As I was watching the Morsan 300 Sale this week (Full results here), a recurring question kept bouncing around in my head, “Where did all the money go?”

Eastside Lewisdale Gold Missy - Grand Champion WDE and Royal '11

Eastside Lewisdale Gold Missy – Grand Champion WDE and Royal ’11

What I mean is that here you have a family that pretty much funded the high-end dairy genetics marketplace since the turn of the century.  For at least the last 10 years, you would not run a sale without making sure that Morris Thalen was coming.  Morris would buy at pretty much all levels and all types of cattle.  Morsan invested in top pedigree cattle, index cattle and even unique special offer animals such as variant red and polled.  He was everyone’s dream buyer.  On top of that Morris is a great person to deal with:  very pleasant, modest and appreciative of everyone in the industry.  Therefore, that is why watching the Morsan 300 Sale raised my concerns.  Here is a family that has invested heavily and was presenting many animals with outstanding pedigrees.  Nevertheless, most of them were selling for under $4,000 and the sale averaged just over $6,023.  This is but a fraction of what the sale results would have been in the past.  Not for a minute am I suggesting any error on the part of Morsan Farms.  I actually am very impressed with the work they have done over the years (Read more:  Morsan Farms – Money Well Spent).  They have had a World Dairy Expo Grand and Supreme Champion, as well as a Red & White Champion.  They have also managed to breed high index into these cow families.  Great work by a great family.

What I do think has happened is that the industry has changed, Furthermore, Morsan themselves are great examples of this very change.  Before Morsan was a household name for winning shows and buying top cattle, they were a well-run commercial operation.  In 1998 they milked 200 commercial grade cows and today they have grown to milk 1600 to 1800 cows (80% purebred).

You see it was not the genetics market that Morris started out in.  As said previously, he actually started out in the commercial market and grew into the high-end genetics market.  I think that is something many people forget but it is key to what has happened to the industry as a whole over the past 14 years.  You see, while we watched all this money flying around at the high-end genetics sales, it was actually the evolving commercial market that was funding it.

Commercial Producers – The backbone of the high end genetics marketplace

This same phenomenon is happening in barns all around the world every day.  Commercial producers have been looking to accelerate the improvement of the cattle they milk and using high-end bulls was not doing it quickly enough.  So, with a strong US dollar and high milk price, even commercial producers were out buying better cattle.  Sure they were not buying your $100,000 show cow, but they were buying your $3,000+ fresh heifer with a nice pedigree.  In turn the breeder of that heifer was then buying your $20,000 to $30,000 dollar nice pedigree potential EX cow from some of your higher end seed stock producers. Seed stock producers would, in turn, buy your $100,000 big time show winner or high index animal.  And hence you have what I like to call the “Dairy Genetics Circle of Life.”

The problem is that this lucrative model fell apart and now the circle of life is on life support.  This isn’t because the high-end genetics market is not as good as it once was.  Genetic advancement is faster and the prices for very top animals are actually better than ever.  Genomics has brought a completely new level of breeder confidence, and bull sale prices have gone through the roof (Read more: How Much Can You Trust Genomic Young Sires?)

The problem comes at the other end of the equation.  Milk prices around the world (except in supply-managed countries like Canada) have plummeted and so has the US dollar.  This has caused the commercial market for fresh heifers to all but dry up.  Hence the rivers of cash that used to flow into the system are gone.  Commercial producer actions have caused two major changed in the marketplace.  First, years of buying these better quality cattle has greatly accelerated the genetics in their herds.  Secondly, they have become better herd managers, particularly for longevity.  No longer are their cows seen as a 1-2 year investment.  They are looking to get multiple lactations out of these animals and, as a result, this has decreased the demand for replacement animals.

The Bullvine Bottom Line

With the funding model broken, we now find those breeders that dealt in the high-end genetics marketplace having to find new business models.  Some are getting out of the high-end genetics marketplace altogether saying “It was a great ride while it lasted.”  Others are finding new markets and services aiming at commercial producers or to supply AI studs with recipients for their new genetic programs.  Then there are those who are left in limbo.  They love working with these high end cattle and want to keep pushing the envelope on genetic advancement but, more and more.  they are finding it hard to fund this passion.  They are not sure what to do now that the money is gone.

To these seed stock producers I say look for new ways to fund your model.  Is it through bull sales since female sales are a lot less than they used to be?  (Read more: Investing in Dairy Cattle Genetics – Think Outside the Box, Stop the Sale! Genomics, Chocolate and the Future of the Dairy Breeding Industry and How Genomics is Killing the Dairy Cattle Breeding Industry) Or is it through developing a product (bloodline) that you can sell directly to the commercial producer?  Any way you look at it commercial producer dollars are what fund the high-end genetics marketplace.  When the river runs dry always look at the source.  For the high end genetics marketplace the source is the commercial producer.  As the commercial producer goes so goes the rest of the industry.  Are you ready to go with the flow?

 

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