barns and less likely to have milking parlors, feed total mixed rations or use rBST or DHI or other record-keeping services. New farmers were much more likely than established farmers to use management-intensive rotational grazing (30 percent versus 15 percent).

“A number of the practices widely used by recent entrants – the tendency to minimize the number of acres owned and rented, the tendency to employ existing facilities (especially stanchion barns), and the tendency to employ MIRG – suggest that a key dairy entry strategy is to combine cost minimization and investment minimization,” according to Jackson-Smith.

About 800 new dairy operations started during the 18-month study period, from spring 1994 through 1995. The researchers compared data on these new entrants with information gathered from established farmers in the 1997 Dairy Farmer Poll. Other researchers in this study were Fred Buttel, Brad Barham Daniel Mullarkey and Lucy Chen.

In a forthcoming study, PATS and other UW researchers will provide an in-depth look at 35 new dairy entrants and their efforts to become the next generation of dairy farmers in Wisconsin. For a copy of “Entry into Wisconsin Dairying: Patterns, Processes and Policy Implications,” contact PATS at Taylor Hall, 427 Lorch Street, Madison WI 53706, phone (608) 265-2908.