Bottom Line Impact of Heifer Raising

A sharp pencil can show whether your investment in replacements provides an adequate returns. As heifer-rearing costs continue to rise, new studies are showing just how much replacements can impact your bottom line. A high replacement rate and calving at older ages translates into more heifers-and even higher costs-just to maintain milking herd size.

For the past few years, the cost of raising a heifer has been commonly estimated at $1,500 to $2,000. However, one recently completed analysis, based on 2007 Ontario Dairy Farm Accounting Project (ODFAP) survey data, puts the figure at nearly $2,500. Led by Dairy Farmers of Ontario (DFO), ODFAP collected data from 84 Ontario dairy farms.

Cash costs in this analysis totalled $1,614, with purchased feed and crop production making up the biggest share (see Table 1, page 42). It doesn't include a value for colostrum or milk fed to the calf. Also, instead of directly valuing home-grown feeds, it includes crop production costs. It appears that, at $667, the ODFAP study may underestimate feed and crop production costs.

Interest costs might surprise you at $394. Other significant cash costs included repair expenses of $150 per heifer. Depreciation of buildings and equipment used for heifers added another $294.

Most producers can readily identify these cash costs of raising a heifer. But they often overlook some overhead costs, and their own time and management.

The study reported 39.2 hours of unpaid labour and management to raise a heifer. As a producer, your time is worth money, but how much? At $15 per hour, it adds $588, bringing the total cost of raising a heifer to $2,496. That's up 30 per cent from a similar analysis in 2000 that had calculated $1,922.

Some producers would value labour at a lower rate, while others would price it higher. At $8 per hour, the total cost of raising a heifer would be
$2,222. If the calculation had used DFO's $23.40 rate for labour and management, the cost to raise a heifer would total $2,825.

The new Profit Profiler program developed by CanWest DHI has a unique way of looking at heifer costs. These calculations found heifer-raising costs averaged 12 per cent of a dairy farm's milk revenues. Actual costs ranged from eight to 16 per cent of milk revenue for the 25 per cent and 75 per cent percentile range groups.

Profit Profiler calculated the average annual cost of $889 per heifer, excluding interest and depreciation. At the average calving age of 27 months, that works out to $2,000 plus interest and depreciation to raise a heifer.

These Ontario numbers are similar to U.S. reports. A 2007 University of Wisconsin report estimated the cost to raise a heifer in that state at $1,649 US, up 31 per cent from 1998. At current exchange rates, that's more than $2,000 Canadian.

One notable difference between the Ontario and Wisconsin studies was labour required. In Wisconsin, labour averaged 21.3 hours per heifer, compared with Ontario's 39.2 hours.

The Wisconsin study estimated the daily cost to raise a heifer at various ages and weights shown in Table 2. As expected, pre-weaned calves were the most expensive at $5.42 US per day. After weaning, costs were $1.60 to $1.80 per day until 10 months of age. Then daily costs slowly increased to $2.60 at 21 months of age as bred heifers approached freshening.

A 2007 analysis by Cornell University and Cornell Co-operative Extension in New York State reported an average cost of $1,734 US, or $2,170 Cdn, to raise a heifer. This study analysed 17 farms that averaged 885 heifers. Typical labour requirement was 18.2 hours per heifer on these large farms.

When you consider the cost of raising one heifer, the number of animals needed to supply herd replacements can measurably impact your total farm costs. Table 3 determines herd replacement requirements.

The table takes into account two factors: age at first calving and the milking herd's annual turnover percentage. It includes a 15 per cent allowance for culling, non-breeders and death loss.

Ontario's DHI herds currently average 27 months of age at first calving and a 32 per cent annual herd turnover. The following two examples show the impact of heifer costs. One herd has a lower than average first-calving age, and the other has a higher than average calving interval and herd turnover percentage.

A lOO-cow herd with a 30 per cent herd turnover and a 24-month age at first calving would need 69 heifers on hand to supply adequate herd replacements. A second lOO-cow herd, with a 40 per cent turnover and a 28-month age at first calving, would need 107 heifers in inventory to meet replacement requirements.

The first herd could sell six extra heifers each year, reducing net heifer expenses. The 38 extra heifers needed in the second herd would pose significant extra expense. The second herd would have to buy five each year to maintain enough replacements.

Heifers represent an important investment in your dairy farm's future. As with all investments, however, looking at costs as well as returns could pay dividends for your bottom line.