HighGround Dairy has updated its Margin Monitor to better capture the impact of today’s cattle markets on producer margins. Beginning Monday, our producer margin outlook will incorporate forward projections for revenue from beef sales, including cull cows and beef-on-dairy calves, instead of relying on a fixed value. By incorporating beef revenue into the calculation, the Margin Monitor will provide producers with a more comprehensive view of margin management that reflects the realities of today’s market.
Today’s High Cattle Prices
Previously, the model estimated beef revenue at a flat $1.50/cwt. With record-high cattle prices, that figure no longer captures the full story. Incorporating CME feeder cattle futures and a dynamic price adjustment factor, HighGround’s updated calculations now estimate beef revenue above $4.00/cwt of milk over the next twelve months, with some months exceeding $5.00/cwt. This adjustment means that even as milk prices have softened recently, margins look more favorable with cattle values factored in.
Methodology
Our new methodology for calculating beef income closely mirrors the approach used in the Livestock Risk Protection (LRP) program. For forward projections, we rely on CME feeder cattle futures combined with a dynamic price adjustment factor (PAF), as determined by LRP. For historicals, we use USDA data—the same data used to develop the PAFs for LRP—to maintain consistency with how prices are forward-projected.
Several key assumptions are left stable over time. These include:
- A 1,000-cow milking herd averaging approximately 80 pounds per cow per day with flat monthly milk production
- 150 dry cows
- 55% of cows pregnant to beef sires
- 6% calf death loss
- 28% annual cull rate
On a monthly basis, this translates to approximately 50 beef-on-dairy calves at 85 pounds per calf and 27 cull cows at 1,300 pounds per cow. We also assume balanced heifer inventories and a consistent breeding strategy over time. While beef-on-dairy has only become widespread in recent years, we elected to keep the breeding strategy consistent in our historical applications to maintain simplicity and comparability.
Result: Stronger Margins
As beef revenue provides a significant income stream thanks to record cattle prices, margins are looking far more favorable heading into the future than they were under our previous methodology. Although milk prices have declined, the combination of strong beef revenue and lower feed costs continues to support profitability going forward.
By updating the Margin Monitor to reflect cattle market dynamics, we are able to provide producers with a more accurate and timely view of their risk management opportunities. If you have any questions about our methodology or ideas for improving the Margin Monitor, please don’t hesitate to reach out. Otherwise, check out these changes for yourself in Monday’s Margin Monitor email from HighGround Dairy!
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