Farm Progress

Agrivision: Sell heifers or milk them?

The Agrivision panel answers a question about expanding the herd or paying down debt.

November 4, 2016

4 Min Read

Sell or milk heifers?
My wife, my son and I milk 210 Holstein cows with a 25,000-pound rolling herd average. A couple of years ago, we began breeding our heifers and some of our cows with sexed semen because we had originally planned to expand our herd to 300 cows. That was before we got stuck with these stubborn low milk prices. We have 30 heifers due in February, March and April, and nearly all with heifer calves. Would we be better off selling them as springers for $1,500 each, or keeping the heifer calves and selling them as fresh heifers for the same price? We plan to use the money to pay off our bills at the feed mill and vet clinic, and buy seed for next spring. We also have another 40 heifers carrying heifer calves due in late April, May and June. Should we plan to sell all of them as springers, or freshen them out, sell the heifers and keep the calves? We have a double-eight milking parlor and 215 freestalls. When we decide to expand, we’ll have to add on to our freestall barn or build a second one. We have a $300,000 mortgage and own 350 acres of cropland.

Hodorff: From the information given, it would indicate you are in a very good equity position. I would not change my long-term goals because of some lower milk prices. In my view, you are not using your parlor to its full capabilities. My advice would be to continue on your plan of growth. You can decide your rate of growth. With your parlor, you could easily double your cow numbers. I feel your challenge will be management. When you expand, who will manage the dairy? In my view, you are more challenged to plan for your growth from a management situation than an animal inventory and milk price situation. If you decide to sell your heifers, you will probably be selling them at a loss. Milk prices will improve.  

Miller: Provided you get the same price for springers as you would a fresh cow, it seems to make the most sense to sell the fresh cows and either sell the calves or retain them to keep your options open to expand the herd. The other reason to retain the calves is that they are likely all heifers, as they were bred with sexed semen. If you have not completed a business plan, now would be a great time to meet with a qualified dairy business consultant to assist in putting together a plan. While you have thought through some of the components, a consultant's experience with these plans can lay out the options and assist with timing, should you decide to move forward with an expansion. Good luck with your plans.

Hagedorn: Good question. Stubbornly low milk prices are forcing us to be creative in how we deal with farm assets — and debt. It appears you can generate $45,000 with the sales of the first batch of heifers. Will that be adequate to cover the feed mill, vet debt and purchase of seed? My primary question is, can you sell fresh heifers and keep the calves at the same price that you can market 30-day prefresh heifers? If you have the time, feed and space, I would opt for the former and market fresh heifers and raise the young stock.  Depending on how much debt you have to service, you can go through the same process with the next 40 heifers. If old debt is cleaned up, you could look at retiring some of the mortgage or replace some older cows in you herd. Regardless, down the road you will be in a better position to consider the expansion project.

Agrivision panel: Doug Hodorff, Fond du Lac County dairy farmer; Sam Miller, managing director of agricultural banking, BMO Harris Bank; and Katie Wantoch, Dunn County Extension agriculture agent specializing in economic development. Filling in for Wantoch while she is on maternity leave is Mark Hagedorn, Eau Claire County Extension dairy and livestock agent. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919, or email [email protected].

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