Smaller Heifer Supplies to Slow Expansion
February 7, 2022
The supply of young dairy heifers has been shrinking. USDA estimates there were 4.45 million dairy heifers on Jan. 1, according to the annual Cattle report released last week. Dairy heifer supplies were 3.4% smaller than the prior year and dropped to their lowest annual start since 2009. According to USDA, fewer than 2.84 million dairy heifers will calve and enter the milking herd this year, the smallest total since 2005.
Although high milk prices will prompt dairy producers to add cows, the combination of limited heifer supplies, tapped-out processing capacity, expensive construction materials, supply chain snarls, and a labor shortage will slow expansion and dramatically raise the cost to build and stock new facilities. At last month’s monthly dairy sale in Pipestone, Minnesota, the top 25 springers, or heifers ready to calve, brought $1,700 to $2,100/ head. Last week, springers averaged roughly $1,440 at auctions around the country, the highest national average since 2017.
While prices stand at four-year highs, most springers are selling for less than the cost to raise them, and increasing feed costs are adding quickly to that expense. For years, the disconnect between the cost to raise replacements and market values has discouraged some dairy producers from feeding their own springers to maturity, and that has contributed to the decline in dairy heifer numbers. High beef prices have further incentivized dairy producers to crossbreed with beef genetics, which has resulted in fewer dairy bull and heifer calves. Last year, the average crossbred bull calf was worth more than twice that of a Holstein bull calf. The drought has forced many cattle growers to slaughter cows and heifers, which will reduce beef calf supplies in the year to come.
Beef producers will compete with dairy producers for a shrinking pool of calves, which likely will raise the price of young stock for both industries. The dairy industry will still be able to grow the milk-cow herd by slowing cull rates, but the price of expansion will likely be historically high.