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8. Dairy Industry
The dairy industry consists of retail sales of milk, cheese, soy products, spreadable fats, and
yogurt, with cheese representing the largest percentage of sales in the industry. Dairy is the primary
agricultural business in 11 states—California, Wisconsin, New York, Pennsylvania, Idaho, Michigan,
New Mexico, Vermont, Arizona, Utah, and New Hampshire.
Milk is the second largest category of dairy sales in the United States.
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Historically, supply and
demand forces, influenced by federal
and state dairy programs, have largely
determined the price farmers receive for
raw (unprocessed, unpasteurized) milk.
The 1996 Federal Agriculture
Improvement and Reform Act, however,
removed price supports, reformed
federal milk marketing orders, and
drastically reduced the role of
government in regulating dairy markets.
This law signaled the end of 63 years of
governmental agricultural support policies that were first established during the "New Deal" era by the
Agricultural Adjustment Act of 1933. This new law meant the end of government purchase and stock
holding of dairy products. The new formula of pricing, where the price class is determined by the enduse
of the milk, increased price fluctuation for dairy farmers and expanded the control of
large dairy processors and cooperatives.
Table 7: United States Dairy Market Category
Category Value ($million) % of the market
Cheese 21,817.1 43.5%
Milk 16,574.2 33.0%
Yogurt 6,624.7 13.2%
Spreadable fats 4,001.2 8.0%
Soy Products 1,139.2 2.3%
Total 50,156.4 100%
Source: Marketline, February 2013
Before this law, small and mid-size dairy farms were more able to control prices, and therefore,
make a fair living. Now, with variable prices each year, smaller farms are less able to deal with these
fluctuations. When prices paid to dairy farmers fall and their costs of production remain constant or
increase, small and mid-size dairy farms cannot compete with larger ones and are squeezed out of the
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