By CAROL RYAN DUMAS
Little or no profits in the milk-production sector in the second half of 2012 and strong cull prices drove dairy cow slaughter to its highest level in 26 years.
At 3.1 million for all of 2012, it was the second-highest slaughter on record, said Tiffany Hora, statistician with USDA National Agricultural Statistics Service. Last year's dairy cow slaughter was eclipsed only by the 1986 slaughter, which was 3.6 million and fueled by a federal whole-herd dairy buyout.
While the first half of 2012 was good for dairy producers, with strong milk prices and manageable feed costs, things took a turn for the worst in the second half, said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin.
Producers, particularly those in the West, struggled with negative margins between milk prices and feed costs, which led to heavier culling in late 2012 and early 2013.
"Profitability was not good enough to keep those cows," he said.
Some farms went out of business and some others are not running at capacity. That put a lot of cows on the market, he said.
Nationwide, producers dealt directly with drought and the resulting high feed prices, he said.
In addition, beef supplies are tight and cull cow prices are strong, double what they were just a few years ago. Culls are selling in the range of 80 cents per pound and approached 90 cents a pound for a few months last year. More typical prices are 40 to 50 cents a pound, he said.
In spite of the culling, milk cow numbers in the national herd, at slightly above 2011, held steady because there's been a high percentage of replacement heifers in the herd over the last few years due to sexed semen and lower mortality rates, he said.
That gives producers the opportunity to cull more heavily, he said.
Dairy cow slaughter for the first quarter of 2013 was 830,000, compared with 803,000 in 2012 and 781,000 in 2011.
Another factor was last year's closure of a major slaughter plant in Quebec, Canada, said Derrell Peel, extension livestock marketing specialist with Oklahoma State University.
"A significant part of the 4.4 percent increase in dairy cow slaughter this year (2013 year to date) is likely due to increased imports of Canadian dairy cows," he said in last week's Cow/Calf Corner newsletter.
Stephenson said that when Canada has lost capacity in the past, animals from Canada have moved to the U.S. for slaughter, but he doesn't attribute much of last year's high dairy cow slaughter to imports from Canada.
With milk prices increasing and feed costs projected to decrease, things could turn around this year and slaughter could slow. That said, cull prices remain high, but dairy producers want to make milk, not beef, he said.
Jerry Dryer, chief market analyst at Rice Dairy, a Chicago brokerage house, expects the culling pace to slow.
Revenue over feed costs is looking a lot better, and the supply of replacement heifers is tightening, he said.
And despite the reported struggles of western dairies, expansions are numerous and talk of milk supply management as part of the farm bill has many producers building their production base, he said.