U.S. dairy herd growth hits a 22-year low; breeding for beef operations offers significantly higher profit margin

Amid worldwide cheese and beef consumption increases, there's a hiccup in the American supply chain -- beef production is hampering dairy growth because there aren't enough heifers. "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," reports Fran Howard of the Daily Herd. "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, an analyst with the Daily Dairy Report."

Dairy producers profit from raising crossbred bull calves.
(Photo by Maureen Hanson via Dairy Herd)

The profit margins on livestock reflect the shortage. Howard reports, "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."

For dairy-cattle producers, the profit difference is dramatic. Sharp told Howard, "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. And the industry is listening."

The Department of Agriculture estimated that on Jan. 1, 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," Howard explains. "Sharp noted that 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 told Howard, "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 of filling 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."