Dairy cows can affect cull cow market

Because so many dairy cows end up in the beef system, dairy cow slaughter has a significant impact on cull cow markets.

There has been much discussion about beef cow slaughter this year. Dry weather, rising input costs, and strong cull cow prices are resulting in large numbers of beef cows leaving cow-calf operations and moving into the beef system.

It has been somewhat surprising that cull cow prices have remained as high as they have given beef cow slaughter levels. Certainly, some of this strength in prices is due to strong demand, but dairy cow slaughter is an often overlooked component of cow slaughter, and I wanted to discuss that in a bit more detail this week.

As of January 1, the USDA estimated there were a bit over 30 million beef cows, and just under 9.4 million dairy cows, in the US. While inventories of both fluctuate though the years, it is very common for there to be 3 to 3.5 times as many beef cows in the US as there are dairy cows. However, because the dairy cow herd gets culled more harder than the beef herd, dairy cow slaughter typically accounts for around 50% of all cow slaughter.

One way to illustrate this would be to consider cow slaughter as a percentage of cow inventory for given year. Simply comparing USDA’s estimate for cow inventory with slaughter levels would suggest that 11.5% of the beef cow herd was harvested in 2021, as compared to 32.9% of the dairy cow herd. Of course, the number of replacement heifers determine whether inventory actually increases or decreases for given year.

Because so many dairy cows end up in the beef system, dairy cow slaughter has a significant impact on cull cow markets. In the same way that profitability of cow-calf operations impact how hard the beef cow herd is culled, dairy profitability impacts how hard the dairy herd is culled.

While feed costs are very high, farm level milk prices were at unprecedented levels this spring. The US All Milk price set a record in March and then set a new record in April. Improvement in milk prices has resulted in dairy operations keeping cows in production a bit longer. While beef cow slaughter has been up by more than 15% from last year, dairy cow slaughter is actually down by more than 3% so far in 2022.

While total cow slaughter is definitely running high, decreases in dairy cow slaughter are partially offsetting the increases in beef cow slaughter. Looking ahead, this trend is likely to continue. As I write this on June 21st, CME(C) Class III milk futures are above $22 per cwt through the end of 2022. To the extent that milk prices remain high, I think we can expect dairy cow slaughter levels to remain relatively low and provide some support for cull beef cow prices.

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