Evaluating heifer raising enterprise for efficiencies

Jan Shepel
A farm management expert notes that heifers like these, “eat, sleep, make manure, wreck the place and try to kill themselves” so it’s best for farmers to try to determine how many of these non-productive animals they really need to keep around, especially given the tight margins of today’s dairy markets.

MADISON - It’s a question that comes up when margins on the dairy farm are tight – how many heifers do we need to keep? Those heifers, while they are the future of the dairy herd, can also be expensive to keep around and they aren’t producing any value on a daily basis.

“Let’s face it, heifers eat, sleep, make manure, wreck the place and try to kill themselves,” says Jason Karszes, a farm management specialist with Cornell’s College of Agriculture and Life Sciences in Ithaca, New York.

He is part of the school’s Pro-Dairy program using education and applied research, and notes that the replacement program on a dairy farm can be a significant expense representing between 15 and 20 percent of the total costs of the farm business.

With tighter margins on dairy farms, a key management focus is the replacement program and how many animals are being raised.

Karszes sits down at kitchen tables with dairy farmers each year to look at balance sheets and analyze ways to trim expenses. The cost to raise heifers is a frequent target in the analysis. He recently spoke in Madison to a group of dairy farmers who were looking to learn from his insights from that experience in New York’s dairy country.

This aspect of farm operations has come to the forefront in the last three to five years as heifer numbers have risen on dairy farms and the expense of keeping large numbers of heifers has also risen, he said.

Based on the herds he works with in New York, 7 percent of the farm’s balance sheet is made up by the livestock and accounts for 14 to 21 percent of the operating costs on the dairy farm.

He broke it down with information from 17 New York State farms showing that as the percentage of heifers goes up compared to cows, the percentage of operating costs also rose. “The question becomes, are we making money doing it?”

Using farm data from 61 farms involved in a financial record program there, where all of the farms raise their own heifers on the farm, Karszes showed how their rate of return on assets (ROA) changed as the percentage of heifers to cows goes up. Some farms had 82 to 84 percent heifers to cows while others were as high as 130 percent heifers to cows. That latter percentage dropped the return on assets significantly.

Start with questions

Karszes said that when trying to get at the right answer for a given farm, he starts by asking how many replacements are needed to maintain the dairy herd size of mature milking cows.

“What’s the herd doing? Is it turning over fast or slow?” he said. “And what is the cost to raise a heifer?”

Jason Karszes

Another aspect of this picture is the value of animals in the marketplace.

“Only in four or five years of the last 20 years have heifers been priced higher than the cost to raise them,” he said.

(He noted that costs get higher on a heifer that “has to be loaded on a trailer nine times before she calves.)

There are no set answers to the question of how many heifers to raise to maintain a given milking string size. The farmer needs to answer several questions to arrive at a decision:

  • What is the herd replacement rate?
  • What is the average age at calving?
  • How can they be raised in the system?
  • What is the non-completion rate for replacements?

That last group includes those animals that started and didn’t finish; didn’t get to become milk cows. In New York, he said, farmers have on average an 8 percent non-completion rate.

"Farmers put money into all those animals that didn’t make it,” he adds.

He asks farmers to pencil out the cost to raise heifers and whether or not they have space to do it.

“If the herd has a high turnover rate and heifers’ calving age is older, that farm will need over 100 percent of heifers to cows,” he said.

Quality is better

Another set of questions for the farmer relates to the quality of the heifers being raised -- how is quality defined and evaluated; how much space is there for the heifers; what are the costs associated with different aspects of the replacement program.

The mission of heifer growing on the farm should be to raise the highest quality heifers and get the maximum profits from them once they enter the milking herd. “A quality heifer carries no limitations that would hinder her production in the farm’s management system,” Karszes said.

The ultimate goal is to have the highest quality heifers possible and raise them for the lowest cost possible. Heifers should be evaluated at first calving, to determine if they are too heavy or too light, whether or not they have mastitis, good feet and legs or injuries. Checking records for prior treatments for things like calfhood pneumonia may be a good starting place to evaluate the health and quality of older heifers.

Top quality heifers will have the ability to express their genetic potential once they are in the herd, he added.

Farmers should evaluate the number of dead-on-arrival calves out of first-calf heifers, as a metric of the health of those mothers. Also, peak milk production from those first-calf heifers and culling rates in that same group are a good place to evaluate the heifer production enterprise. Retention of those animals to their second lactation should be equal to or greater than 84 percent, but the variation in that statistic is a good place to look as well.

For every one pound of average daily gain in heifer calves prior to weaning, researchers have documented an 800 to 1,500 pound increase in milk in the first lactation and increased production in subsequent lactations.

With tighter margins on dairy farms, a key management focus is the replacement program and how many heifers are being raised.

Taking steps to reduce mastitis in heifers results in first-calf heifers that produce 1,100 pounds per animal on average more milk.

“If we don’t have quality heifers can our costs ever be low enough?” he asked.

One measurement to use in evaluating a heifer program is variation in their production when they get to that first lactation. He suggested looking at the 50 highest and the 50 lowest producers. If there is a lot of variation, it’s something to look at. Farmers he consulted with have found those lower producing heifers were often those that had been sick and treated as baby calves.

Strategies for heifers

Quite often on farms, dairy heifers get the poorest feed and the oldest facility. Some are the “dungeons” where the smallest barns are crammed full of overcrowded heifers.

If the replacement program capacity is less than the number needed, Karszes had some potential management strategies:

  • Don’t overcrowd heifers if it negatively impacts the quality of the animals.
  • Make additional investments in the replacement enterprise.
  • Utilize custom services.
  • Purchase animals needed instead of raising them.

The farmer should try to determine how many heifers fit into the system and look at growth rates, treatment rates and the impact that overcrowding may have on costs.

Overcrowding has costs

Using 2012 data from New York farms, Karszes compared the cost of raising heifers per animal on 17 farms. The range was from $2,662 to $3,403. These tallies included direct costs like feed, labor, veterinary care, bedding and breeding.

Broken down into daily rates, the range ran from $2.21 per day to $2.95 per heifer per day.

Karszes urged farmers to look at what costs would go away if they no longer raised heifers. They should also try to determine if there is some segment of the heifer system that’s too expensive. Maybe as a strategic decision they need to consider not raising any heifers, he added.

“In the current market it bears looking at whether or not to raise any if you can buy them for $700 less than the cost of production,” he said, adding that this strategy comes with added risks to biosecurity on the farm.

For some farmers the right strategy may be to raise fewer animals and leave some barns empty, reducing the number of heifers down to their cull rate.

“There’s no universal answer. Some farms do very, very well but the number of heifers will impact operating costs.  And the quality of heifers is critical,” he said.