Heifer Economics

Dairy July 09, 2012 Print Friendly and PDF

Introduction

Today’s successful dairy operation recognizes that heifers are an important investment in the future. They place high value on the heifer and regard it as a managed resource, whether raised on the farm or contract grown. Unfortunately, on many farms, the dairy heifer is the most overlooked and under managed asset on the farm.

The main goal for managing replacement heifers is to freshen them between 22 and 24 months of age to reduce expenditures and to increase total milk production. This can be accomplished through good nutrition and sound animal management practices.

Other areas of focus include genetic improvements. This can be made through a well planned and thought out breeding program. Maintaining a good health program during the heifer-raising period is important. This includes vaccinations, deworming, and any necessary treatments.

The success of a heifer-raising program is directly related to its overall economic management. The purpose of this paper will focus on the economic awareness needed for developing a long-term heifer raising enterprise.

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Economic Awareness

The costs involved in raising heifers should be an important issue for dairy farmers. Replacement animals typically account for 15 to 20 percent of milk production costs. Replacement heifers rank as the second or third largest component of production costs after feed and possibly labor on most dairy farms. These costs can vary from farm to farm depending on individual management strategies.

The cost of raising heifers is influenced by two main concerns, management and economic. The management concerns are:

  1. Herd morbidity and mortality rates.
  2. Age at first calving and herd replacement rates.

The economic concerns are:

  1. Ownership costs
  2. Operating cost

Management Concerns

Herd morbidity and mortality rates

Minimizing calf morbidity and mortality rates involves a combination of management components from a good dry cow vaccination program, colostrum management, sanitation, and proper nutrition and care of the newborn. In addition, it includes a variety of preventative measures as well as maintaining good health practices. Ultimately, controlling calf health problems will save many times the cost of these practices with reduced heifer raising costs.

Age at first calving

Age at calving and herd replacement rates are the largest factors influencing heifer costs. This affects the numbers of heifers that must be raised to maintain a profitable milking herd size.

Table 1 summarizes the numbers of heifers that must be maintained at various levels of herd replacement rates and ages at first calving. These two factors alone have a major impact on the overall costs.

Table 1. Heifer herd size for a 100-cow herd and a 10% heifer cull rate.
Cull Rate (%) Age at First Calving (months)
  22 24 26 28 30
26 53 58 63 67 72
30 61 66 72 78 83
34 69 76 82 88 94
38 77 84 92 99 106
42 86 93 101 109 117

When age at calving increases, so does the need for heifer housing, feed, labor, and management. This increase in input variables can be as much as 50 % or more in extreme situations. An example of this magnitude of increase would be comparing a farm with a 26 % herd turnover rate and 22 month calving age with another having a 38 % herd turnover rate and a 30 month calving age. The first farm would need 53 heifers in the replacement herd, while the second would require 106, or twice as many heifers just to maintain a constant 100 cow herd size. The costs to raise these extra heifers can be tremendous and make a major difference in the profit potential of each farm.

Economic Concerns

It is important for farmers to understand the total costs involved in raising dairy heifers. In order to operate a successful enterprise it is necessary to know the current costs in order to predict future costs.

Ownership costs

Ownership costs include buildings, equipment, property, machinery, depreciation, interest on investment, repairs, taxes, and insurance. Many of these things that may seem obvious to the owner may get overlooked. Care should be given to include all ownership costs when evaluating a heifer-raising program. Each ownership cost adds significantly to the overall cost of raising a heifer.

Operating costs

Operating costs include feed, labor, bedding, utilities, veterinary care, breeding costs, and supplies. These vary nearly proportional to the number of heifers raised at one time. With good record keeping most variable costs are easily understood and calculated.

Table 2 gives a typical breakdown of heifer expenses, both ownership and operating, from birth to prefreshening. The table shows the results from a spreadsheet that calculates the costs to raise a replacement heifer. Aspects that need to be included when calculating the cost to raise a heifer are feed, labor, breeding, bedding, health, buildings, equipment, mortality, and interest.

In Table 2, costs are separated by the following age periods:

  • birth to weaning
  • weaning to 6 months
  • 6 months to first bred
  • bred to prefreshening

Calculating costs in this manner provides managers the ability to evaluate areas of strength and weakness within their heifer-raising program.

Feed costs usually constitute 60% of the total overall expense to raise heifers. The most expensive age period in feed cost per heifer is birth to weaning. This is due to the large labor and feed costs per animal.

Labor costs calculate the time required raising a heifer. Every aspect has some cost associated with it, in this instance, the cost of time. Labor costs are the second highest expense in raising a heifer, around 13% of the total cost.

Breeding costs includes both artificial insemination and the use of a service bull. The use of a service bull is not a cheap breeding source. Maintaining a service bull on a heifer operation incurs cost such as the interest on the purchase of the bull, feed, and labor to manage the service bull. These costs are often quite large on a per heifer basis.

Bedding, health costs, buildings, and equipment costs are all necessary to calculate the costs to raise heifers. Even though buildings and equipment may have depreciated their value to $0, these items still require maintenance that must be calculated as real costs.

Mortality and interest costs calculate the opportunity cost of raising a heifer. Mortality cost is associated with the loss of the investment, while interest cost is the opportunity cost of having capital invested in a heifer versus the bank. These two cost estimates are the most overlooked items when calculating heifer-raising costs. This is because opportunity is a non-tangible product that cannot be seen or touched. However, it is a cost that must be calculated. Mortality and interest costs constitute the third largest expense.

It is impossible to estimate every cost that contributes to the total cost to raise a heifer. Expenses that are difficult to estimate include water, power, fuel for equipment, and time to transport or move heifers. Thus, when calculating the cost to raise a heifer it is advisable to incorporate a miscellaneous cost figure that can cover these costs (Table 2).

Table 2. Costs of raising replacement dairy heifers.
  Birth until Weaning Weaning until 6 mo 6 mo until 1st Bred Bred until Prefresh Totals
Operating Cost

Feed

$50.82 $112.46 $228.02 $309.83 $701.18

Labor

$20.87 $60.00 $30.24 $71.27 $182.37

Breeding

      $21.60 $21.60

Bedding

$2.56 $6.42 $1.35 $11.02 $21.35

Health

  $7.90 $1.62 $2.81 $12.33
Capital Ownership Cost

Buildings

$0.91 $3.64 $20.86 $34.61 $60.02

Equipment

$0.90 $3.54 $6.93 $6.18 $17.55
Animal Ownership Cost

Mortality

$0.60       $0.60

Interest

$1.05 $6.80 $15.36 $48.33 $71.54

Miscellaneous

$10.00 $10.00 $10.00 $10.00 $40.00
Totals $87.71 $210.75 $314.43 $515.65 $1,128.54
Age at Weaning/d 42 Age at 1st Bred/mo. 15 Age at Pre-Fresh/mo. 23.5
Per Day $2.25 $1.53 $1.17 $2.02 $1.60
ADG/lbs 1.5 1.8 1.8 2.0 1.87
Per lb/gain $1.50 $0.85 $0.65 $1.01 $0.86

Ownership costs for the heifer operation are often hard to calculate and easy to overlook. It is important for farmers and heifer growers to know what the actual cost of their heifer-raising program is before changes can be made. Economic awareness will be the most valuable tool the farmer has for making sound operating decisions. In addition, by knowing their actual heifer-raising costs, some farmers find that the alternative of having someone else raise their heifers (contract grower) is a cheaper alternative.

Specialization in the dairy industry and pressure to make sound economic and environmental decisions has created a need to evaluate each dairy management decision. Research has shown that the two most expensive age periods based on total cost per day to raise a heifer, are birth to weaning and bred to prefresh. Selecting management methods that can decrease the length or expense of these periods can have a significant impact on the total cost to raise a heifer.

Other Areas of Improvement

There are some aspects of calf and heifer raising that can be more efficient than others. Many farms can benefit by reducing some cost components in their replacement program without reduction in heifer quality. The following is a listing of some areas that should be considered as potential cost saving areas for heifer raising on most farms.

  1. Feed a lower cost source of liquid feed to young calves.
  2. Feed high quality and palatable concentrates to younger animals.
  3. Analyze forages and run ration formulations for all major groups.
  4. Monitor group size and age/weight variation within groups.
  5. Use proven feed additives to improve growth and feed efficiency.
  6. Keep weight gains steady at 1.8 pounds per day before nine months of age and 2.0+ pounds per day after nine months of age.

Feed a lower cost source of liquid feed to young calves.

Depending on a variety of aspects available to the farmer, changing from whole milk to other liquid feeds can be cost effective. Milk replacers are often about 50-60 percent of the cost of feeding whole milk, if salable milk is fed. Where farms are set up for feeding waste milk and colostrum in a safe and easy manner, this can be even more cost effective. Waste milk systems are not without problems or increases in management, however many farms can handle the additional problems that arise. Waste milk and colostrum must be fed in a consistent manner to avoid health problems, and if possible, pasteurized to minimize any health problems and disease transfer.

Feed high quality and palatable concentrates to younger animals.

This means feeding the best quality calf starters and calf growers to the young calves. A high quality starter, one with no mold, no dust, with a good texture, high levels of nutrients, and plenty of molasses and or flavoring agents, will make a dramatic impact on early starter and dry matter intake. Optimizing starter intake will allow calves to grow at higher rates of gain and will allow for earlier weaning ages. Typically, calves need 1.5 to 2 pounds of grain per day for at least three days prior to weaning. Once weaned, calves require significantly less labor and if they continue to grow at rapid rates, will be much more economical per pound of gain then when fed liquid diets.

Analyze forages and run ration formulations for all groups.

Since forages make up a large part of heifer diets, they must be sampled and analyzed for nutrient content in order to achieve balanced diets for these animals. Slightly or severely misbalance diets will not be utilized nearly as well as those that are balanced. When forages make up a large part of the diet, even a small difference between estimated and actual analysis will be costly. In addition, allocating forages to the various age groups that will best utilize them is an aspect of forage feeding that can be cost effective.

For example, high protein forages should be fed to younger aged heifers that have a high protein requirement. Lower protein forages should be fed to older aged heifers with lower protein requirements and increased gut capacity for less nutrient dense forages.

Monitor group size and age/weight spreads within groups.

This aspect of heifer feeding management means monitoring the different ages and sizes of heifers within a group, and how well their nutrient needs are being met by the diet for that group. Smaller heifers will tend to under-consume and larger heifers will over-consume rations if grouped together and fed a restricted diet.

Use proven feed additives to improve growth and feed efficiency.

The use of ionophores has proven effective in improving feed efficiency and/or growth rates of heifers. This improvement is in the range of 5 to 7 percent or more, and is well documented in the scientific literature. These compounds also have other benefits for the dairy heifer including control of coccidiosis. The cost/benefit ratio is extremely favorable in using these compounds.

Keep weight gains steady.

Often farmers get heifers too fat or too large early in life and cause these animals to require more nutrients to be needed for maintenance later in life when their growth rates are less. Unless rapid early growth is used with earlier calving, this practice is not as efficient as raising heifers at a steady rate of gain as needed for the desired age and weight at calving. Growing heifers too slowly in early life is also expensive as it requires more nutrients in later stages of heifer development, increases age at calving, or reduces body weight at calving. All of these are detrimental to overall heifer economics.

Research has consistently demon-strated that rate of gain greater than 1.8 pounds per day before nine months of age will cause a decrease in first lactation milk production. After nine months of age, increasing growth rate to 2 pounds per day or more will achieve larger size heifers at calving.

Heifer raising costs can be great if they are not controlled and evaluated given the farm and the required end product. Periodic monitoring of heifer economics will pay great returns for dairy farmers.


This publication is available in alternative media on request.

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Author Information

Peter Tozer
Matthew Gabler
Trent Schriefer
Jud Heinrichs
The Pennsylvania State University
Department of Dairy and Animal Science

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.