One of the main aspects of dairy farm expansion is the change in the ownership structure of farm entities. Based on a survey of Wisconsin dairy farms, we estimate that in 2011 about 24 percent of dairy farms were owned by limited liability companies and partnerships (LLCs and LLPs) or corporations. That number climbed to 28 percent in 2016 and could be expected to reach 33 percent by 2021.

These more complex ownership structures (LLCs, LLPs, and corporations) are suited to accommodate multiple owners. Their primary advantages are personal liability protection and the simplicity of asset ownership sharing and transfer.

In Wisconsin, most herds of 100 cows or less have one or two owners, while herds with more than 500 cows typically have at least two or three owners. Therefore, as of 2016, the vast majority of larger herds (500 cows or more) were owned by either LLCs, LLPs, or corporations.

In contrast, more than 85 percent of the smaller herds (100 cows or less) were still owned in sole proprietorship. That number falls to 50 percent for herds with 100 to 200 cows and to 27 percent for herds between 200 and 500 cows. It should be no surprise that as the dairy farm population evolves toward larger farms, the overall number of farms owned in sole proprietorship declines.

Despite the growing complexity of ownership structures, most farms are still controlled by a single family. According to USDA data, in 2014 only 1.4 percent of U.S. dairy farms were classified as nonfamily farms, and they generated about 6 percent of the nation’s production.

Although they still represent a small portion of the dairy farm population, complex farm ownership structures are likely to gain ground. The advantages those structures provide in terms of financial and fiscal management combined with narrowing profit margins and financial hardships will likely prompt more farmers to adopt them.

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(c) Hoard's Dairyman Intel 2017
May 1, 2017

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