The US market and VocalTag Technology

The landscape of the American dairy farming industry has changed dramatically in recent years. Small family farms are being replaced by enormous dairy operations equipped with automated milking parlors and even robotic milking machines. While a small number of large operations are leveraging high volume and maximizing productivity, smaller farms are struggling for survival from year to year as milk prices and demand remain stagnant and input prices continue to eat away at margins.

In essence, the viability of the American dairy farmer in these conditions is reliant on increasing milk production, which can be done in one of two ways - by increasing the herd size or increasing the milk production per cow. To achieve the latter, farmers must rely more and more on advances in technology. While some new products contribute to the bottom line by actually obtaining more milk from individual cows, others focus on reducing milk losses through the prevention and detection of disease and other health conditions.

U.S. Dairy Market

Economic Overview.
The U.S. dairy market is currently comprised of approximately 100,000 farms with a national herd size of 9.2 million cows producing some 167 billion pounds of milk in 2001. More than 86% of dairy cows in the U.S. are found in the “twenty major states” with the top producers (in terms of pounds produced) being California, Wisconsin, New York, Pennsylvania, Minnesota, and Idaho.

The industry has experienced dramatic changes in recent years with respect to total number of farms and cows, average milk production per cow, and size of farms. While both the number of farms and cows continues to decrease, the average milk production per cow as well as the aggregate milk production has increased significantly over the past decade. In addition, the number of smaller herds is decreasing while the number of large farms is increasing.
Finally, the big dairy farms are getting bigger, accounting for an increasing percentage of the total U.S. herd.

Consolidation and emphasis on individual cow productivity are driven by a number of economic pressures facing U.S. dairy farmers including low milk prices, high input costs like land, labor, and feed, and growing debt loads. The long-term expectation in the U.S. is that milk production will grow 1-2% per year as productivity gains and structural changes continue to increase efficiency.

In this challenging economic environment, farmers have two main options to remain viable – either increase herd numbers or increase productivity per cow. As a result, “a new type of dairy farm is emerging that is much larger, lowering capital costs per cow. This new dairy farm will use more purchased inputs, including labor, and have other characteristics similar to typical western dairy operations.”

Regulatory Overview.
The objectives of the U.S. dairy policy are as follows:

• To assure adequate, safe supply of milk at reasonable prices
• To maintain prosperity of producers
• To protect the environment
• To ensure that program spending is cost-effective
• To promote market orientation/competitiveness
• To honor international trade agreements

To achieve its objectives, the USDA sponsors a number of programs for the dairy industry that provide a range of services including balancing supply and demand, assisting with foreign competition, and providing farmers with short-term relief payments.
The five major programs are:

• Milk Price Support Program
• Dairy Export Incentive Program (DEIP)
• Emergency Market Loss Assistance Program
• Milk Marketing Orders
• Dairy Compacts

With regard to the general strictness of the dairy regulatory environment, the United States is a bit of paradox. While in some respects standards in the U.S. are more rigorous than Europe in terms of equipment, construction, and materials (i.e. rubber, grade of steel manufacture), the U.S. has lower standards of milk quality than in Europe. Milk regulations in the U.S. are becoming tighter, however, which positively affects demand for new technologies in the industry.

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