Jason Karszes presented this for DAIReXNET on December 16th, 2013. For more information, please see our archived webinars page at www.extension.org/pages/15830/archived-dairy-cattle-webinars.

1. Critical Economic Decisions
when Raising Heifers
Jason Karszes
Farm Management Specialist
PRO-DAIRY Program
Department of Animal Science
Cornell University

2. Goal of The Replacement Program
The primary goal of all heifer programs is to raise
the highest quality heifer who will maximize profits
once she enters the lactating herd. A quality heifer
is one carrying no limitations into the dairy herd
that would hinder her ability to produce under the
farm’s management system. Profits are maximized
by obtaining the highest quality heifer at the lowest
possible cost.

3. Key Areas
• Quality
• Costs
– Feed
– Labor
– Non-performance
• Number raised
• Capturing value of excess heifers

4. Relationship with the Dairy
• Large impact on overall financial
performance of the dairy businesses
– Quality of animal that enters herd
– Investment
– Daily costs
– Excess animals

5. Quality of the Replacement
• Growth vs. milk
• Calving problems
– Too heavy (fat)
– Too light (frame)
• General condition of the animal
– Mastitis
– Feet and legs
– Injury
• Prior treatments
• Replacement Heifer Management Snapshot

6. Quality of The Replacement
• 1st Calf Heifers “Treated” as Calf/Heifer*
≤30%
24 hrs.  3 mos. ____, 4 mos.  fresh ____
• DOAs in first calf heifers
≤9%
Male DOAs. ____, Female DOAs ____
• 1st Calf average peak milk
• 1st Calf lactation total milk yield
•
•
•
•
•
≥80% of Mature
≥80% of Mature
1st Calf Culls ≤ 60 Days in Milk
≤5%
1st Calf ME’s
≥Mature
1st Calf “Treated” in Lactation*
≤15%
85% retention (any herd) to 2nd lactation
≥85%
Lower #1 reason for 1st lactation culls
(continuous improvement)

7. Quality of The Replacement
• Net present value of earnings
• Higher the quality, higher the value
• What is the current quality of the
replacements?
– What is being tracked?
• What improvements can be made?
• What value do the improvements have?

8. Quality of The Replacement
• Areas impacting quality
– Overcrowding
– Facilities
– Nutrition
– Management

9. Costs to Raise Dairy
Replacements
• 20 to 30% of the costs to operate the
business
• Investment in assets
• Direct and indirect costs

10. What is The Cost?
• Are they free?
• Just purchased feed?
• Just hired labor?
• The sum of:
– All inputs, cash and non-cash
– Fixed costs associated with capital investments
– Opportunity cost of capital
– Charges for animals not completing replacement
program.

11. Reported Costs to Raise Dairy
Replacements
• Michigan
1973
1980
1986
$617
$1,085
$1,177
• Wisconsin 1982
1987
1998
2000
2007
$1,549
$1,326
$1,099
$1,360
$1,649
• Washington1992 $1,242
• Pennsylvania
1998 $1,088
1985 $925 Low
$1,271 Medium
$1,597 High
• Idaho
1992
$1,159
• New York 1990 $1,265
1993 $1,150
2003 $1,429
2007-8 $1,734
2012 $2,090

12. What is The Cost?
• Hard to know what the “Average” is
• Conduct study every 5 years to capture
costs on farms
• 17 farms have completed study
• A descriptive study

13. From Birth To Calving
• The following tables represents what the
costs were for these 17 farms.
• If all input costs and usage levels stayed the
same over two years, this is what the cost
would be.

14. Selected Measures
Dairy Replacement Program
17 Northeast Dairy Farms, 3rd Quarter 2012
Replacement Program
Number of Heifers
Age, Months
Weight, Pounds
Total Weight Gained, On Farm
Average Daily Rate of Gain
% Non-Completion Rate
Average
636
23.1
1,302
1,163
1.74
10.62%
80th Percentile Range
333
20.3
1,208
956
1.58
4.16%
1,305
25.0
1,368
1,272
1.96
17.66%

15. Costs, Per Day per Animal
80th Percentile Range
Average
%
Feed
$1.597
53.3%
$1.296
$2.051
Labor
$0.359
12.0%
$0.215
$0.509
Bedding
$0.131
4.4%
$0.028
$0.293
Health
$0.061
2.0%
$0.028
$0.128
Breeding
$0.069
2.3%
$0.036
$0.107
Machinery, Operation & Ownership
$0.123
4.1%
$0.056
$0.225
Building, Operation & Ownership
$0.171
5.7%
$0.070
$0.300
Manure, Storage & Spreading
$0.073
2.4%
$0.024
$0.150
Non-Performance Expense
$0.113
3.8%
$0.034
$0.179
Interest on Daily Investment
All other Costs 1
$0.205
6.8%
$0.182
$0.236
$0.094
3.1%
$0.000
$0.440
Total Cost per day per Animal
$2.99
$2.66
$3.40
Total Cost per Pound of Gain
$1.72
$1.52
$1.89
Total Cost per Animal Completing System
$2,084
$1,860
$2,263
Total Investment in Animal
$2,232
$2,010
$2,413
1
Trucking, Insurance, Custom Boarding, Professional Services

16. Feeding
Average
80th Percentile Range
Average Daily Rate of Gain
1.75
1.58
1.96
Average Daily Dry Matter Intake per Animal
15.18
12.20
19.16
Feed Conversion Ratio(Lbs. of Gain/Lbs. DM)
0.12
0.09
0.15
Feed Cost per Pound of Dry matter
$0.112
$0.089
$0.142
Feed Cost per Day per Animal, On Farm
$1.673
$1.423
$2.051
Feed Cost per Pound of Gain, On Farm
$0.958
$0.839
$1.195
Grown Feed
63.5%
43.8%
76.9%
Purchased Feed
36.5%
23.1%
56.2%
Percent of Total
Labor
Average
80th Percentile Range
Heifers per Weighted Daily Labor Hour
39.4
26.4
57.6
Pounds Gained per Weighted Daily Labor Hour
97.5
30.9
176.8
Cost per Heifer Per Day
$0.378
$0.215
$0.511
Cost per Pound of Gain
$0.217
$0.124
$0.303
Number of Annual Worker Equivalents
2.14
0.95
4.27
Pre-Weaned Heifers per Hour
11.6
6.2
21.7
Post-Weaned Heifers per Hour
59.0
38.8
102.1
$39,964
$27,655
$48,845
Cost per Worker Equivalent

18. Feed
• Single largest expense – 53% of total
• Range = $1.42 - $2.05 per head per day
• Key factors
– Forage quality
– Time on feed
– Dry matter intake
– Feed conversion

23. Labor
• Second largest expense – 12% of total
• Large range across farms
– <$150 to >$350 per heifer completing system
• Labor efficiency
– <30 to >55 heifers per labor hour

24. Facilities
• Large influence on labor efficiency
• Key characteristics
– Location
– Bedding type
– Size of pens
– Animal handling
• Number of moves of heifers by trailer

27. Non-Completion
• The expense associated with animals that
start the system and don’t complete the
system
• Died and sold as non-performers
• Allocated to animals that complete the
system
• Relationship to quality

29. Number of Heifers Being Raised
• Quality impact – overcrowding
– What number of heifers was system designed
for?
• Investment level
– Buildings
– Machinery
– Manure storage

30. Number of Heifers Being Raised
• What is future plans of the dairy?
• Capturing value of excess heifers
– When should they be sold?
– Should they even be raised?
• How do you decide who to sell?
– Genetic
– Environmental conditions
• Growth
• Illness

31. N u m b e r o f H e ife rs M a in ta in e d , A ll A g e s , fo r V a rio u s C a lv in g A g e s a n d R e p la c e m e n t R a te s
A v e ra g e H e rd S iz e , M ilk in g a n d D ry A n im a ls
100
N o n -C o m p le tio n R a te *, D a iry R e p la c e m e n ts
8 .0 0 %
C o w R e p la c e m e n t R a te , P e rc e n ta g e
20
23
26
29
33
36
39
42
45
18
31
36
41
45
52
56
61
66
70
20
35
40
45
50
57
63
68
73
78
22
38
44
50
55
63
69
75
80
86
24
42
48
54
61
69
75
81
88
94
26
45
52
59
66
75
81
88
95
102
28
49
56
63
71
80
88
95
102
110
30
52
60
68
76
86
94
102
110
117
32
56
64
72
81
92
100
109
117
125
C a lv in g A g e
M o n th s
*
N o n c o m p le tio n ra te re p re s e n ts th e p e rc e n t o f h e ife rs th a t s ta rt th e re p la c e m e n t s y s te m th a t d o n 't e n te r th e d a iry h e rd .
P re p a re d b y : J a s o n K a rs z e s , S e n io r E x te n s io n A s s o c ia te , P R O -D A IR Y , C o rn e ll U n iv e rs ity

32. What is the Relationship?
• Setting the base
– Treat heifer enterprise as a separate business
– Set budget for dairy to buy heifers
– Current enterprise performance
– Project changes in performance

33. Base Scenario
• 300 cow dairy
• Stable herd size
• 36% cull rate, last 5
years
• Budgeted expense per
heifer = $1,700
• Sell calves for $150
• Cost/day, raising costs
(cash), per heifer =
$2.30
• Age of first calving = 27
months
• Capital investment per
heifer = $700
• % heifers cull rate per
year = 7%

34. Replacement Enterprise - Base
• Number of heifers needed to maintain herd size = 264
• Total cost per day per heifer completing system =
$2.72(cash cost + depreciation + non-performance expense)
• Total cost of animal = $2,236(no beginning value or interest on
investment)
• Net enterprise income = -$72,213
• Total investment in enterprise = $519,101
• % return on total investment = -13.91%
• Overall dairy business % return = 7.70%

35. Changes that Can Be Made
• Improve quality of animal + $200 premium
• Lower raising costs by $.05 per head/day
• Decrease calving age by 4 months
• Decrease number needed – dairy cull rate –
from 36% to 32%
• Decrease heifer cull rate from 7% to 2.5%
• Sell excess heifers - $1,700
• Do them all

36. Summary Table – Replacement
Only
Net Enterprise Total
Income
Investment
Return on
Investment
Number
Raised
Base
-$72,213
$519,101
-13.91%
264
Lower Cost
-$67,308
$512,964
-13.14%
264
Decrease Age
-$40,898
$405,198
-10.09%
225
Dairy Cull%
-$64,189
$461,423
-13.91%
220
Heifer Cull%
-$58,031
$474,710
-12.22%
254
Premium Paid
-$52,882
$524,746
-10.08%
264
Combined
-$2,800
$329,472
-0.85%
189
Comb with int. inv.
-$7,191
$386,514
-1.86%
189
Comb sell excess
-$8,681
$374,076
-2.00%
237

37. Summary Table – Overall
Business
Net Farm
Income
Total
Investment
Return on
Percent
Investment Heifers/Cows
Base
$273,159
$2,769,101
7.70%
88%
Cost
$277,974
$2,762,964
7.89%
88%
Age
$304,474
$2,655,198
9.21%
75%
Dairy Cull%
$301,583
$2,711,423
8.91%
78%
Heifer Cull%
$287,342
$2,724,710
8.34%
83%
Premium Paid
$292,490
$2,774,746
8.38%
88%
Combined
$362,972
$2,579,472
11.75%
63%
Comb w int. inv.
$358,581
$2,936,514
11.32%
63%
Comb sell excess
$357,091
$2,684,491
11.07%
79%

38. Summary
• Replacement program impacts overall farm
performance
• Quality is key focus
• Feed and labor are the largest two cost areas
• Non-performance expenses should be
minimized
• Number of heifers raised a management
question

39. Thank You!
Questions?
Jason Karszes
JK57@cornell.edu