Speaker: Beef-on-Dairy System Delivers Profits for Dairy Farms
Published: Friday, February 18, 2022
Indiana dairy farmers heard an update on a variety of industry issues, including dairy-beef production and sustainability, during a regional meeting held last Thursday in Plymouth.
Dairy beef currently represents 21 percent of the U.S. beef supply. Most of this beef comes from animals such as Holstein steers and cull cows that are not essential to milk production. Whereas these animals were once thought of as byproducts, the industry is starting to take a new look at dairy beef as a potential source of income.
With beef demand at an all-time high and the native beef herd in a state of contraction, Pete Dueppengiesser, sales specialist with ST Genetics, said dairy farms have a "great opportunity" to capture more value by inserting beef genetics into their herd and marketing the offspring. The resulting crossbred calves often look like a beef animal, thanks to the influence of Angus, Charolais or SimAngus genetics.
"Everybody's a little bit different in this whole beef-on-dairy thing," said Dueppengiesser, who also is a dairy farmer from Fon du Lac, Wis. "Some people are just thinking about it. Other people are flying with this type of a program."
But there are several challenges with raising beef-influenced cattle on a dairy farm. First, most farms specialize in producing milk, not beef. It can be costly to raise young stock to a finished weight, so many farms often sell the newborns to a calf raiser, or feed them to 400 pounds before selling them to a feedlot.
A second challenge is limited space. Regulated farms aren't allowed to exceed total animal numbers on their CAFO (concentrated animal feeding operation) permits. That's one reason why many farms sell their bull calves right away.
"We have to stop treating these animals as a byproduct," Dueppengiesser said. "They are a financial stream that, if done well, can really be a profitable enterprise on our dairies."
Farms that use genomic testing can save a lot of money by identifying superior replacement heifers and designating the rest for beef. If done well, a dairy can brand its own beef program and market it to buyers.
Homestead Dairy in Plymouth has been using this beef-on-dairy system for about four years. Co-owner Brian Houin said he uses genomic testing to identify the newborn heifers that will become part of the milking herd, and also the ones that will receive beef semen.
Houin pays a local farmer to feed the beef calves to 400 pounds, then he ships them to a feed yard located out of state. Once the calves reach a finished weight, they are sold and the profits split between Houin and his partner.
The Plymouth farmer has been doing genetic testing for 10 years and says it's worth the investment.
"I can maybe make $200 a head on a beef calf, (but) we're losing $300 to $400 to raise a Holstein heifer," Houin said. "There's a big difference in cost."
He said that Angus-Holstein calves are becoming popular on dairy farms.
"I think cross calves are here to stay," he said. "Especially on the dairy side, you're going to see more farms wanting to go that route."
This beef-on-dairy opportunity comes as the U.S. beef cow inventory is declining. The all-time high reached 45.7 million head in 1975. Today, the U.S. beef cow herd stands at 30.1 million head.
"Not only is the inventory decreasing, we (dairy farms) have a big advantage in consistency as far as supply," Dueppengiesser said. "We are making those calves all the time."
While purebred Angus and other native breeds have an advantage in terms of quality grades, in recent years, dairy beef has closed the gap, according to Dueppengiesser.
"But we've got to do it right," the genetics representative said, "because they (beef producers) aren't happy about this. They want to promote the fact that we can't do it as well, and our animals won't grade as well, and they're not wrong in a lot of cases, so we need to get it right."
A historical chart shows dairy beef quality tends to suffer during times of high feed prices.
"So, what do people do when feed is expensive? They cut back, and it affects grades," he said.
According to the latest outlook from Cattle-Fax, fed steers will be worth $300 more per head this year than last year. Feeder calves are selling for $35 more per head. Prices for cull cows and bred cows are also up.
"We're going to see better prices, and I think we continue to see demand for beef that is strong," Dueppengiesser said.
Most dairy farms sell calves shortly after birth. However, if they want to maximize the value from their beef program, Dueppengiesser said they can raise the calves to a finished weight.
"If you want to capture the most money, you finish them."
He added that not all farms have the labor and space to house additional animals, so it depends on your situation.
Regarding milk prices, Houin said 2022 is shaping up to be the most profitable year since 2014.
"It looks like the next three or four months are going to be profitable, especially the people who have their feed costs locked in—at least until fall," he said. "The next six months look pretty good, but if you haven't (locked in feed prices) it's going to be tough, because feed prices have just exponentially increased over the last three to four months."
Even with high milk prices, profits could be out of reach for some farms due to higher costs.
"It's kind of sad to think we have the potential for record milk prices here in the first and second quarter, but yet it's still not going to be profitable for dairymen because the other input costs have gone up."
Another topic broached at the regional dairy meeting was sustainability. Rachel Turgasen, milk supply and policy specialist with Foremost Farms, talked about what the dairy industry is doing to improve its carbon footprint.
She said dairy farms have made significant progress in sustainability, as measured by soil conservation, feed efficiency, energy use and other criteria.
"Farms have decreased the carbon footprint associated with milk by 63 percent," Turgasen said. "We know that through your actions in soil conservation and water conservation, we know that we're using 30 percent less water and 21 percent less land in just a 10-year time period."
Overall, dairy farms are responsible for just 1.9 percent of all U.S. greenhouse gas (GHG) emissions. The industries responsible for the largest share of GHGs are: transportation (28 percent), electrical (27 percent), industry (22 percent) and commercial/residential (12 percent).
However, Turgasen noted that sustainability is a continual process and there is "more to be done."
In late 2020, the dairy industry committed to a net-zero policy for carbon emissions by 2050. That initiative has four key areas: feed production and practice changes, manure handling and nutrient management, cow care and efficiency, and on-farm energy efficiency.
Turgasen said the goal of this announcement was to position dairy as a leader in the sustainability space.
"Dairy can be a solution to climate change," she said, adding that all farms, regardless of size, can be part of the solution.
"There are things on this list that everyone can do," she said. "I think it was Krysta Harden, who is the CEO and president of the U.S. Dairy Export Council, who said, 'One farm can't do everything, but all farms can do something.' The point is, all farms can find something that works for their operation."
As part of the industry's Net Zero Initiative, Turgasen said farms are being sought for pilot projects relating to feed production, use of cover crops, conservation tillage, nutrient recovery (through manure digesters) and other areas.
Farms can also improve their carbon footprint by working with their dairy co-op to do GHG footprinting and educating themselves about carbon markets and funding opportunities.
Turgasen praised the U.S. Department of Agriculture's recent announcement that it plans to commit $1 billion toward projects that support climate-smart farming.
"This really helps us position U.S. dairy globally as a sustainable source of nutrition," she said. "The U.S. has one of the most sustainable dairy supplies in the world, and so as we look to those exports, which we know are so important, engaging in climate-smart strategies will really help us in that area."
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