Producing More Milk on Fewer Farms: Neoclassical and Neostructural Explanations of Changes in Dairy Farming1

Neoclassical theory in economics has served as the guiding paradigm for agricultural development in the United States. At one level, this model emphasizes the substitution of capital in the form of machinery and chemicals for land and labor. At another level, the paradigm calls for the introduction of mass production techniques, such as product standardization and the routinization of labor processes. Using data on dairy farms and dairy processors from the 50 states, the neoclassical model accounts for changes in productivity on dairy farms; however, the model is less useful in accounting for changes in dairy farm structure. To explain changes in structure, recent neostructural theory that links the structure of markets to the structure of production is used. It is concluded that persistence of family-size dairy farms may rest more on developing and protecting markets for the milk they produce than with tinkering with the neoclassical model.