Livestock Marketing Information Center explains dairy liquidation impacts on cull cow prices

Greeley, Colo. – Some producers saw the cull cow market dip below 40 cents since last fall because ranchers are competing with dairy herd liquidators to get the best price for their cull cows. 

“The worst may be behind us, but I would still recommend staggering the selling of cull cows. We don’t want to take our culls to market the same week a dairy is liquidating all their cows,” Jim Robb told ranchers during Beef Day at the Colorado Farm Show in Greeley, Colo. on Jan. 29. 

Robb is the senior agricultural economist for the Livestock Marketing Information Center.

Dairy cow liquidation impacted beef cow/calf returns in 2018, mostly because of declining cull cow value. Many ranchers held on to their cull cows this year, choosing to feed them longer with cheaper feedstuffs and wait for market improvement. 

Robb recommended watching the news for a shift upward in futures milk prices, which may signal a slow-down of dairy herd liquidation. 

By-products pounded

The trade war over imposed tariffs with China has also taken a toll on beef by-products exported from the U.S. China has placed a tariff on hides, and the U.S. exports 40 percent of beef hides to China. 

In retaliation, the U.S. put a tariff on leather. 

“Basically, our cowboy boots are going to cost more,” Robb said. “But, what this has really done is push down the value of by-products. The fed cattle market is not as strong as the meat market because of leather and other items. The U.S. producer is paying for this leather tariff not the U.S. consumer.”

Fed cattle futures are trading lower because of weather issues in Iowa and much of Nebraska. Slaughter cattle prices may be weaker this coming summer because of the number of cattle that will need to be placed, Robb said. 

“Cattle feeders lost a lot of money in 2018 feeding those animals. They are not bidding as much now. If we have long yearlings coming off summer grass, we may find it harder to make last year’s market,” he explained.

Flat calf market

Calf prices were also well below a year ago because of a flat market, Robb continued.

However, he envisions prices by the end of 2019 to be above last year, predicting a two-year climb. In the Southern Plains, 500- to 600-pound steer calves may bring $170 to $175 in the fourth quarter, with calves in the northern plains in the $175 to $180 range. 

“The general price outlook is up a little, just not significantly. But, prices are expected to start on a climb upward in the fourth quarter of 2019, that may last through 2020,” he said. 

During the last several years, the rate of increase of the calf crop has been climbing rapidly, but Robb said inventory is slowing down this year. 

“We have not been in a normal cattle cycle for cattle inventory,” he said. 

In fact, for the first time since 1963, he anticipates prices and inventory to go sideways, instead of seeing up-and-down movement, commenting, “I look for the market to continue to be flat.”

Dairy-beef cross calves

The dairy industry will also have an impact on calf prices. Many large dairies are no longer producing their own replacements and have started breeding their dairy cows to a black bull. It is a way they can gain value by producing a $350 or more dairy-beef cross calf, versus a $30 to $40 dairy calf. 

“I would expect to see more of these type of calves on the market beginning this spring and well into the future,” Robb said. 

Estimated average cow/calf costs are upwards of $900 a cow at this point, Robb said. Producers are getting some relief in costs, mostly from lower fuel prices and cheaper forage costs, which are expected to be down in 2019. 

Estimated cow/calf returns are expected to average close to $100 after 2019. 

“They showed a loss in 2018, mostly because of the cull cow market,” he explained.

Robb warned producers that cash flow and market planning may become more crucial in these flat markets, and he encouraged producers to intertwine the two. 

“We may not be able to add $400 to cull cow values like we have in the past because of the flat market. We need to become better planners,” he said.

Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.