Large Holstein Steer Discounts Seen as Packers Reduce Slaughter

January 16, 2017 11:13 AM

Cattle prices are still considerably lower than the highs of two years ago. However, Holstein cattle appear to be facing their own price pressure as buyers push discounts and some packers shut the door.

Step into the Lake Odessa Livestock Auction in Lake Odessa, Mich. where Holsteins are up for bid.

“The expansion is underway and it will not stop,” said Tom Rademacher, a producer in Eagle, Mich.

Rademacher is talking about the state’s dairy boom. The USDA’s latest milk production report says Michigan is continuing to see growth in milk cows and production, growing more than 5 percent over the same month a year ago.

“The herds were 250, and are now 1,000 or 3,000 head,” said Rademacher.

While the state’s dairy herd expands, the prices at auctions shrink. Producers say Holsteins seem to see larger discounts than normal.

“The Holstein steer market has just gone all to pieces,” said Verne Lettinga, owner of the Lake Odessa Livestock Auction. “The fellas feeding colored cattle and black cattle are not too bad yet. They’re holding up at $1.10 and $1.20 in that range, but these Holstein steers are 80 to 90 cents.”

“Typically, you have your Holstein prices $10 or $15 below the standard animals, and there’s talk of $20 or $25 below because they need to go further to find a home to be slaughtered,” said Bryan Doherty, senior market advisor with Stewart-Peterson.

Some major packers are cutting back or not accepting dairy cattle for slaughter, and producers say it’s not helping.

“There is a bigger discount with Holsteins today because some of the packers are not killing Holsteins,” said Lettinga. “They just quit and all they’re killing is colored cattle.”

Some truck drivers at the auction say they’ve already reduced their trips to Tyson in Joslin, Ill.

“All of the cattle now are pretty much going to different packing houses besides Tyson,” said Tom Wiskow of Wiskow Trucking and Livestock. “They don’t want Holsteins. They want all colors down there.”

Sale barn owners and producers have told AgDay the squeeze is mainly felt at Tyson plants in the Midwest.

Tyson says the company cannot comment on its buying practices, they consider it proprietary.

Doherty says the impact of packers scaling back is hard to determine at this point.

“The packer industry continues to look for high efficiency and profit margins,” said Doherty. “It looks like the dairy steer, the Holstein steer is on the short end of the stick again. The industry is going to have an issue with supply.”

The changes are out of the producer’s control and soggy markets have the dairy industry nervous about the prospects for finding profits beyond the milk parlor.

Some packers are scaling back while others are maintaining the numbers. Cargill told AgDay the company “has not changed its cattle procurement practices.”

JBS also says, “The JBS Regional Beef business remains dedicated to the calf-fed Holstein steer market. As part of our business model, our plants in Green Bay, WI, Tolleson, AZ, and Plainwell, MI, will continue to actively participate in Holstein steer slaughter. We purchase cash cattle every day to support our strategic investments in JBS Holstein-based beef brands.”

Despite dairy growth, Lettinga believes the dairy industry is seeing some consolidation with smaller dairies in Michigan. He also says there’s a need for more packing houses in Michigan because of the Holstein steer market.

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