Replacement costs - are your heifers eating your lunch?
What are your farm's dairy heifer replacement costs? Most dairy producers never think about optimizing replacement costs, even though the cost of raising heifers is often the second biggest cost on a dairy farm behind feed, usually between 15 to 25% of the total cost of production. Replacement cost is the cost of raising or purchasing replacement females minus the money received for cull animals. The average replacement cost for Minnesota dairy herds in 2010 was $447 per cow, with the average cost to raise a replacement heifer at over $1500.
Replacement costs cannot be evaluated without consideration of culling rates. The ultimate goal of a culling/replacement strategy should be to maximize the profit of each stall in the barn. If you believe your herd's cull rate is too high, evaluate the reasons cows are prematurely leaving the herd and then focus on fixing the management deficiencies that are leading to the excessively high cull rate.
One of the major factors affecting replacement costs is total heifers in inventory. The inventory required is affected by age at first freshening and cow culling rate. Figure 1 shows that only 80 heifers are needed in inventory to maintain the herd's size that has a 24-month age at first freshening and a 30% cull rate. Compare this to 130 heifers needed with a 45% cull rate and a 26-month age at first freshening. For a 100-cow dairy, the result of the difference will be a $36,019 lower annual replacement cost if all other herd costs are similar and assuming a $2 per day raising cost.
Figure 1. Replacement inventory needed.
The biggest cost of raising replacements is feed cost. The goal of every producer should be to minimize feed cost while achieving optimum growth. Achieving this goal will vary depending on geographical location and feedstuffs available. Producers should work with their nutritionist to reach this goal. Here are some general strategies to reduce feed cost for raising replacements:
1. Encourage early starter intake to allow for early weaning
2. Minimize shrink and feed waste
3. Avoid overfeeding nutrients - follow NRC (National Research Council) requirements
4. Procure forages that are economical
5. Balance low cost rations
6. Minimize refusals - feed to an empty bunk
There are several approaches that have been successful in lowering feed cost. These include managed intensive grazing, feeding crop residues and by-products, and limit feeding. However, specific management strategies are needed for success. Again, work closely with your nutritionist if you are going to try one of these approaches.
Average days to first calving has a big effect on replacement costs because it affects the total days on feed before calving. Often times the focus has been growing heifers faster in order to begin breeding them younger and have them calve at an earlier age. The problem seen in herds is not that producers are starting to breed heifers at an early enough age, but typically it is getting all heifers bred very rapidly after the voluntary waiting period. It is important to get all heifers bred in a timely manner. The advantages include:
1. Decrease in overall raising costs
2. More homogenous groups make feeding and management easier
3. Prevents overweight old heifers
Figure 2 shows age at first calving for two herds that I work with. Even though the average age at first calving is pretty similar (24 vs. 25 months), 89% of the heifers in Herd 1 calve between 22 and 25 months of age while in Herd 2 only 73% of the heifers calve during the same time frame.
SummaryReplacement costs are large on every dairy farm. Replacement costs can be optimized by focusing on a few key strategies. These include:
1. Optimize cull rate by minimizing involuntary culling
2. Grow heifers rapidly on low cost diets
3. Develop a breeding strategy that gets all heifers bred rapidly after the voluntary waiting period.
Figure 2. Age at first calving for two different herds.