Trying to get a handle on dismal milk prices, U.S. dairymen sent 728,700 cows to slaughter in the first quarter of 2009, 113,000 more than the same period in 2008, according to the Livestock Marketing Information Center in Denver.
The high milk prices in early 2008 disintegrated by year's end when the worldwide economic downturn caught up with milk production, said Wilson Gray, extension economist with the University of Idaho in Twin Falls.
Declining domestic purchases of dairy products and dwindling restaurant traffic left the dairy industry with more supply than the market would take. A weaker U.S. dollar also had 5 percent to 6 percent of dairy production going overseAs in 2008. That's down to about 2 percent so far this year.
"They (producers) figured the government's been buying powder since last October. That's always a leading indicator there's too much product compared to consumption," Gray said.
Dairy cow slaughter jumped in January. At 265,400 head, it was up 58,200 head from January 2008, according to the Livestock Marketing Center. The first quarter saw a 50 percent increase in slaughter over last year, Gray said.
Dairymen just can't afford to feed cows at current Class III milk prices - $9 to $10 a hundredweight in Idaho - when feed costs are running $8 to $10 cwt., he said. Feed costs are 50 percent to 60 percent of a dairy's operating costs, and Idaho dairymen need $14 to $16 cwt. on milk to break even.
"They're not getting anywhere close to that," Gray said.
The national Class III price inched up a bit in April to $10.78 cwt., but is projected to be down to $9.99 for May, according to Dairy Management Inc., which supplies National Milk Producers Federation with market reports.
Those prices have dairymen losing money hand over fist, $100 to $150 a month per cow, Gray said.
"You take that by a thousand cows, that's a pretty deep hole. They've been dealing with that for six months," he said.
Thus, more cows going to slaughter.
"When milk is $18 to $20 (cwt.), you can afford to put the cows in the barn, they'll at least pay for feed," he said. "But at $9 or $10, they have to be pretty productive. (Producers are) culling pretty hard."
Gray said he expects the higher culling trend nationally to continue.The higher slaughter rates in January and February started waning in March when CWT announced another herd buyout. "April and May was more of a normal culling," Gray said. "People backed off to see what the program is going to do."
That could happen again if another buyout is announced in the fall, he said.