United States and European Union Dairy Farms: Where Is the Competitive Edge?

The United States (US) and European Union (EU) dairy industries are undergoing rapid structural change as farms become fewer and larger, milk productivity per cow increases, and agricultural policies evolve. This paper examines productivity measures of dairy farms in all dairy production regions of the US and seven member states of the EU. We generally find that larger, more intensively-managed dairy farms experience greater net return on assets and are more scale efficient than smaller, more extensive dairy farms. Efficient farms are found in all farm size and system categories, with many of the smaller farms experiencing relatively high technical efficiency. Overall, we find significant economic forces at work towards more efficient and productive dairy production in both the EU and the United States. With potential efficiency gains that can be made, various EU dairy production regions may significantly strengthen their export positions following the milk quota seizure of 2015.