Auction Yards Feel the Strain
In late 2008, Cooperatives Working Together (CWT) initiated its sixth herd retirement round since the program was started in 2003, removing 50,630 cows that produced almost one billion pounds of milk. Throughout December, on into January and early February, 186 herds in 33 states were removed. The dairy industry-sponsored program has become one solution in the battle against managing skyrocketing input costs, dramatically decreasing milk prices and better-then-average milk production.
The impact at the auction yard has been noticeable. At Farmers Livestock Market in Oakdale, California the numbers in January were staggering. Owner Steve Haglund says that during this time of year, he normally sees between 400 and 600 head of culled cows each week. During the height of the CWT retirement his numbers increased to 1,000 head and then some.
The sheer volume had an immediate impact on price. “Right away, we saw a price drop of 35 percent. Normally culled cows go for $0.50 per pound and that fell to the high $0.20s and low $0.30s in January,” notes Haglund.
Adding to the problem was the resulting back-log at the packing houses. Haglund saw cows being left for 5 or 6 days until they could be processed, as opposed to being picked up within hours of the sale. “The packing houses just couldn’t keep up,” he says.
Ultimately, Haglund believes that the CWT process has to be managed in a timelier manner. The huge influx of culled cows had some impact on beef producers, but not extensive given the time of year. In all reality, though, it doesn’t make for good relations between the dairy and beef industries. “It [CWT retirement program] pits one producer against another and that’s the last thing we need in agriculture,” says Haglund.
The story wasn’t much different for Jon Dolieslager, owner of Tulare County Stockyard in Dinuba, California. Throughout the month of January, Dolieslager estimates that he doubled sales of culled cows. For his operation, he saw increases not only from the CWT retirement, but other producers were voluntarily bringing more cows to sell as well. “My regular customer volume increased about 25 percent, along with the extra head we took from the kill program,” notes Dolieslager.
Like Farmers Livestock Market, prices fell too. “Our cows are normally selling for $0.45 per pound and we dropped to $0.30 per pound for most of January,” says Dolieslager. The packing house issue continued in this part of the state, with cows sitting up to 2 days, instead of 3 to 4 hours.
He points out that it’s not only California sales that are impacting the packing houses. “Consider that most of the states around us have only one or no packing houses at all. Arizona and Idaho each have a single house, while Nevada and Utah have nothing. All their animals are coming into California too, so the onslaught is just overwhelming.”
Dolieslager understands the need for the CWT program and commends dairymen for funding their own system of herd management. From his end of things, though, the process could use some improving. “We’ve got to try and spread these retirements out over a longer period of time,” he says. “The residual impact on prices and the process in general lasts long after the cows have come and gone.”
He also notes that around his yard, strained relations between dairy and beef producers were relatively mild. However, had this program taken place in April or May, Dolieslager would expect a very different story. “It’s good they did the kill now. Were it later in the spring, the tension between the beef and dairy guys would have been really bad. That’s peak beef season and those producers are feeling the economic pinch too – high feed costs, water shortages, and strong competition. They don’t have the time or money to hold their animals 30 to 45 days in the hopes that the [CWT retirement program] cows make it through the system allowing prices to bounce back.”
Both owners recognize that these are unique economic times. Each hopes that as the dairy industry looks for ways to work through the struggles, thought and care are given to the bigger picture, along with recognition of the broad impacts programs like CWT herd retirement have on the livestock market in general.
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