Is Beef-On-Dairy Hurting Long-Term Milk Production?

There is potential for profitability in the dairy market, particularly in byproducts such as butter and cheese.  Shawn Hackett of Hackett Financial Advisors said the whole milk food chain is shifting to a more profitable landscape.

“Especially for the U.S. producer, we're a place that people are seeking to get these secure supplies that they need, that they want to secure at home," Hackett said.  "The other interesting thing is this strong inclination to keep the dairy herd animals for longer and breeding them to the beef cows for the very, very high cattle market. That's done a couple of things. It's kept production higher for longer than we might have expected before.”

But that profitability may not last as producers are keeping animals on their farms longer, which he noted can have an unintended side effect on milk production.

"You're keeping animals on the farm for longer, past their peak production levels, before you replace them, and we're starting to see the milk-per-cow numbers over the last several months really fall off significantly," said Hackett.  "And we might have gone too far with this whole breeding to beef cattle and such, to where our dairy herd needs to be upgraded. We may see an extended period of much-below-normal milk-per-cow efficiency, which then breeds into an inability to produce your components at the levels that you've been anticipating, at a time that the market is wanting to stockpile a lot of these products, like the milk powder, like the whey, that are storable.”

Hackett said producers may have gone too far with beef-on-dairy, and it may be time to refocus on the dairy herd.

“We might have actually pushed too far over the edge and lost our normal process of keeping the dairy herd fresh, and it’s something to watch," Hackett continued.  "If these numbers continue to fall, we could be looking at far more constrained production ahead than what the USDA and many have been expecting. We've never gone down this road before, so all this is fresh, unbridled territory, but when I think it through, the dairy producer is getting a check. He has a bank account. His dairy cows to beef that he's been doing month after month, bringing all kinds of extra income. So, it's very hard for the dairyman to say, ‘I'm going to stop doing that.’”

It’s time, Hackett added, to think longer-term when it comes to the success of a dairy operation.

“There's a short term, I can sell the cows to the beef market. I can make these good margins. But if I destroy the freshness of my dairy herd, and my milk-per-cow efficiency is subpar or even declines for a longer-term period of time, then I, as a dairyman, I'm in trouble," said Hackett.  "It's very, very hard to freshen up a dairy herd that gets too old on your farm. I think we've reached a level, or we're going to be reaching a level here pretty soon, where the dairyman is going to start thinking more about the long-term health of keeping dairy production going, because that's still, at the end of the day, his bread and butter.”

Click Here to learn more about Hackett Financial Advisors.

If you have a story idea for the PNW Ag Network, call (509) 547-1618, or e-mail glenn.vaagen@townsquaremedia.com