Key Takeaways:
- The U.S. dairy industry is experiencing a significant decline in dairy replacement heifers, reaching a 20-year low.
- Compared to their sale values, rising costs of rearing dairy heifer calves have led farmers to reduce replacement inventories.
- The contraction in the U.S. beef herd has resulted in record-high prices for beef cattle and retail beef products, influencing dairy farmers’ breeding decisions.
- The current shortage in replacement heifers could restrict meaningful growth in U.S. milk production shortly.
Decline in Replacement Heifers
The U.S. dairy industry is grappling with a sharp decline in the number of dairy heifers available to replace older cows, which could limit domestic milk production growth over the next few years. According to the USDA’s latest Cattle report, dairy replacement heifers have fallen nearly 15% over the last six years, marking a 20-year low. This decrease comes when the global demand outlook for U.S. dairy products faces uncertainties due to export market challenges.
Economic Pressures on Dairy Farmers
A recent CoBank Knowledge Exchange report highlights the economic pressures contributing to this decline. The cost of rearing dairy heifer calves has significantly outpaced the increase in heifer values, leading dairy farmers to reduce their replacement inventories. This shift is partly due to farmers opting to breed more dairy heifers and cows with beef bulls, a strategy influenced by the contraction in the U.S. beef herd and the consequent rise in beef cattle prices.
“Raising dairy heifers has become increasingly unprofitable, with losses ranging from $600 to $900 per animal,” noted Corey Geiger, CoBank’s lead dairy economist. In response, dairy farmers have adjusted their breeding practices to manage on-farm heifer inventories more efficiently, thereby reducing costs and generating additional income from beef sales.
Cost and Value Discrepancy
The cost discrepancy between rearing dairy heifers and their sale values has led to a prolonged decline in replacement heifers. Data from the University of Wisconsin Extension and Penn State Extension specialists illustrate the upward trend in heifer rearing costs, which are not matched by corresponding increases in heifer sale prices. This imbalance has made it increasingly difficult for dairy farmers to maintain or expand their herds, affecting the industry’s overall growth potential.
Impact on U.S. Milk Production
The reduction in replacement heifer availability has only recently become apparent as dairy farmers encounter difficulties sourcing replacements due to the tightened supply. This shortage has driven dairy replacement prices to an eight-year high, signaling that higher values may persist given the current supply constraints.
Geiger emphasizes that this shrinking replacement pipeline will likely hinder the ability to expand U.S. milk production for some time. Even if dairy producers adjust their breeding strategies, the time lag before the resulting calves reach milking age means the impact on milk production capacity will not be immediate.
Read the report here.
