America's Heifer Shortage is Preventing Expansion. Is the Big Money for Beef-on-Dairy a Factor?

Dairy herd expansion is unlikely to occur quickly as the beef industry continues to bid up for young stock and dairy heifers remain in short supply. Dairy producers can make more money breeding for beef operations than they can producing heifers for their own farms or their neighbor’s operation, according to Sarina Sharp, analyst with the Daily Dairy Report.

At a late-January livestock auction in New Holland, Pennsylvania, cattle feeders paid an average of just over $414 for newborn Holstein bull calves, the highest price in eight years. But dairy-beef crossbred calves brought a whopping $675/head at the same auction and crossbred heifer calves commanded a similar price.

“The beef industry is short of young stock, and it will remain so for at least another 18 months. If this margin holds, a 1,000-cow dairy that produces crossbred bull calves can expect to earn about $100,000 more in 2024 than it would selling Holstein bull calves. High beef calf prices are sending a clear signal to the dairy industry to make more beef calves and fewer dairy heifers,” Sharp said. “And the industry is listening.”

For six consecutive years, dairy heifer inventories have declined. In its biannual Cattle report released last month, USDA cut its previous estimate for the number of dairy heifers available on January 1, 2023. USDA now estimates that the industry started 2023 with 8.3% fewer heifers than it had at the start of 2022. That’s a substantial reduction from its initial estimate that showed a 2.3% decline, Sharp noted.

USDA estimated that on January 1 of this year, there were 4.059 million dairy heifers. While that was only a 0.35% drop from 2023’s steep decline, the decline still marks the smallest heifer inventory in 20 years, according to Sharp’s calculations.

USDA also slashed its estimate of heifers expected to calve and enter the milk-cow herd in 2023. The department’s initial forecast called for a 2% year-over-year drop. Now USDA forecasts 7% fewer heifers were ready to enter the milk herd at the start of last year. Mature heifer inventories ae also expected to decline 1% this year. Just 2.59 million heifers are likely to calve and enter the dairy herd in 2024, by far the lowest inventory in USDA’s 22 years of projections, Sharp noted.

“The decline in heifers in the final months of 2023 explains why the dairy herd shrunk despite unusually low cull rates,” Sharp said. “Waning heifer inventories will ensure that growth in the U.S. dairy herd will be slow and costly. If the industry develops an appetite to expand, already lofty heifer values will shoot upward, raising the cost to fill a new barn. The increasing popularity of crossbreeding suggests that the heifer shortage will continue for years, reducing how quickly the industry can respond to high milk prices.” 

For more on heifers, read:

• Replacement Heifer Supply Continues to Tighten, Prices See Explosive Growth
• Heifer Supply and Global Dairy Demand Remain Flat Heading into 2024
• Lack of Dairy Replacements has Slowed Slaughter
• Stop Raising ‘Peter Pan’ Heifers
• Homogenizing Heifer Feed with Liquid Supplements
• Well-Grown Heifers Bring More Value