Dairy and beef farmers are aware of the cyclical nature of the cattle industry. They also know the two segments are closely related. Corey Geiger, economist for dairy production and processing, CoBank, recently discussed trends in dairy and beef.
“Dairy is dynamic and growing,” said Geiger. “It’s the largest category in all grocery. Dairy is the world’s largest refrigerated supply chain, and sales were up 3.3% collectively in the U.S. from 2023.”
In measuring industry growth, milk matters more than cows. Over the last 25 years, cow numbers are only up 2.4% while milk production has grown by 39% by volume.
“A paradigm shift has happened,” said Geiger. “From 1945 to 2010, milk production and component production were one in the same. From 2011 to 2024, USDA data show milk production has grown 16%; however, during that same window, milk components (butterfat and protein) have grown 27.2%.”
The first time USDA looked at milk components was in 1924, and butterfat in pioneer America through World War II peaked at 3.89%. The number one dairy products at the time were butter and fluid milk; cheese was a small player.
“Then the markets changed, and from 1966 to 2010, butterfat held at 3.65% to 3.69%,” said Geiger. “In 2010, everything changed, and we’ve had four years in a row of record butterfat percentages in the milk supply.”
While butterfat can be changed through genetics and feeding programs, protein is more of a biological function that’s influenced by nutrition. Overall dairy component production is growing, and Geiger said that’s what matters.
“The old rule of thumb is that 100 pounds of milk makes 10 pounds of cheese,” said Geiger. “We’ve seen a 12.5% improvement in the past 14 years on the amount of cheese made from milk. Now, the average 100 pounds of milk makes 11.4 pounds of cheese. Butterfat is growing at a higher rate than protein, so 100 pounds of milk previously made 4.4 pounds of butter, and now we’re at 5.1 pounds. That’s big growth.”
About 90% of U.S. milk is in the Federal Order system and priced on Federal Order components. While butterfat is currently ahead, Geiger said protein will gain the lead because it’s what consumers are demanding.
As customers face inflation, dairy sales are impacted. However, there’s a lot of cheese consumed away from home. “If consumers pull back on spending, the patterns of where they’re consuming food change,” said Geiger. “Cheese disappearance in the home, in retail and export is all up.”
The cull cow and cattle inventory is taking some interesting turns. Geiger pointed out that in recent weeks, U.S. dairy farmers have pulled back on culling by 608,700 head, and to date, there are 100,800 fewer cows.
“This is taking place because fewer heifer replacements are leading to fewer cows culled,” he said. “It’s reshaping what’s taking place on dairy farms.”
As he explained more about the role of genomics, Geiger says the large population base of Jerseys and Holsteins allows 70% accuracy prediction on heifer calves’ performance as cows. Today, 20% to 25% of newborn heifer calves in the U.S. are genomically tested.
Cattle with beef on dairy genetics will remain an important aspect of the beef supply as the national herd begins to rebuild. Photo by Sally Colby
“We are learning more about our dairy animals,” he said. “That’s impacting the milk supply. This alone is one of the big reasons we’re able to shift what our dairy cows are doing.”
Dairy replacements are influenced by the demand for beef. “Top replacements are going at $4,000 and higher,” said Geiger. “That shows how short we are on numbers to fill the pipeline. Part of that has changed because of beef on dairy. In 2023 and 2024, there were 7.9 million units of beef semen sold to dairy farmers. That has flatlined a little because we don’t have enough replacements. We are quickly reaching a point that the two main semen products sold to dairy farmers are gender-sorted dairy to make heifer calves and beef.”
Prices for lean (90% or higher) ground beef rose to $400/cwt. ($4/lb.), which Geiger said is largely driven by dairy cow and beef cow slaughter being down.
He said 20% of farm revenue now comes from beef on dairy, cull cows and newborn calves. “The value of the uterus – the cow’s ability to have a calf – is contributing so much to our ROI,” he said. “If the calf is worth a lot, we might need to keep a more marginal cow because beef on dairy is climbing.”
Abbi Prins, industry analyst, CoBank, also shared information on cattle industry trends. Prins explained Kansas State’s consumer-driven monthly meat demand monitor. “The top three things consumers value when they purchase protein are taste, freshness and price,” she said. “If a product doesn’t taste good, isn’t fresh or the value isn’t there, they won’t be a repeat buyer.” She noted that some characteristics, such as environmental impact, aren’t top priorities for consumers.
Regarding beef semen sales, Prins said the units of semen sold to dairy producers continues to rise. As sexed semen for dairy females continues to influence herd numbers, there’s a chance sexed beef semen will be produced to create beef on dairy bull calves.
“If we look into feeder cattle supply, USDA data show fed dairy-type animals in the feeder cattle supply was at 3 to 3.5 million head over the past almost 20 years,” said Prins. “With beef on dairy calves entering the feeder cattle supply, CattleFax forecasts that over half of dairy-related animals in the feeder supply will be beef on dairy crosses.”
However, there’s still concern regarding the decline in the overall cattle inventory. “We have the smallest beef cow herd since 1961,” said Prins. “The reason we believe the rebuild of the beef cow herd has not started yet is because of record-high calf prices and poor cash conditions.”
The current beef cow herd is at 28 million head. “Our most recent peak was in 2019,” said Prins. “We’ve been liquidating the herd since then. At the end of the most recent cycle, we had already seen peak calf prices, and now we’re at over $400/cwt. for recent calf prices via USDA data. We haven’t really seen big signs for retention. We’ve heard anecdotally that some regions are starting to hold back heifers for rebuilding. We’re hoping the beef cow numbers start ticking up in 2027.”
by Sally Colby
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