Tight US Heifer Market Predicted

Tight heifer supplies and a shortage of Posilac (rBST) have led to a lower revised USDA projection for 2004 milk production, with levels now expected to remain almost unchanged from 2003. The revised prediction stems from a primary source of information that the supply/inventory of dairy replacements is significantly reduced from a year ago. A second and potentially bigger impact could result from a combination of curtailed availability of Posilac compounded by the reduced number of replacements available.

On January 1, 2004 according to USDA figures, there were 4,020,000 dairy replacement heifers (500 pounds and over) on farms representing a decline of more than 2 percent from the beginning of 2003. With the figure translating to 44.7 heifers per 100 milk cows, the replacement herd is still considered large by historic standards; still, with elevated culling levels in recent years it may not be high enough to meet the demand. Of concern is the fact that the largest decline in replacement inventory coincides with the older heifers that would be expected to join the milking herd in 2004 – down 4% from a year earlier.

Factor in the absence of imported Canadian heifers and cows - which normally provide a buffer - and extra tightness to replacement supplies can be predicted. Live animals are still unable to cross the border due to BSE-related restrictions. Under normal circumstances, imports of female dairy breeding stock from Canada have represents 1 to 2 percent of the U.S. heifer herd.

Monsanto’s announcement that producers can expect to receive only half of their normal Posilac allocation could be the wild card in how the dairy year plays out. Already butter and Cheese prices have risen substantially in anticipation of reduced milk supply later in the year. Higher milk prices normally fuel an increased demand for replacement heifers. And with Posilac in scarce supply producers could find the need to replace late lactation animals slated for slaughter sooner as their production falls off more rapidly, adding further yet to the increased demand for replacements.

Lower inventory, higher milk prices fueling demand, no Canadian heifers to provide a buffer and the potential Posilac-induced hastened exit of cull animals – they all signal an extra tight year ahead for finding affordable replacements.

Posted Mar 4th

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