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Natzke dave
Dave Natzke
Editor / Progressive Dairy

March dairy cull cow marketing highest since 1986

Strong beef prices and small milk income margins in March pushed monthly U.S. dairy cull cow marketing to its highest total since 1986. For those with long memories, that was the year of the whole-herd buyout program.

The number of dairy cull cows marketed through U.S. slaughter plants was estimated at 306,100 in March 2023, up 39,600 from February and 8,900 more than March 2022. With 27 non-holiday weekdays and Saturdays, slaughter averaged 11,300 head per day.

Prior to March 2023, slaughter had topped 300,000 only twice – in March 2019 and March 2021 – in the past 36 years. Cull dairy cow slaughter rates topped 300,000 during six months in 1986, including 401,000 in April of that year, when producers agreed to slaughter or export their entire herds and get out of dairying for at least five years in return for USDA payments, under a program to reduce surplus milk production.

The USDA estimated there were 9.435 million dairy cows in U.S. herds in March 2023, up 6,000 from February and putting the March culling rate at about 3.2%. Year-to-date (January-March) dairy cull cow slaughter now stands at 870,400 head, up 45,800 from the same period a year earlier.

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Heaviest dairy culling during March occurred in the Southwest (Arizona, California, Hawaii and Nevada) at 76,600 head, and Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin) at 69,400 head.

Other monthly regional totals were estimated at 40,500 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 42,500 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and 43,700 head in Alaska, Idaho, Oregon and Washington.

The increase in dairy cows marketed for beef is filling a void created by declining slaughter rates for steers and beef cows. The USDA’s Cattle on Feed report, released April 21, indicated marketings of fed cattle during March totaled 1.98 million head, 1% below 2022. Cattle and calves on feed for the slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 11.6 million head on April 1, down 4% compared to April 2022.

Primary data for the USDA’s Livestock Slaughter report is obtained from reports from about 900 federally inspected plants and nearly 1,900 state-inspected or custom-exempt slaughter plants.

Same story: February 2023 fluid milk sales lower

U.S. fluid milk sales trended lower again in February, according to monthly data from the USDA Agricultural Marketing Service:

  • Total sales: Sales of packaged fluid milk products totaled about 3.37 billion pounds, down 3.2% from the same month a year earlier. At 7.15 billion pounds, year-to-date (YTD) sales of all fluid products were down 1.8%.
  • Conventional products: Monthly sales totaled 3.15 billion pounds, down 3.1% from the same month a year earlier. YTD sales totaled 6.68 billion pounds, down 2% from January-February 2022.
  • Organic products: February sales totaled 218 million pounds, down 3.2% from a year earlier. At 476 billion pounds, YTD sales of all fluid organic products were up 1%. Organic represented about 6.5% total fluid product sales in February and 6.7% YTD.

The U.S. figures are based on consumption of fluid milk products in federal milk order marketing (FMMO) areas, which account for approximately 92% of total U.S. fluid milk sales and adding the other 8% from outside FMMO-regulated areas. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, non-food stores, schools, the food service industry and home delivery.

2022 ‘mailbox’ prices jumped

At $24.64 per hundredweight (cwt), full-year 2022 “mailbox” milk prices were up $6.95 per hundredweight compared to the year before. Those same mailbox prices averaged about 92 cents per cwt less than announced average “all-milk” prices for the same period, based on a preliminary look at two USDA milk price announcements. 

The all-milk price is the estimated gross milk price received by dairy producers for all grades and qualities of milk sold to first buyers, before marketing costs and other deductions. The price includes quality, quantity and other premiums, but hauling subsidies are excluded. During 2022, all-milk prices averaged $25.56 per cwt, up $7.03 from the $18.53 average in 2021.

The mailbox price is the estimated net price received by producers for milk, including all payments received for milk sold, and deducting costs associated with marketing. The 2022 mailbox price averaged $24.64 per cwt, up $6.95 from the $17.69 per cwt average in 2021.

The price announcements also reflect similar – but not exactly the same – geographic areas. The USDA National Ag Statistics Service (NASS) reports monthly average all-milk prices for the 24 major dairy states. The mailbox prices reported by the USDA’s Ag Marketing Service (AMS) cover selected FMMO marketing areas. 

Vitaliano: April dairy outlook

Dairy product demand and use are recovering from inflationary pressures at a time when dairy producer income margins are being squeezed, according to National Milk Producers Federation’s Peter Vitaliano. Summarizing dairy markets in the April 2023 Dairy Management Inc./National Milk Producers Federation Dairy Market Report, he said mid-April forecasts indicate that the monthly Dairy Margin Coverage (DMC) margins are close to bottoming out for the year, at around $6 per cwt in the next few months, followed by a slow rise that will not likely top $9.50 per cwt until the fourth quarter of the year.

For more information on commercial use, dairy trade, milk production, product inventories, prices and margins, view the April Dairy Market Report.

Coming up

The USDA releases its monthly Ag Prices report on April 28. The report includes factors used to calculate March 2023 DMC margins and potential indemnity payments. The report will also include April 2023 average dairy replacement cow prices.