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Dairy Outlook: Dairy heifer prices have skyrocketed as the number of replacements drops to a 20-year low.

Fran O'Leary, Wisconsin Agriculturist Editor

February 20, 2024

3 Min Read
a line of dairy cows standing in a pasture
HIGH-PRICED HEIFERS: Dairy replacement prices have now jumped to an eight-year high, with USDA data and auction market reports ranging from $1,890 to $2,800 per head.FARM PROGRESS

The number of dairy replacement heifers in the U.S. has plummeted nearly 15% during the past six years to reach a 20-year low, according to data from USDA’s most recent cattle report. What does that mean?

Any potential opportunities to boost dairy exports may be stymied by an inability to expand U.S. milk production, according to Corey Geiger, lead dairy economist for CoBank.

Beef on dairy

“That imbalance has prompted dairy farmers to reduce their heifer replacement inventories, in large part by breeding more dairy heifers and cows to beef bulls,” Geiger explains. “Contraction in the U.S. beef herd due to drought and other adverse conditions has led to record-high prices for beef cattle and retail beef products.”

Geiger says the rising cost of raising dairy heifers has far outpaced increases in heifer values over the past several years.

“Raising dairy heifers has been a losing proposition for most farmers in recent years, to the tune of $600 to $900 per animal,” Geiger says. “To better manage on-farm heifer inventories, dairy farmers have turned to using beef semen on a portion of their dairy herd to reduce the number of replacement heifers. That’s enabled farmers to cut the costs associated with raising heifers and generate additional income from beef sales.”

Less than a decade ago, dairy heifers sold for a tidy profit, but costs to raise them today mean they sell at a loss. While heifer-rearing cost estimates vary, they are all trending upward. University of Wisconsin Extension survey data from 1999 to 2015 found the total cost to raise a dairy heifer from birth to entering the milking herd climbed from $1,360 to $2,510 per head. In a similar analysis looking at 2016 to 2021, Penn State Extension specialists calculated heifer-raising costs averaged $2,034.

Meanwhile, heifer values have not kept pace with higher rearing costs, Geiger says.

“From April 2018 to January 2022, the sale price of dairy heifers never exceeded $1,400 per head, according to USDA’s Agricultural Prices report,” he says. “The discrepancy between rearing costs and sale value led to a prolonged and steady decline in replacement heifers in recent years.”

Some fluctuation in the population of replacement heifers is a natural outcome of market and economic forces, Geiger says. But a sufficient inventory is important to the continuity of U.S. milk production and is critical to the industry’s ability to expand.

“While the number of replacement heifers has dropped to a 20-year low, the overall U.S. dairy herd has been stable, with 9.3 million to 9.4 million head of dairy cows over the last six years,” he notes.

The steep drop in the heifer supply went largely unnoticed until recently, when dairy farmers went looking to buy now-scarce replacements. As a result, dairy replacement prices have now jumped to an eight-year high, with USDA data and auction market reports ranging from $1,890 to $2,800 per head.

Long-term situation

“These higher replacement values will likely be in place for the foreseeable future given the tight supply,” Geiger says.

The shrinking replacement pipeline will impact the ability to grow U.S. milk production for some time.

“Even if dairy producers reverse course and use more dairy bull semen in the coming years, it will be two to three years before the resulting dairy calves reach the milking barns,” he says.

About the Author(s)

Fran O'Leary

Wisconsin Agriculturist Editor

Even though Fran was born and raised on a farm in Illinois, she has spent most of her life in Wisconsin. She moved to the state when she was 18 years old and later graduated from the University of Wisconsin-Whitewater with a bachelor's degree in journalism.

Fran has 25 years of experience writing, editing and taking pictures. Before becoming editor of the Wisconsin Agriculturist in 2003, she worked at Johnson Hill Press in Fort Atkinson as a writer and editor of farm business publications and at the Janesville Gazette in Janesville as farm editor and feature writer. Later, she signed on as a public relations associate at Bader Rutter in Brookfield, and served as managing editor and farm editor at The Reporter, a daily newspaper in Fond du Lac.

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