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Why Are Dairy Farmers Desperately Holding onto Their Cows in 2024? Uncover the Truth

Why are U.S. dairy farmers holding onto their cows amid a 20-year low in replacements? How is the beef-on-dairy trend reshaping the industry?

Summary: U.S. dairy farmers are shifting gears, sending fewer cows to slaughter to keep herd sizes stable. This move is driven by the profitable beef-on-dairy market, with high cash flows from selling beef-on-dairy calves. The drop in dairy replacements and rising heifer costs since September 2023 has led producers, especially in the West, to keep more cows, causing slaughter numbers to hit a 20-year low. The high value of week-old beef-on-dairy calves ($800 to $1,000 each) offers a profitable opportunity for dairy farmers, who are also investing in gender-sorted dairy semen to plan for future replacements. This trend shows no signs of reversal, presenting both challenges and opportunities.

  • Record drop in cow culling, reducing slaughter by 397,200 head over 10 months.
  • Shift driven by profitable beef-on-dairy market, boosting cash flow for dairy farmers.
  • Beef semen sales surged 276% from 2017 to 2023, with most sales to dairy farmers.
  • Dramatic decline in dairy replacements, pushing heifer costs to $3,000+ per head.
  • Week-old beef-on-dairy calves now fetching $800 to $1,000 each, a lucrative opportunity.
  • Growing trend of using gender-sorted dairy semen to ensure future heifer replacements.
  • Current trends show no signs of near-term reversal, creating both challenges and benefits.
dairy farming industry, crisis, beef-on-dairy concept, drop in dairy replacements, rising heifer costs, western areas, herd numbers, profit, cull cows, slaughter numbers, 20-year low, strategic move, beef-on-dairy market, economic incentives, milk production, high-yielding dairy cows, cattle semen sales, dairy-beef calves, $800 to $1,000, dairy cow replacements, scarcity, costs, auction markets, supply-demand mismatch, high pricing, profitable opportunity, demand, limited availability.

Imagine being a dairy farmer in 2024, facing a harsh reality in which every choice might make or break your existence. Farmers have been forced to reconsider their strategy due to the 2024 dairy crisis, mainly caused by a drop in dairy replacements and rising heifer costs. Are you interested in knowing why this is occurring and what it implies for the future of your farm? Since September 2023, dairy farmers in the United States have sent fewer cows to slaughter for 46 weeks, indicating a desperate attempt to protect their herd.

YearCows Sent to SlaughterBeef Semen Sales (in Millions)Dairy Replacements AvailableAverage Heifer Replacement Value
2017665,0002.51,000,000$1,200
2023606,0009.4800,000$2,800
2024397,0009.4709,100$3,000+

Why U.S. Dairy Farmers Are Clinging to Their Cows: Unraveling the Staggering Industry Shift

Since September 2023, dairy producers in the United States have kept more of their cows, especially in western areas. This strategic move was made due to a lack of dairy alternatives and high beef-on-dairy market pricing. Farmers want to protect their herd numbers and profit from the lucrative beef-on-dairy business by limiting the number of cows sent to slaughter.

The dairy business has seen the impact of a considerable decline in cull cows during the last ten months. Between January 1, 2024, and July 6, 2024, dairy producers in the United States slaughtered 259,400 fewer cows. Extending this pattern to September 2023, we observe a stunning reduction of 397,200. Culling numbers have fallen to a 20-year low in parts of the United States, including the West.

This rapid fall represents a strategic move as farmers stick to their herds, aided by a beef-on-dairy solid market. Record-high beef prices encourage producers to keep cows for extended periods to crossbreed calves, contributing to the historic low culling rate.

Beef-On-Dairy: The Game-Changer for Dairy Farmers’ Cash Flow 

The beef-on-dairy market is at the center of this movement, drastically altering the economic incentives for dairy producers. Traditionally, dairy producers prioritized milk production and keeping a consistent herd of high-yielding dairy cows. However, the growth in cattle semen sales to dairy producers has wholly transformed the scene. Farmers produce more lucrative calves for the meat market by inseminating dairy cows with beef semen.

This rise in cattle semen sales has improved cash flow for various reasons. First and foremost, dairy beef calves are much more expensive than purebred dairy calves. According to the National Association of Animal Breeders, beef semen sales will increase by 276% by 2023, with dairy producers receiving 84% of the proceeds. This move has resulted in week-old dairy-beef calves commanding between $800 and $1,000 each. The most excellent purebred dairy bull calves sell for less than half that amount.

The record prices for dairy-beef calves are partly due to the beef sector’s low feeder supplies, which have been at their lowest since 1972. This scarcity raises demand and, as a result, the price of beef-on-dairy calves, making it a very successful investment for dairy farmers. Dairy producers that include beef genetics in their herds do more than preserve their dairy cows for milk output. Still, they use high market prices for beef calves to boost their cash flow.

Beef Semen Sales Surge: A 276% Leap That’s Revolutionizing Dairy Farming

Some surprising facts support the enormous rise in beef-on-dairy initiatives. According to the National Association of Animal Breeders, beef semen sales to dairy producers in the United States have increased by an astounding 276% between 2017 and 2023. Specifically, sold units significantly increased from 2.5 million in 2017 to 9.4 million by 2023  [National Association of Animal Breeders].

Dale Woerner of Texas Tech University believes there are between 3 and 3.25 million beef-on-dairy animals in the United States. “The growth in this area has been exponential, creating a significant shift in both the dairy and beef industries,” says Woerner [Texas Tech University].

The Heifer Crisis: Soaring Prices and Scarce Supply Challenge Dairy Farmers

YearDairy Heifer Inventory (in 1,000s)
20044,200
20084,350
20124,500
20164,650
20204,300
20243,500

The effects of dairy cow replacements have been nothing short of remarkable. With the inventory of dairy heifer replacements at a 20-year low, scarcity pushes up costs. At auction markets nationwide, prices for dairy heifer replacements have risen beyond $3,000, indicating a significant supply-demand mismatch. This fast jump in replacement prices presents a considerable problem for dairy producers, who must now negotiate a more competitive market to renew their herds.

High Prices for Beef-On-Dairy Calves: A Golden Opportunity for Dairy Farmers

The current trend of high pricing for beef-on-dairy calves is a profitable opportunity for dairy producers. Week-old calves sell for between $800 and $1,000 a head, twice the price of the finest purebred dairy bull calves. This increase in value is caused by a combination of inadequate feeder supply and continued high demand from the beef industry. Because beef-on-dairy calves fetch such high prices, and it takes almost three years from a heifer’s pregnancy to her first calf, there are no indications of a near-term reversal. As demand for excellent beef rises and availability remains limited, dairy producers will prioritize this lucrative crossbreeding technique.

The Smart Bet on Heifers: Dairy Farmers Embrace Gender-Sorted Semen for Expansion

Meanwhile, dairy producers looking to expand their operations are increasingly resorting to gender-sorted dairy semen. This strategy ensures that more female calves, or heifers, are produced to replace old cows and sustain milk output. In 2023, 54% of all dairy bull semen sold in the United States was gender-sorted, representing a 5% rise over the previous year. This trend emphasizes the need for dependable replacements in an industry facing a dairy cow crisis.

The Bottom Line

The dairy farming environment in the United States is rapidly changing. Farmers resort to the beef-on-dairy concept to save their income flow when faced with a steep fall in dairy alternatives. While this trend gives a much-needed financial boost, it has resulted in a heifer shortage issue, raising replacement prices and forcing the sector to adjust. The increase in beef semen sales and the strategic shift to gender-sorted semen demonstrate dairy producers’ inventive methods for overcoming these obstacles. With milk supply staying static and replacement costs skyrocketing, the economic viability of dairy farming is jeopardized. The demand for smaller but bigger dairy farms and growing input prices are altering the business. The choices made today will likely affect the future of dairy farming in the United States, requiring farmers and industry stakeholders to reassess their strategy and plan for the difficulties.

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Declining Grain Prices Offer Major Financial Relief for Dairy Producers

Uncover how falling grain prices are alleviating financial pressures for dairy farms. Could reduced feed expenses enhance the profitability of the dairy sector? Find out more.

The agricultural sector is rife with anxiety as plummeting grain prices disrupt farming communities. While crop producers bear the brunt, a glimmer of hope shines in the dairy industry. Here, reduced grain prices mean cheaper feed, offering dairy producers a significant opportunity to enhance their profit margins.   Falling grain prices have varying impacts on the diverse agricultural landscape. For dairy producers, low-cost feed is a boon, alleviating expenses that can consume up to 50% of income. Each farm must assess feed costs based on specific needs and forage quality.   This scenario showcases a divided world in agriculture. Grain growers scramble to maintain profitability, yet dairy farmers benefit from reduced operational costs.

The Feed Puzzle: A Crucial Component in Dairy Farm Economics 

In dairy farming, feed expenses are significant outlays that affect financial sustainability. Depending on internal feed production, these expenses could account for 20% to 45% of a dairy farm’s total revenue. Dairy finance expert Gary Sipiorski points out that purchasing all feed may drive this cost to almost 50% of the milk check, underscoring the critical requirement of innovative feed management to preserve profitability. You play an essential part in this process.

MonthFeed Cost ($/cwt)Year-over-Year Change (%)
January10.50-5%
February10.30-6%
March10.00-8%
April9.80-9%
May9.50-11%

Grain Price Declines: A Financial Boon for the Dairy Sector 

Lower grain prices have brought financial comfort to dairy farmers by lowering a significant outlay and increasing profitability.Ag Insights president Phil Plourd notes this pattern, pointing to the concurrent cost drop and increase in milk futures. This double benefit makes margins more appealing than in the prior two years. Although Plourd warns that the circumstances may change, the present financial status of the dairy sector is bright. 

Driven by reduced feed costs and robust milk futures, Plourd notes a good profit increase for dairy farmers. Although theoretical models point to favorable circumstances, actual complexity, like erratic weather and market volatility, might skew this view. Producers should so approach the matter with strategic preparation and cautious hope.

Strategic Steps for Capitalizing on Declining Grain Prices

Jay Matthews is Ever’s vice president in the feed and dairy producer segment.Ag emphasizes the long-term advantages of lowering grain prices for dairy farmers. Given consistent milk prices, margins are right now rather appealing. Especially if waiting for improved base values on maize and protein, Matthews advises growers to enter fresh crop physical purchases and have hedges in place. However, He advises against complacency, given that erratic weather and seasonal variations might compromise these benefits. He emphasizes the danger of managed money covering their net short position in the summer, mainly depending on unfavorable weather. Protecting profits and maximizing profitability among market volatility and environmental uncertainty depend on deliberately controlling feed cost risk.

The dairy industry has to be alert about possible hazards even if dropping grain prices indicates a promising future. Jay Matthews emphasizes the importance of a proactive strategy, as erratic weather and seasonal variations might undermine existing benefits. Managed money covering net-short positions in lousy weather could set off quick changes in the market. Mainly maize and protein, dairy farmers should create robust risk management plans involving hedging for new crop holdings and tracking basis levels. Dairy farmers may better negotiate uncertainty and maintain profitability by being ready.

Historical Trends Highlight Substantial Decrease in Feed Costs

Analyst Monica Ganely of the Daily Dairy Report and Quarterra founder notes a significant decrease in feed expenses. May’s feed costs were about $3 per cwt. Less than last year, the most significant drop since 2021. This drop gives dairy companies substantial financial benefits that help them maintain good profit margins.

The Bottom Line

For dairy farmers, the declining trend in grain prices provides a significant benefit regarding feed expense reduction. This financial relief improves profit margins and gives the dairy industry fresh hope—a rare occurrence given more general agricultural difficulties. To fully enjoy these economic advantages, producers have to be proactive. This covers planned feed purchases and readiness for weather and market changes. Using hedging techniques and being alert helps dairy farmers protect their margins against volatility. Producers should keep educated, review their financial plans often, and be ready to react quickly to developments. This time of low feed prices should be both a call to action and a possibility to guarantee a strong future for dairy farming.

Key Takeaways:

  • Lower grain prices are reducing feed costs for dairy producers, which can take up a substantial portion of a dairy farm’s gross income.
  • Independent consultant Gary Sipiorski estimates feed costs to range between 20% to 45% of gross income, depending on farm specifics.
  • Phil Plourd from Ever.Ag Insights highlights concurrent decreases in feed costs and high milk futures, resulting in strong prospective margins.
  • Ever.Ag’s Jay Matthews advises dairy producers to secure new crop physical purchases and hedges amid favorable margins and current market conditions.
  • Analyst Monica Ganely provides data showing May’s feed costs significantly lower than last year, delivering the lowest levels since 2021.
  • Producers are urged to stay cautious of market volatility and environmental changes that could affect these gains.

Summary:

The agricultural sector faces a crisis due to falling grain prices, disrupting farming communities. However, the dairy industry has seen a bright spot as reduced grain prices mean cheaper feed, offering a significant opportunity to enhance profit margins. Low-cost feed can alleviate expenses that consume up to 50% of a dairy farm’s income. In dairy farming, feed expenses are significant outlays that affect financial sustainability, accounting for 20% to 45% of a farm’s total revenue. Dairy finance expert Gary Sipiorski points out that purchasing all feed may drive this cost to almost 50% of the milk check, underscoring the critical requirement of innovative feed management to preserve profitability. Lower grain prices have brought financial comfort to dairy farmers by lowering a significant outlay and increasing profitability. However, actual complexity, like erratic weather and market volatility, might skew this view. Producers should approach the matter with strategic preparation and cautious hope. Historical trends show a significant decrease in feed costs, with May’s feed costs being about $3 per cwt, the most significant drop since 2021.

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Avian Influenza Outbreak: How US Dairy Cows Are Suffering

Explore the devastating effects of the avian flu outbreak on U.S. dairy cattle, recognizing the surge in mortality rates and culling practices among farmers. What implications does this hold for the future landscape of dairy farming?

The U.S. dairy industry is grappling with an unprecedented crisis as the avian flu, a disease typically associated with poultry, has now infiltrated dairy cows across multiple states. This alarming development has resulted in significant cattle losses, with infected cows either succumbing to the virus or being culled by farmers due to the lack of recovery prospects. These measures are dealing a severe blow to the sector, given the higher cost of raising dairy cows compared to poultry. 

Bird flu in cows could take a more significant economic toll than initially thought. 

For farmers, the avian flu outbreak is not just a health crisis but also an economic disaster. The need to prioritize containment efforts is adding to the financial pressures on struggling producers. The situation is further complicated by secondary infections, which are causing higher mortality rates and management challenges, thereby exacerbating the economic implications. 

  • Increased culling of infected dairy cows
  • Secondary infections elevating mortality rates
  • Long-term impact on milk production and market prices

As the virus spreads, the agricultural sector’s resilience is being tested, but it’s also a testament to the industry’s ability to adapt and overcome. This makes long-term adaptations critical for survival, but it also instills a sense of hope that the sector can weather this storm.

Avian Flu Strikes Dairy Industry: A Significant Economic Threat

StateInfected CowsCulled CowsSecondary Infections
South Dakota1,7002412
Michigan2002010
ColoradoUnavailableReportedReported
OhioUnavailableReportedReported
TexasUnavailableReportedReported
New MexicoUnavailableReportedDecreased
North CarolinaNoneNoneNone
KansasNoneNoneNone
IdahoUnavailableNo ResponseNo Response

Reuters’ Leah Douglas and Tom Polansek highlighted a critical issue in the agricultural sector: dairy cows in five U.S. states have died or been culled due to the avian flu. State officials and academics confirmed that the affected cattle either died from the virus or were euthanized by farmers after failing to recover. This development could have significant economic implications, considering the higher costs of raising dairy cows than poultry.

The Financial Fallout: Avian Flu’s Deep Economic Impact on Dairy Farms 

The economic ramifications of the avian flu outbreak in dairy cattle are severe, straining farmers already on thin margins. Dairy cows represent a much more significant investment in cost and maintenance than poultry. Raising a cow involves substantial feed, healthcare, housing, and labor expenses over several years, making the financial stakes high. 

As dairy operations confront this crisis, culling infected cows adds economic pressure. Each lost cow means a direct financial hit and disrupts milk production cycles, affecting farm income. The smaller herd size reduces milk output, lowering sales and profits. The costs of rebuilding herds and replacing culled cows add further stress. These impacts can be devastating for small to mid-sized farms and may lead to closures. 

The impact of the avian flu outbreak extends far beyond individual dairy farms, affecting the entire agricultural sector. The ripple effects of the outbreak are felt by feed suppliers, veterinary services, and dairy product distributors, all of whom experience a drop in demand due to the reduced number of cows. This highlights the need for robust disease management and support systems to mitigate future outbreaks and protect the livelihoods of those dependent on the agricultural sector.

Secondary Infections: The Underestimated Threat to Dairy Cattle Health 

Secondary infections significantly contribute to the mortality of dairy cattle affected by avian flu. As the virus weakens their immune systems, cows become vulnerable to other infections they would usually resist. 

Russ Daly from South Dakota State University explains, “Some animals died not from avian flu, but from secondary infections that thrived in their weakened state.” 

Olga Robak from the Colorado Department of Agriculture adds, “Infected cows often didn’t recover their health because secondary infections took hold after their immune systems were compromised.” 

Phil Durst of Michigan State University Extension notes, “In Michigan, secondary infections are notably high among infected cattle, further depleting herds struggling to recover.” 

Ohio Department of Agriculture spokesperson Meghan Harshbarger confirms, “Most deaths in Ohio are due to secondary infections, rather than the avian flu virus itself.” 

Therefore, while the initial avian flu infection is severe, the subsequent secondary infections are proving fatal for many dairy cows, complicating herd management during an outbreak.

Case Studies: Devastating Impact of Avian Flu on Dairy Farms

In South Dakota, a dairy farm had to cull 24 cows—12 that did not recover from the virus and another 12 that succumbed to secondary infections. This illustrates the drastic measures needed to maintain farm health

In Michigan, about 10% of a farm’s 200 infected cows were culled due to their inability to recover from avian flu, highlighting the severe impact on large-scale dairy operations. 

Colorado dairies also culled cows that failed to return to milk production, showing how the virus can significantly disrupt milk output and economic stability.

State Responses: A Patchwork of Impact and Strategies Amid Avian Flu Crisis

State responses to avian flu in dairy cows vary significantly. In Ohio and Texas, officials reported that most cow deaths resulted from secondary infections. Similarly, New Mexico’s state veterinarian indicated that early culling due to reduced milk production has diminished as recovery rates improved. Conversely, North Carolina and Kansas officials reported few to no cow deaths, suggesting a more contained situation.

Expanding Crisis: Avian Flu’s Relentless Spread Across U.S. Dairy Herds

The situation continues to worsen, with avian flu affecting dairy herds in Minnesota and Iowa. This brings the total infected dairies to 86 across 11 states. Since May 30, 18 new herds have tested positive. Recent USDA data shows new cases in three Texas dairies and another in Idaho. Increased voluntary testing by the USDA suggests more cases may emerge as the virus spreads.

USDA’s Pilot Program: A Crucial Weapon in the Fight Against Avian Flu in Dairy Herds

The USDA’s pilot program is a critical strategy in tackling the avian flu outbreak in dairy herds. By urging producers to test their herds voluntarily, it aims to identify H5N1 cases and quickly limit the virus’s spread. Farms must test negative for three consecutive weeks using ‘on-farm bulk milk’ or similar samples to be designated as ‘negative status,’ ensuring herd health and industry integrity.

Achieving a ‘negative status’ is crucial. It provides a framework for disease monitoring and control, preventing outbreaks from becoming more significant crises. Rigorous testing protocols help identify infected animals early, reducing economic losses from culling and secondary infections. Additionally, it restores consumer confidence in the safety of dairy products, which is essential for market stability. Such measures are vital in safeguarding public health and the dairy industry’s future.

Ensuring Food Safety Amid Avian Flu: USDA’s Assurance in the Integrity of Meat and Milk Supplies

As avian flu affects dairy cattle, food safety remains a top concern. The USDA assures that both meat and milk supplies are safe. Rigorous inspections by Food Safety and Inspection Service (FSIS) veterinarians at federal slaughter facilities ensure that only healthy cattle enter the human food supply. Any cattle that do not pass these inspections are excluded. 

Additionally, the USDA confirms that milk from healthy animals is safe for consumption, highlighting ongoing efforts to protect public health. These measures not only reassure consumers but also maintain the integrity of the U.S. food supply chain, instilling confidence in the safety of dairy products.

The Bottom Line

The avian flu’s penetration into the U.S. dairy industry is causing significant economic fallout. Dairy cows are dying or being culled due to the virus and secondary infections. Robust responses from state and federal agencies are now more critical than ever. Case studies from states like South Dakota, Michigan, and Texas highlight the dire impact. The USDA’s pilot program and testing efforts are essential for crisis management, food safety, and public trust. While current meat and milk supplies are safe, continuous monitoring and effective strategies are paramount to protect the agricultural economy and public health.

Key Takeaways:

  • Economic Impact: The culling and deaths of infected dairy cows are creating substantial financial strain on farmers, as cows are significantly more costly to raise compared to poultry.
  • Secondary Infections: Many cows are dying not directly from avian flu, but due to secondary infections that take advantage of their weakened immune systems.
  • State Reports: Multiple states, including South Dakota, Michigan, and Colorado, have reported significant losses, with differing responses and outcomes based on local conditions and strategies.
  • Rising Infections: The spread of avian flu continues to escalate, with new cases recently confirmed in Minnesota and Iowa, bringing the total number of affected states to 11.
  • Testing Initiatives: The USDA has initiated a pilot program encouraging dairy farms to test herds more frequently, aiming to identify negative status herds and curtail the spread of the virus.
  • Food Safety Assurance: Despite the outbreak, the USDA maintains that the U.S. meat supply remains safe due to stringent inspection processes ensuring only healthy animals enter the food supply.
  • State Variations: Impact and response strategies vary across states, reflecting a patchwork approach in managing the outbreak and its aftermath.

Summary: The U.S. dairy industry is facing an unprecedented crisis as the avian flu infiltrates dairy cows across multiple states. This has resulted in significant cattle losses, with infected cows either succumbing to the virus or being culled by farmers due to the lack of recovery prospects. The outbreak is not just a health crisis but also an economic disaster for farmers, with prioritizing containment efforts adding financial pressures on struggling producers. Secondary infections, causing higher mortality rates and management challenges, further complicate the situation. The agricultural sector’s resilience is being tested, but it is also a testament to the industry’s ability to adapt and overcome. Long-term adaptations are critical for survival, but it also instills hope that the sector can weather this storm. State responses to the avian flu in dairy cows vary significantly, with most cow deaths resulting from secondary infections. The USDA’s pilot program is a critical strategy in tackling the avian flu outbreak in dairy herds by urging producers to test their herds voluntarily.

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