1. No More “Magic Cows” Modeling the Biological Constraints of the Dairy Industry Erica Pagel 2002 System Dynamics Student Colloquium Albany, NY October 4, 2002

2. Changes in US Dairy Industry Fewer, but larger farms Technological advances Declining cow numbers, but more milk Government involvement in markets How has government policy, particularly the Dairy Price Support Program (DPSP), altered the path of structural change among dairy farms from what it otherwise would have been?

3. Fewer, but Larger Farms Farms with Milk Cow Herds U.S. Census of Agriculture

4. Fewer, but Larger Farms Interviews with Stephenson & Blaser Number of Farms by Milking System

5. Price Impacts with Government Support US Milk Price and Government Support Levels USDA-ERS

6. Dynamic Hypothesis Technological Changes Economies of Size Capital Barriers to Adjustment Off-farm Income Government Involvement (DPSP)

7. Farm Stocks and Flows Farm Category Expansion Flows Exit Flows

8. Co-Flow Structure

9. Cow Biology Capacity must come from existing capacity Pipeline/Fixed Delay

10. Is this possible?

11. Another thought …

12. Model Components 1.Farm Movements Exits and expansions 2.Milk Price Market determined or support price 3.Cow Herd Physical numbers and financial value 4.Capital Stock Productivity and desired capital 5.Debt Interest rate and lender’s perceptions 6.Costs Fixed and variable 7.NFI Distribution Paying the bills 8.NFI Expectation Perceptions of current and future NFI