Duration: 10/01/1996 to 09/30/2001

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

Dairy farming and the dairy industry are undergoing tremendous structural transformation. The size, number and distribution of farms are changing. Labor and management structures are changing. Specialization is leading to changes in enterprise combinations. New technologies are changing the mix of capital, land and labor - and require new skills. The transformation has disrupted everyone from suppliers of inputs to the consumers of dairy products and from individuals to families to communities, as they all try to adjust.

The problem is change and management of the change. Dairy farm families, dairy handlers, processors, retailers, consumers and communities, state and local officials, and national policy makers struggle to adapt to the changes. Lack of understanding of the change leads to disorientation, dislocation, inappropriate family and business decisions, inappropriate policies and regulations, inefficient allocations of public and private resources, and loss of livelihood and way of life.

In order to manage change better, we need to know more about the changes taking place, their causes, successful strategies for managing change and what makes some strategies more successful than others.

Related, Current and Previous Work

This project rests on a broad and interdisciplinary foundation built by animal scientists, agricultural economists and rural sociologists studying structural change. They have observed changes in farm populations, characteristics,operations and performance, explored relationships among these changes and their antecedents, and begun developing models of the dairy-farm system.

The changing structure of dairy farming in the United States has been characterized by three major trends over the past 50 years. Milk production/cow has increased tremendously, due to advances in dairy technologies and management (Lyson and Gillespie; Gravert). Average herd size has grown, requiring increased amounts of hired labor (Gilbert and Akor). Milk production has shifted from the Mid-west toward the sunbelt (Lyson and Geisler).

Farm structure and structural change vary across the U.S. Considerable state-level diversity exists in dairy-farm size, productivity and organizational characteristics, and in processing-industry structure (Davidson and Schwarzweller, 1995). Differences in productivity growth have been attributed to differences in the classical factors of production - land, labor, capital and management (Lyson and Gillespie). States that have been able to substitute capital and management for labor and land at a faster rate have seen their milk production/cow increase over states with lower rates of substitution. Milk- market structure has been related to the persistence of family operations. Small-scale processors tend to buy from small-scale producers, while large- scale processors capture economies of size by seeking out or attracting large- scale producers.

While the trend toward fewer and larger dairies over the past 50 years shows no signs of abating, family labor operations may persist well into the future, especially in areas with a tradition of family dairy farming (Davidson and Schwarzweller, 1993). In the near term, at least, dairy farming in the U.S. is likely to be characterized by a dual structure of production (Gilbert and Akor; Lyson and Geisler).

Ag economists have conducted many studies of dairy farming. A small subset of them relate closely to dairy-farm structure. A few ag economists, seeking to explain why changes in farm structure occur, have begun building models using a conceptual framework of a farm as a system of interdependent parts. This farm system is frequently organized in representative farms, consisting of resources, enterprises, inputs, outputs and prices. The best farm-structure models incorporate two or three factors that influence structure. Zepeda and others examined associations among farm characteristics, technology adoption and farm structure. With Butler and Carter, she focused on the impact of bovine somatotropin on the California dairy industry. Working toward a whole-farm dairy-systems model, Smith, Klemme and Holmes have linked farm characteristics, production systems, herd performance and financial performance. (See paragraph 11 in Responses to issues.)

Others, not working directly on model development, have related farm structure and characteristics to one or more antecedents. Technology has been one theme. Carley and Fletcher, for instance, found that both farm ownership arrangements (i.e., sole proprietor, partnership and corporation) and geographical characteristics were related to technology adoption and milk yield. Others have noted that cost-reducing, as opposed to producUonenhancmg, technologies and practices have been adopted more rapidly by smaller operations. The less capital-intensive operations using rotational grazing or purchasing all their feeds have been profitable for some producers in the current economic environment (Barham, Chavas and Klemme; Welsh). Bauman related three alternative feed-acquisition strategies to cost of production and size on Minnesota dairy farms. He suggested that the lower costs of purchased-forage operations may partially explain why the uppermidwest share of milk production is declining.

Ag economists and rural sociologists have related human resources to farm structure. Some of the work has focused on the concept of human capital, linking personal characteristics to management behavior (Rahm and Huffman). Ag economists working in the human-resource-management area have recognized the impacts of both human capital and organization on farm performance (Milligan, 1993).

A number of authors have examined on- and off-farm work of husbands and wives. Lyson (1985), Meara, and others have shown these labor allocations and other variables of social organization at the farm-household level to be related to enterprise mix, production system, mechanization, farm size, gender roles, age, education, off-farm demand for labor and farm income. The accessibility and availability of off-farm employment opportunities affect decisions to pursue particular agricultural enterprises (Lyson, 1986). Laborintensive operations such as dairying require full-time, year-round labor and are not generally conducive to part-time farming strategies.

Some of the links between dairy farms and the surrounding social and business community and economic environment have been noted. In one community in Minnesota, Love observed that small farms interacted more with local businesses than large farms, and dairy farms interacted with these businesses more than cash-crop farms. Davidson and Schwarzweller (1993; 1995) noted that local processors are a key to the viability of dairy farming in a region and dairying may be one of the best ways to maintain the economic base in economically marginal regions. Morse et al. examined economic flows between dairy farms and the rest of two communities in Minnesota, while conducting rural-development programs aimed at retaining and expanding local businesses, including farms.

The influence of policy on farm structure has been another concern. Gladwin and Zabawa noted that price supports, other state and federal government programs, access to markets, and agricultural infrastructure affect farm structure. Dellenbarger et al. related changes in dairy-farm structure in Louisiana to changes in market conditions and to agricultural policy. Kaffka and Milligan (1989) noted that in addition to modem technologies, appropriate management practices and local value-added processing, policies that deliberately create positive externalities are also needed to sustain dairying.

Besides the models noted above and the usual survey and interview methods, some investigators have used the panel methodology proposed here for studying structural change. Since 1907, Stanton and others have maintained a dairy-farm panel in Dryden, New York to track changes. Frese established farm-operator panels m Mississippi for a wide variety of projects. examining structural change among them. Panel studies are a powerful, although complicated methodology (Babble; Blalock) - often as close to experimental conditions as social scientists get.

A search of the CRIS database yielded 13 state projects and eight regional projects relevant to the proposed work. Eight of the state projects are contributions to the NE-177 project and will not be discussed here. Five of the regional projects are production oriented. Of the three social-science or multidisciplinary projects, one has terminated, one is NE-177 and the other is actually an information-exchange group, rather than a research project.

While three of the state projects are complementary, none duplicates the work proposed. Yonkers and Ford are building a farm-level model for relating dairyfarm structure to technology, the economic environment and government policy in Pennsylvania. Zepeda is developing a model that links technology and policy to structural change. Stanton, Casler and Knoblauch are using farm-level data from Illinois, Missouri, New York and Ontario to examine farming practices, size, environmental impacts and economic performance. Their objectives include identifying likely changes in the structure of the dairy industry over the next 2 decades. All three projects are missing both the human resource as a factor of farm structure and community impacts. Besides covering limited geographical areas, all three projects are missing both the human resource as a factor of farm structure and community impacts. Zepeda's and Stanton's models exclude the social and economic environments.

Other work continues on sub-systems. Pelsue is projecting the potential impact of seasonal dairying on the New England milk market. Two studies deal with impacts of farm structure on communities. Kelsey is relating changes in land use to local government finances in Pennsylvania. Levins is relating sustainable agricultural practices to environmental quality and ruralcommunity viability in Minnesota.

Several regional research projects on dairying and the structure of agriculture exist or recently ended.

NC-119 Dairy herd management strategies for improved decision making and profitability

NC-185 Metabolic relationships in supply of nutrients for lactating cows

NC-198 Identification and analysis of issues influencing the competitiveness of the U.S. Dairy industry

NE-112 Resistance to mastitis in dairy cattle

NE-132 Environmental and economics impacts of nutrient flow in dairy forage systems

NE-148 Regulation of nutrient use in food-producing animals

NE-177 Organizational and structural change in the dairy industry

S-246 The transformation of agriculture: resources, technologies, and policies

NC-119, NC-185. NE-112. NE-132 and NE-148 are production oriented and will not be discussed here

NC-198 is actually an information-exchange group, rather than a research project. The exchange group focuses on impacts on the dairy industry as a whole, rather than impacts on farms and communities. It functions by organizing workshops and seminars to share research findings and facilitate collaboration, rather than by organizing joint research activities.

NE-177 is the project proposed for revision here-

S-246 has just been concluded. It covered all of agriculture. While it did consider the influences of policy and technology on farm structure and of farm structure on the surrounding community, it did not consider the roles of the human or other farm resources, or social or economic environments in determining farm structure.

In summary, the literature identifying factors and conditions that affect dairy-farm organization and business outcomes is abundant m both production and social sciences. Investigators from animal science, agricultural economics and rural sociology have looked and are looking at structural change in the dairy industry, examining how and why it occurs. The underlying goal of much of this work has been understanding the change process.

The work has progressed to the development of partial models of the antecedents and consequences of structural change. The models have not yet been extended to cover the array of factors recognized to contribute to farm structure. As we move from understanding structural change to managing it, we need a comprehensive model of the antecedents and consequences of change. Technological, economic and political environments have been combined in models. The human resource, social environment and community are missing from these models.

A conceptual framework for a more comprehensive model - a farm-environment-community model - is being developed in the NE-177 project. It is based on the premise that farm organization is a function of characteristics of 1) resources on the farm and 2) the environment around the farm. The resource characteristics are internal factors and include characteristics of physical resources, such as soil drainage, and characteristics of human resources, such as training and goals. The environment around the farm includes the economic, social, political and technological environments, which are external factors. Farms are interdependent with their communities. Changes made on farms will also have impacts on the communities.

We now know what many of the pieces of the conceptual framework are. Some pieces, however, are not yet ready to put in the framework. Many of the examinations have been limited to a state or community. Many have focused on individual factors, rather than a class of factors, e.g., management-intensive grazing, rather than technology. To complete the conceptual framework, we need to fill out these categories and add the missing components. The next thing to do is develop a data set that includes the full range of factors and conditions influencing farm structure, using enough geographical areas to represent the range of conditions existing in the U.S.

With all the pieces, we will be ready to put the conceptual framework together. (See paragraph 3 in Responses to issues.)

Objectives

1. Determine the interrelationships among and relative importance of social, economic, technological and political environments, regional conditions, and entrepreneurial strategies affecting restructuring of the dairy industry in different dairy localities.
   
2. Identify, examine and assess the effects of structural change in the dairy sector on local communities and related enterprises.
   
3. 
   

Methods

These procedures may be adjusted if more efficient or powerful methods of achieving the objectives are identified. Procedures for Objective 1 To assess the dynamics of change at the farm level and provide information for completing the conceptual framework for the comprehensive model of farm structure, a coordinated, mufti-state, mufti-community panel study will be organized, secondary data assembled and key informants from the communities interviewed. Each participating state will establish at least one panel of 30-50 dairy-farm families who are willing to participate in a 5-year study and who live in a dairy-farming community or contiguous area. The first community selected in each state will represent the mainstream of dairying in that state, socially and economically dependent on dairying. Second communities may represent other interesting, relevant and research-worthy situations. Rationales for selecting communities will be reviewed and ratified by the Committee. (See paragraphs 3, 5, 6, 14, and 17 in Responses to issues.) Five data-collection efforts will be conducted with these panels - a baseline survey, follow-up surveys, exit and entrance interviews, and off-year censuses. Data collected in the baseline survey will include farm characteristics, practices, operations and performance, labor, management and family structure, entrepreneurial strategies, family and business goals, perceptions and priorities, economic conditions, and non-farm employment. Both current status and changes in the last 3 years will be obtained. Follow-up surveys will focus on changes made, planned or observed in the above data categories, including new investments and major renovations. Entrance and exit interviews will be quite similar, focusing on why the family entered or exited dairying. Data will include perceptions of future economic conditions, current and expected farm performance, and special events (such as marriage, injury and death). The ofd year censuses will note entrants, exits and major reorganizations occuring between years 1, 3 and 5. (See paragraph 15 in Responses to issues.) These data-collection activities will be jointly planned and implemented. Wisconsin will lead a sub-committee charged with designing and producing common survey instruments and coordinating field work. Texas will provide advice on design to ensure statistical validity and provide for ease of data handling. (See paragraph 7 m Responses to issues.) Survey materials will be centrally produced. Implementation will be synchronized. (See paragraph 8 in Responses to issues.) Surveys will be conducted in winter, starting with 199697 for the baseline survey. Participating dairy farmers in each state will be interviewed directly or by phone a minimum of three times over the 5-year period. Entrants and "exiters" will be interviewed as they appear. Data management and analysis will be coordinated by Texas. (See paragraph 8 m Responses to issues.) Data will be summarized and analyzed initially at the state level. They will then be pooled in a common data set in Texas for further analysis. To characterize the social and economic environments in the communities studied, secondary data will be assembled and key informants interviewed. Secondary data will provide characteristics of the local population and economic activity. Key informants will provide information about changes in infrastructure and other aspects of the operating environment, e.g., establishment of a cheese-processing plant, change in dairy-cooperative membership, and change in local or state water-quality regulations. Secondary data from the Census of Agriculture, City and County Data Book, and other sources will be assembled in New York. These data will be used to formulate specific questions for later parts of the panel study, distributed to the states for in-state reports and analyses, and sent to Texas for merging with the panel data. Open-ended interviews of county extension agents and other key informants will be designed jointly and conducted in the early fall in each state. Changes in the operating environment will be inventoried and may be used to formulate questions for the panel study. Interview summaries will be circulated among project members. Results will be coded for merging with pooled data. Texas will merge the secondary and interview data with the pooled panel data. Panel sizes will probably decrease over time, resulting in a nonrectangular panel. Data on community characteristics will allow us to relate changes in the panel to local conditions. (See paragraph 10 in Responses to issues.) Using the combined, pooled data, regional analyses will be performed to assess the importance of the various factors influencing farm structure, compare changes in the operating environments, compare responses to the changes and develop statistical models of the relationships between environmental factors and structural change. Retrospective data in the baseline survey will provide a basis for examining the impacts of current changes in the technological, economic and political environments. These will form the basis for mid-project reports. Principles of and generalizations about dairy-farm restructuring will be assembled. They will contribute to development of the conceptual framework for a model of structural change in dairy farms. Later reports will cover factors and conditions influencing farm structure, elements of conceptual models and successful strategies for managing change. (See paragraph 2 in Responses to issues.) Procedures for Objective To assess the impacts of change in farm structure and provide information for defining the community-impact section of the conceptual model, two surveys will be conducted. The first addresses impacts of the changing dairy industry on businesses in the community The second involves the more general impact of the changing industry on social well-being and quality of life in the community. The business survey will focus on economic impact of dairy farms, and the size and economic strength of dairy-related businesses. Information obtained will include business activity and performance - percent of business assets and labor in dairy farms, percent of businesses that are dairy related, numbers of customers, levels of revenues, amount of farm-related business, and other impacts of farms. The quality-of-life survey will be drawn largely from standard quality-of-life instruments (Andrews) and will include perceptions of how changes in dairy farms affect their communities, e.g., in environmental quality (air and water), civic welfare (farm-neighbor interactions, characteristics of school systems, sources of community leadership and participation in community activities) and community satisfaction (e.g., satisfaction with community as a place: to raise children; that has what is needed for a happy life; and in which people are helpful). (See paragraphs 4 and 16 in Responses to issues.) The same states will take responsibility for coordinating activities as for the farm-panel data. Both survey instruments will be developed and produced jointly and will be implemented in the same seasons (second and fourth summers) in all states participating in this objective. Local businesses, farm agencies and community groups (e.g., Kiwanis, Lions Club) will be inventoried and interview subjects drawn from them by purposive sampling. Up to 30 people, depending on the community, will be selected. Local business representatives, bankers, professionals and municipal officials will be interviewed individually and in groups for the business survey. The quality-of-life survey will be given to municipal and school officials, social-service providers and leaders of social, religious, environmental and service groups. Interview data will be merged with panel data at the state level to characterize the communities studied. They will also be merged with the pooled data from Objective 1 to link changes in dairy farming to changes in the local community and provide data for developing the community-impact part of the model.

Measurement of Progress and Results

Outputs

• Development of survey methodologies for understanding structural change at the community, regional and national levels
• Collection of valuable data sets on the impacts of structural change on members of the dairy industry
• Development of partial models of the antecedents and consequences of structural change
• A conceptual framework for a more comprehensive model - a farm-environment-community-model - is being developed
• Data shows that structural change is having a major impact on dairy farms and the families that operate them
• Data shows that small or family run dairy farms are able to compete with larger ones by employing alternative strategies such as employing cost-minimizing rather than production-maximizing strategies.
• Data suggests that identification of successful strategies will aid members of the dairy industry in making appropriate decisions about adopting or adapting to new technologies and structural change.

Outcomes or Projected Impacts

• Improve our base of knowledge of how and why dairy-farm structure changes and what impacts the transformation has on communities.
• Development of methodologies for measuring community impacts.
• Relationships between antecedents and consequences will be pulled into a conceptual framework for an integrated model.
• Results will be disseminated through journals, extension and popular publications, extension and professional meetings, and through contacts with consultants and decision makers in the dairy industry.
• Improved management of the structural change in the dairy industry.
• Improved models for policy makers and analysts.
• Better understanding of the process will result in less dislocation and disorientation among all the people from input suppliers to the dairy product consumer.
• Preservation of livelihood and way of life for dairy farmers and dairy farm communities.

Milestones

(1999): Establish panels of dairy farm families willing to participate in 5 year study

(2000): Develop survey methodologies and collect data

(2001): Assess impacts of change on farm structure and provide information for defining community impact section of the conceptual model.

(2002): Complete conceptual framework for model of structural change in the dairy industry

(2003): Disseminate results and recommendations to the dairy industry and policy makers through standard channels

(0):0

Projected Participation

View Appendix E: Participation

Outreach Plan

Organization/Governance

The NE-177 Regional Technical Committee was organized in 1990. It operates according to procedures in the "Manual for Cooperative Research," dated 1992. The voting membership of the Committee includes one representative from each cooperating experiment station, appointed by the Station Director, and a representative of each cooperating USDA-CSREES research division. Other representatives of participating organizations, including the Administrative Advisor, Administrative Representative and CSREES representative, are nonvoting members. All voting members of the Technical Committee are eligible for office.

The primary role of the Technical Committee is coordinating the work of the project. Annual meetings are held for the purpose of conducting business related to the project.

The offices of the Regional Technical Committee are Chairperson, Vice-chairperson and Secretary. Subcommittees are named by the Chairperson. Two sub-committees will be established at the outset. A Survey Sub-committee will be charged with designing and producing surveys, and coordinating fieldwork. A Data Sub-committee will be charged with assembling and managing the pooled data set, and coordinating analysis of the data. (See paragraph 7, 8 and 78 in Responses to issues.) The Chairperson, in accord with the Administrative Advisor, notifies the Technical Committee of the time and place of annual meetings, prepares agendas and presides at meetings of the Technical and Executive Committees. The Chairperson's responsibilities include preparation of annual and regional reports. The Vice-chairperson assists the Chairperson in all functions. The Secretary records minutes and performs other duties assigned by the Technical Committee or Administrative Advisor.

Literature Cited

Attachments

Land Grant Participating States/Institutions

CT, KY, MD, ME, MN, MO, NY, OH, PA, TX, UT, WI

Non Land Grant Participating States/Institutions