Weak first-quarter 2018 milk prices applied downward pressure on prices paid for dairy replacement cows, but foreign demand for U.S. dairy heifers remains strong.
Preliminary April 2018 U.S. quarterly replacement dairy cow prices averaged $1,360 per head, $160 (11 percent) less than January 2018 and $280 (17 percent) less than April 2017 (Table 1), according to the USDA’s Ag Prices report, released April 27.
The April 2018 price marked the lowest quarterly average since the first quarter of 2013, and is now down $760 (36 percent) per head from the latest peak of $2,120 in October 2014.
The USDA estimates are based on quarterly surveys (January, April, July and October) of dairy farmers in 23 major dairy states, as well as an annual survey (February) in all states, according to Mike Miller, with USDA’s National Ag Statistics Service. The prices reflect those paid or received for cows that have had at least one calf and are sold for replacement purposes, not as cull cows. The report does not summarize auction market prices.
Among major dairy states, highest April 2018 average prices were $1,600 in Oregon and $1,500 to $1,550 per head in Arizona, Colorado, Idaho, Kansas, New Mexico, Texas and Utah. Of those, milk cow numbers are growing in all states except Oregon, based on the USDA’s monthly milk production estimates.
Lowest average prices were $1,250 or less per head in New York, Ohio, Pennsylvania and Virginia.
While domestic dairy cow replacement demand and prices are weakening, foreign demand in emerging markets continues to build. At 1,588 head, March exports of U.S. dairy replacement heifers remained strong, but the total was down from February. The heifers were valued at just over $2.7 million. Mexico imported 1,224 head during the month, followed by Canada (354 head). Through the first quarter of the year, dairy heifer exports stand at 5,751 head, the second-highest quarterly total in the past four years.
Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri, provided insights on dairy heifer exports after arriving in Pakistan to begin a three-week, seven-country sales trip. He expects large numbers of dairy heifer exports in the second half of 2018 and into early 2019.
“There is a tremendous interest in U.S. dairy cattle right now, not only due to price, but also to the continuing education of the world’s dairy farms that U.S. cattle produce more milk, even though transportation means they cost more,” Clayton said. “The re-emergence of markets like Egypt, and larger sales to Pakistan, could be a bright spot to take some cattle and milk off the U.S. market.“
Challenges to foreign sales include any strength of the U.S. dollar relative to other currencies, and what Clayton calls the “Trump Trade Factor,” which could negatively impact sales to Mexico.
Several countries are timing imports of heifers bred two to five months to avoid freshening in the summer heat, said Gerardo Quaassdorff, T.K. Exports Inc., Boston, Virginia.
Exporting dairy heifers is not without its challenges, he said. Local politics in a buyer’s home country – affecting the lengthy process of obtaining financing through government channels – sometimes delays a foreign buyer’s ability to sign purchase contracts. Slow banking systems also slow transactions. That creates unique challenges for U.S. cattle exporters.
For example, Turkey is expected to delay imports until after the country’s June presidential election. In addition to dairy and beef heifers, Turkey seeks noncastrated bulls as feeder cattle. “Unless there is a long-term commitment and some considerable down payment by the buyer, I am not aware of any U.S. supplier or beef producer willing to keep young bulls in their facilities.”
Nontariff trade barriers can hamper sales, Quaassdorff said. Russia has imposed a requirement that for any dairy cattle imported from the U.S. to be eligible for government subsidies, they must be accompanied by pedigrees going back three generations – and the animal being imported does not count as a generation. Russia also demands heifers bred with either sexed semen of sexed embryos, pregnant two to five months and tested free of leukosis.
Cull cow prices compared
The USDA’s Ag Prices report indicated U.S. average cull cow (beef and dairy combined) prices rose slightly in March. The March average of $68.90 per hundredweight was up $3.30 from February, but 60 cents less than March 2017.
However, year-to-date, 2018 slaughter cow prices are about 3 percent below the average for the same period in 2017, according to the Livestock Marketing Information Center (LMIC).
Analyzing mandatory USDA Agricultural Marketing Service price reporting data from beef packers, the LMIC said regional cull prices varied. In the Midwest (Illinois, Iowa, Minnesota, Missouri and Wisconsin), 2018 year-to-date cull cow prices were running about 6.4 percent below 2017. In the East (an area stretching from Vermont to Florida and Indiana), the 2018 average price is down 5.3 percent; in the North Central region (Montana, Nebraska, North Dakota, South Dakota and Wyoming), the average price is down 2.3 percent.
However, in the West (Arizona, California, Idaho, Nevada, Oregon, Utah and Washington, the 2018 year-to-date average price is 6.9 percent higher than 2017, thanks in part to a new CS Beef Packers plant in Idaho, which is creating additional competition for cattle.
Through mid-April, federally inspected beef and dairy cow slaughter was up 10 percent and 5 percent, respectively. Nationally, beef and dairy cow slaughter is expected to remain above 2017’s level until midsummer and maybe longer, according to the LMIC report.
Two keys to cull cow prices for the balance of this year include low milk prices, which could increase dairy cow slaughter even more than expected, and drought conditions, causing more beef cows to be culled earlier than normal.
16 percent of U.S. dairy cows in drought areas
Improving moisture conditions mean fewer U.S. dairy cows are located in “drought areas,” according to the USDA’s World Agricultural Outlook Board. As of late April, about 16 percent of the nation’s milk cows were located in areas experiencing drought, a 7 percent reduction compared to a month earlier.
The weekly U.S. Drought Monitor overlays areas experiencing drought with maps of major production areas for hay, alfalfa hay, corn, soybeans and other crops, as well as primary dairy and all cattle areas.
A large droughty swath continues to cover most of the Southwest, including major dairy areas in Kansas, Texas, New Mexico, Arizona and California.
The report also showed about 23 percent of major alfalfa hay production acreage is in areas experiencing drought, a 4 percent improvement over a month earlier. 
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Dave Natzke
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