With a contracted beef cattle herd, there is demand for beef from dairy-beef crosses and dairy cull cows. Dairy farms do not appear to be capitalizing on high dairy cattle cull prices as of late, though. In the first quarter of this year, 747,600 dairy cows were sent to slaughter, down more than 120,000 from the 870,600 head culled from January to March of 2023.

More recently, during the week that ended May 4, only 48,975 dairy cows were sent to slaughter. Culling is normally lower this time of year during the spring flush, but this was the first time in nearly eight years that slaughter fell below 50,000 head in a non-holiday week. According to Sarina Sharp from the Daily Dairy Report, slaughter has been about 6,400 head below historical trends since September.

Culling is likely up on farms affected by highly pathogenic avian influenza that are forced to ship cows that do not recover in milk production. However, that has not been reflected in the national slaughter trends. That means other farms are hanging on to cows longer, and that is likely due to a couple of reasons.

One motivating factor to keep more cows milking is the Class III futures price, which has been creeping upward and as of Friday sat above $20 per hundredweight through September. The June Class III futures price surpassed the Class IV price a week ago for the first time since mid-September.

The bigger reason, though, is a lack of replacement dairy cattle. At the beginning of the year, USDA predicted that about 2.5 million dairy heifers will calve and enter the dairy herd in 2024. High rearing costs have led producers to raise fewer heifers. Combine that with the demand for beef, and more farms are using beef semen on dairy animals.

A noteworthy 7.9 million units of beef semen were used in dairy herds in 2023, according to numbers released by the National Association of Animal Breeders (NAAB). That was up nearly 1 million units from the year before. At the same time, domestic dairy semen sales were down 4%.

This lack of dairy replacements coincides with smaller national dairy herd. In March, in the top 24 dairy states according to USDA, there were 71,000 fewer dairy cows than in the same month in 2023. March’s cattle inventory was down 7,000 head from February. This lack of extra dairy cows and low supply of dairy heifers will make it difficult for producers to cull as aggressively as they were if they want to keep their barns full, suggesting that this decline in dairy cattle slaughter will continue.

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(c) Hoard's Dairyman Intel 2024
May 20, 2024
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