Record-high beef-on-dairy prices have reshaped the balance sheet for dairy farmers, turning a once-small revenue source into a major part of the bottom line. But without protection, those gains could disappear just as fast, underscoring how quickly momentum can shift in today’s cattle markets.
Experts caution today’s opportunity demands a more deliberate approach.
Mike North, president of the producer division at Ever.Ag, and Will Babler, principal at Atten Babler Risk Management LLC, made two points clear during the Professional Dairy Producers conference:
- Beef-on-dairy is now a significant part of a dairy’s financial picture.
- Tools like Livestock Risk Protection, or LRP, are critical to protecting those profits, especially at today’s historic highs.
Beef-on-Dairy Income Becomes a Major Revenue Stream
In just a few years, beef-on-dairy revenue has expanded dramatically. Strong demand from feedyards and packers, combined with tight U.S. cattle supplies, has pushed prices for beef-on-dairy calves to levels few producers expected even five years ago. For many farms, those calf checks now add several dollars per hundredweight to the milk check equivalent.
“At the end of 2022, the average dairy was getting paid about a $1 to a $1.50 a hundred in beef revenue,” North says. “Today, that number is north of $5. We’ve tripled that part of the financials. It’s a massive, massive opportunity, and with it a massive growing potential risk.”
Babler described beef as a new pillar supporting dairy profitability.
“We now have this other leg to the stool, whether it be black calves or cull cows,” Babler says. “That also has become a major contributor to our revenue stream.”
But as beef revenue grows, so does exposure to market swings. North and Babler say this makes it a smart time for producers to think about expanding their risk management toolbox. Alongside programs like DMC and DRP for milk, tools such as LRP can help protect beef-on-dairy income, letting producers capture strong markets while buffering against sudden drops.
Are Beef-on-Dairy Calves the New $24 Milk?
For many dairy producers, beef-on-dairy calves have become one of the most valuable animals leaving the farm. Day-old calves have averaged $1,500 in some regions and pushed over $2,000 in others — a price that would have been hard to imagine just a few years ago. North says the current market feels similar to $24 milk.
“What should one do with $24 milk?” he asks. “Walk quietly into the sunset and say, ‘We’ll wait to see if it gets better?’”
With prices sitting at all‑time highs, he says this isn’t the moment to step back.
“We’re talking about all-time records, and you just don’t walk away from those and say, ‘Ah, I’ll check back in next month.’ That’s not how we approach markets like this. You’ve got to go after it,” he says.
Lock in Gains
As attractive as today’s beef-on-dairy calf prices are, North cautions markets at record highs rarely stay there forever. When you’re standing at the top of the mountain, the fall can be just as steep on the way down. That’s why he encourages producers to think carefully about risk management tools like LRP to help guard against sudden market swings.
The federally subsidized insurance program administered by USDA allows producers to establish a price floor while still participating in market rallies, functioning similarly to a put option. Unlike futures contracts, which require fixed contract sizes, LRP policies can be written to cover the actual number of animals in a group rather than standardized futures contract weights.
Babler notes how attractive the program has become in the current market.
“When we look at the tools available, LRP really stands out for cross calves right now,” he says. “There’s a lot of reach in the market, and premiums have collapsed. We’re talking about $30 a head floors.”
Babler explains if prices fall below the level you insured, LRP pays an indemnity equal to that gap. Because the program uses national price indexes rather than individual sale prices, it protects against broad market declines, not differences from one sale barn to another.
Recent changes to the program have also helped increase interest among dairy producers. New coverage options now exist for cull cows and unborn calves, including beef-on-dairy crosses that may be sold shortly after birth.
Subsidy levels have also increased significantly, rising from about 13% in earlier versions of the program to roughly 35% to 55%, depending on the level of coverage selected. Premium payments are now due at the end of the coverage period rather than upfront, which improves cash-flow timing for producers.
These changes have also helped to improve the program’s flexibility. Babler says cattle can now be sold up to 60 days prior to the coverage end date without affecting the policy, compared to the previous 30-day window. Producers may also purchase coverage for animals they have under a valid purchase agreement, as long as possession occurs at least 90 days before coverage ends.
Taken together, those updates have reduced out-of-pocket costs and made LRP more accessible as a risk management tool.
Playing Offense with LRP
North and Babler emphasize LRP isn’t just a defensive strategy. It’s also a way for producers to play offense, capturing opportunities when markets are strong.
“Risk management really has two sides,” Babler says. “You play offense when markets give you opportunities, like we’re seeing in cattle right now, and you lock in the gains. At the same time, you play defense to protect yourself from the downside when things turn. In the past, dairy producers mostly dealt with corn and milk, which often moved in opposite directions. But now there are more markets to work with — milk products, protein, and beef — so there’s a better chance that at least one of them is working in your favor. The goal is to capture those strong markets while still protecting yourself when prices drop.”
While prices are expected to remain strong for now, Babler and North emphasize risk management tools provide a safety net, letting producers play offense when opportunities arise, while still playing defense to protect the gains they’ve worked hard to earn.
