Dairy Herd Management: Are we headed for $5.00 dairy bull calves?

Through the past several years, bull calf, dairy beef and cull cow prices were healthy to robust. In fact, they helped many producers ride out the bumpy milk-price decline in 2015 and 2016. In 2014, Holstein bull calves less than a week old were routinely bringing $400 to $600 per head in sale barns in the upper Midwest.

Perry Wolff, manager of Equity Cooperative Livestock, an auction barn near Stratford, Wis., said he doesn’t think prices will go as low as $5.00 this time around. But today’s bull calf values are a dramatic change from 2014, when $350 to $400 was the going rate for #1, 3-to-10-day-old Holstein bull calves for most of the year. “For the past couple of months, that same type of calf has been bringing $70 to $130 a head here,” Wolff shared. “I think we will level off in the $50 to $70 a head range, but we’ll keep seeing tops over $100.”

The recent slump in bull-calf prices is due to a number of factors. For one thing, the U.S. beef herd is rebuilding. Drought and high feed prices drove the 2014 total U.S. beef herd to its lowest size in 63 years. Demand for dairy beef was strong, as packers scrambled to fill contracts with readily available dairy animals.

But USDA figures show the country’s beef herd is on the rebound. Total U.S. beef cattle numbers have increased for the past 3 years, growing by 2.8 million head in 2015 and 1.6 million head last year. The U.S. beef cow breeding herd grew by just over 1 million head in 2016, to a 7-year high of 31.21 million head.

In the same timeframe, finished Holstein steers have fallen somewhat out of favor with packers. In September 2016, one of the nation’s largest beef packers, Tyson Foods, announced that it would not be renewing any of its Holstein contracts with cattle feeders.

While finished Holsteins almost always have sold at a discount compared to colored cattle, that price gap has usually fallen in the range of $10-15 per cwt. Today, Holsteins are selling at much steeper discounts of $20-35 per cwt.

In response to the price downturn, some shifts in the dairy industry may take place. One that already is happening is the resurgence of veal production. USDA figures indicate veal-calf slaughter has been on the rise since May 2016, following a large and lengthy decline of about 10% per year starting in 2009.

Source: Dairy Herd Management