Today's previously unheard of prices . . . in excess of $500 per head for week-old Holstein bull calves in some regions . . . has been great for dairy farm balance sheets. However, one day it could spell doom as the demand for beef has been cannibalizing another longtime buyer of dairy bull calves - veal.
Just how hard have the current market conditions been on veal growers?
Commercial veal production was down 21 percent in March when compared to the same month one year earlier. That was a net reduction of 1.8 million pounds of veal in just one month (8.7 million pounds in March 2014 compared to 6.9 million in March 2015).
On a dollar basis, many veal growers simply cannot turn a profit given the costs for obtaining bull calves. Presently, finished veal calves fetched $570 per hundredweight (cwt.) with average market weights of 293 pounds. While that was up $100 per cwt. in the past year, it was still not enough to convince some veal growers to go through the effort.
Not only have bull calves been costing more money, so has milk replacer, which is a staple feed for veal calves. In many instances, milk replacer costs mirror milk prices.
Every market that goes up always comes down.
Once beef prices return from the stratosphere and return to earth, we may not have enough veal farmers remaining to buy our extra bull calves. If that unfortunate scenario should occur, bull calves might fall to bargain basement prices.
(c) Hoard's Dairyman Intel 2015
June 15, 2015
