Fewer Cows, More Milk and Lower Real Prices
MP: The Tableau interactive graph above presents an amazing story of increased productivity in milk production over time, from an average of 5,410 pounds per cow in 1924 to 20,079 pounds in 2009, for a percentage increase of 271%. Or we could say that today's cows produce 3.7 times as much milk as cows in the 1920s. It's also true that we are producing record levels of milk in the U.S. with record low numbers of cows, and the significant improvements in milk productivity have dramatically lowered the real price of milk over time. Wholesale milk prices (adjusted for inflation) today are about 75% lower than in the early 1930s, less than half the prices of the early 1980s, and are now close to the lowest level in history.
This dramatic increase in the productivity of milk production is probably similar to productivity gains in most other U.S. agricultural products, and explains why we only spend 9.6% of our disposable income today on food (2008 is most recent year), compared to the 25.2% of disposable income spent on food by Americans in 1933. The productivity gains in farm production also explain why we now only have 2.6% of our labor force working on farms to produce record levels of agricultural output, whereas it used to require 90% of the labor force in farm production in the late 1700s to feed the country (see CD post here for data).