The old adage of, “the quickest cure for high prices is high prices” may be coming true in the dairy bull calf market.
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.
But we’ve also seen stretches in the not-too-distant past when producers hoped to simply recoup the cost of trucking and commission to sell their bull calves. In direct sales, $5.00 per head was an unfortunate reality. During those times, the not-so-funny joke that circulated in concentrated dairy regions was to be careful about leaving your pick-up truck parked unattended, lest you return to find bull calves in the back.
Perry Wolff, manager of Equity Cooperative Livestock, an auction barn near Stratford, Wis., said he doesn’t think prices will go that low 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.
According to the Livestock Marketing Information Center (LMIC), there are pros and cons to feeding Holsteins. On the plus side, then tend to finish with fairly high quality grades, and they are very consistent in composition due to intensive Holstein breeding practices. But they usually have lower yield grades, typically take longer to finish, and are less efficient feed converters. When finished to the same similar weights as colored cattle, one study showed that Holsteins had a 13% lower average daily gain than native cattle, and a 4% lower gain-to-feed ratio.
Holstein steers usually are about 6 to 12 inches taller than colored cattle – which can cause problems with plant through-put at the packer – and have relatively more condemned livers. They also do not fit specifications for many branded and other premium market programs like Certified Angus Beef.
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.
More dairy producers also may adopt the growing practice of breeding the low end of their herd genetics to beef sires – usually with the assistance of genomic sorting mechanisms – to produce more marketable animals. Holstein crosses, however, do not fit as neatly into colored-cattle marketing schemes as half-blood Jerseys, so Holstein herds still will need to have specific marketing plans in place.
Wolff predicted some dairies that traditionally sell their newborn bull calves will retain and grow them longer, with the hope of capturing a price advantage down the road at the feeder stage. And he said small-scale feeders will likely emerge as calf buyers, taking advantage of bargain entry prices.
The one constant that Wolff hopes will not changes is on-farm bull calf care, including timely administration of quality colostrum. “Whether you’re feeding them yourself, selling to a private buyer, or sending them to the sale barn, you want the healthiest, highest-quality calves you can produce,” he advised. “Cultivating your long-term reputation as a quality supplier is critical in times like these.”