Beef-on-Dairy: A Very Lucrative Proposition for Producers

 The U.S. beef industry is experiencing a significant transformation, with dairy producers playing an increasingly crucial role in meeting the nation’s beef demand. This shift is driven by several factors, as explained by Dan Basse, president of AgResource Company on a recent episode of Professional Dairy Producers (PDP) “Dairy Signal.” According to Basse, beef-on-dairy crossbreds have become an indispensable part of the industry.

The U.S. beef cattle herd has reached its lowest numbers in 64 years, a trend unlikely to reverse in the near future. Persistent drought conditions and strong cattle prices have discouraged beef producers from retaining heifers, leading to tighter supply conditions. In response, the beef industry has turned to dairy farmers to produce crossbred animals, which serve as a vital supply line to meet growing beef demand.

Beef-on-Dairy Needs to be in Every Herd

Basse emphasizes the production of beef-on-dairy crossbreds is critical for maintaining the industry’s current output levels.

“It is something that needs to be in every herd,” he said.

The integration of bottom-end genetics from dairy herds to produce beef appears to be an essential strategy moving forward. Basse doesn’t foresee an end to this demand any time soon.

As the average age of cow-calf producers climbs into the upper 60s, Basse predicts beef-on-dairy will remain in demand for years to come. He believes this approach will help sustain beef production and supply, despite challenges faced by traditional beef producers.

“I don’t see a way how you consolidate or make that cow-calf operator to produce enough animals going forward,” he shares.

The market is attempting to incentivize dairy producers with substantial financial offers, with some wet calves generating $1,000 plus, indicating a stable market through at least 2028.

Phil Plourd, president of Ever.Ag Insights, concurs with the ongoing profitability of breeding beef-on-dairy

“It’s a classic ‘bird in hand versus two in the bush’ situation. In this case, the bird in hand is something like $900 for a day-old beef calf,” he says. “That still strikes producers as a better deal than the risks and uncertainties of raising a dairy heifer. The beef situation isn’t any different, either, with the Cattle Report showing the smallest beef inventories since 1961 and all-cattle and calf inventories since 1951. The whole situation is one of the more intriguing mysteries I’ve seen in the 25-plus years I’ve been hanging around the dairy industry.”

Consumer Trends and Market Outlook

The growing role of dairy in beef production aligns with consumer willingness to accept current retail beef prices. Currently, prices are soaring, with retail beef reaching $8.70 per pound. Despite these prices, demand remains robust, and calf and feeder cattle prices continue to rise. Basse notes the market is solid for the foreseeable future, with some uncertainty beyond 2028.

“Beyond that it is always mercury,” he says. “Today, the U.S. consumer is willing to expect retail beef prices at $8.70 per pound and calf and feeder cattle prices that are soaring.”

The beef-on-dairy approach is not just a temporary fix; it’s become a strategic component in the U.S. beef production landscape. As the industry adapts to changing conditions and consumer demand, dairy producers will continue to be key players in ensuring beef supplies remain steady.