Heifer inventory at 20-year low

GREENWOOD VILLAGE, Colo. — Replacements are carrying a hefty price tag these days, with the average going rate for a dairy heifer ranging from $3,000-$4,000. These historic values are caused by a drastic shortage in the U.S. heifer supply, which is at a 20-year low.

A recently published report by CoBank reveals that dairy heifer inventories are expected to shrink further before rebounding in 2027. Corey Geiger, lead dairy economist at CoBank, and Abbi Prins, an industry analyst at CoBank, authored the report.

In January, heifer numbers were at 3,914,300, which was 18% less than 2018.

“In a good year, it would have been over 4.1 million,” Geiger said. “We’re down one-fifth over the past seven years. That’s a substantial number.”

The heifer herd will plummet by approximately 800,000 head over the next two years, Geiger said. The report predicts there will be 357,490 fewer dairy heifers in 2025 compared to 2024; 438,844 fewer dairy heifers in 2026 compared to 2025; and 285,387 more dairy heifers in 2027 compared to 2026.

A drastic movement in beef semen purchases triggered the decline in dairy herd replacement animals, as a large number of beef-on-dairy calves were created.

“What happened was we pivoted too hard, too quick,” Geiger said.

Over the last five years, beef semen sales to dairy farmers grew 58%. Conventional dairy semen sales shrunk 46.5%, while gender-sorted semen rose 43.5%. From 2023-2024, U.S. dairy farmers bought 7.9 million units of beef semen. Record-high prices on the beef side continue to ensure the push for making beef-on-dairy calves remains strong.

“Farmers can make instant money by selling a calf 1-7 days old for an average of $1,000-$1,200, and really, that’s pure profit,” Geiger said.

Prins agreed.

“Beef on dairy is a big deal right now and very impactful to the dairy industry,” she said. “Dairy farmers have enough risk as is, so if you can capture revenue and de-risk the operation, that’s a win-win for the dairy producer.”

Making up for the lack of replacements is the U.S.’s highest cow herd since 1993, which is numbered at over 9.5 million head. Geiger said cows are being retained for their ability to make another calf as cull cow numbers fell by more than 600,000 since Labor Day 2023.

“This has never happened in my lifetime,” Geiger said. “It’s a new lever that people are pulling. Dairy farmers are keeping older cows, and that’s how we’re maintaining herd size or even growing it right now.”

This strategy is made possible by better genetics. Not only has production improved, but health traits such as productive life, reduced somatic cell count, udder health and fertility are now part of the breeding mix.

“We couldn’t have kept these cows 20 years ago,” Geiger said.

The growth in gender-sorted semen sales is driving the replenishment of the dairy replacement herd going forward. In 2024, the sales of gender-sorted semen increased by 1.5 million units from 2023 — a 17.9% spike in one year’s time in an effort to make more heifers, while beef semen sales were flat from 2023-2024.

“Those calves hitting the ground will become milk cows in 2027,” Prins said. “The biggest caveat to all of this is that, even though we’re going to be down year over year for the next two years and are then going to see an upward trajectory, we’re still going to be down overall. It’s going to take time for that replacement inventory to replenish.”

In the meantime, Prins believes there is room for replacement heifer prices to go even higher than where they stand currently.

“We’re close, but I don’t think we’ve hit the peak quite yet,” she said.

As dairy producers look to replace animals in their milking herd or grow their herd larger, they are faced with tough decisions.

“People have normally gone on the open market and just bought them, but now at these prices, they’re going to plan their expansion,” Geiger said. “That’s what has changed in our industry.”

The dairy industry’s focus on genomics is another important factor to keep in mind, as more than one out of four heifer calves is genomically tested, Geiger said. Dairy producers are using genomic testing to pick the best replacements to become the next generation.

“Some farmers are being selective and picking the top 10%-20% of cows to breed to gender-sorted semen, and the rest are getting bred to beef,” Geiger said. “They want to have the best cows in their barn.”

The deficit in dairy replacements coincides with historic milk plant expansion.

“The reason why this story really matters is that we have $11 billion worth of dairy processing investments coming online by 2027-2028,” Prins said. “That’s a lot of money on the line. Do we have enough milk to fill these plants? If there are not enough cows, do we have enough replacement heifers to replace the older cows?”

If replacement heifer numbers remain scarce, Prins said the industry could be scrambling as they work to complete these plants.

“That’s something we’ve really focused on at CoBank,” she said. “These plants take time; they don’t just start at full capacity on opening day. You’re going to see the ramp-up and have dairy producers expanding their herds.”

For example, Prins said a lot of expansion is taking place in New York with many new plants coming online. She foresees a regional shortage of butterfat and protein required to make the dairy products these plants are slated to produce.

“They’re going to need more cows in that area or at least regionally speaking to ship milk to fill those plants,” Prins said. “We’re watching where cow numbers are shifting and trying to see where these replacement heifers are coming from.”

Prins said the processing investment taking place in the U.S. is unmatched worldwide.

“You don’t see this kind of investment in the European Union or New Zealand,” she said. “There is a lot of demand domestically and internationally. We’ve had record exports this year followed by record exports last year. We’re sitting in a good place; we just have to work our way to fill those plants, and that will take some time.”

As the dairy replacement heifer shortage continues, the need for a farm to provide excellent care to its heifers becomes more pronounced.

“We’ve always wanted to take good care of our dairy heifer calves — our replacements — but now, we’re in an era where that’s more economically important and prudent than ever before,” Geiger said.