US dairy heifer inventories hit 20-year low as beef-on-dairy reshapes herd decisions

5 January 2026

3 minute read

North America

Abbi Prins, livestock industry analyst at CoBank, was interviewed by The Dairy Site’s Sarah Mikesell at World Dairy Expo in Madison, Wisconsin, USA, about Prins’ recent report on dairy heifer inventories.

Where do replacement heifer inventories currently stand?

Currently, we're at a 20-year low with regards to dairy replacement heifer supply, which is an issue because there's a lot of things going on in the dairy industry. We have $10 billion worth of dairy processing assets coming online in the next couple of years. And we need to have some more heifers coming into the milking herd to be able to supply enough milk components and volume into those new plants. The problem is it's not looking to rebound anytime soon. We're thinking maybe 2027 before we start seeing some growth.

What factors have led to the low supply?

My initial response is that it’s related to what's going on in the beef cattle market. If you've been following beef lately, we're experiencing record high beef prices, and that's partially because we have a low supply and strong beef demand. This simple economic formula means that the price is going to go up.

Dairy producers’ largest source of revenue is milk sales, and that's followed by cull cows and now beef on dairy calves because they've been able to capitalize on this new beef on dairy revenue stream.

Now that we have more beef on dairy calves in the cattle supply, we have fewer replacement heifers that are being bred and raised. We're still producing more beef on dairy because of those record high prices, so naturally we're seeing fewer replacement heifers.

How is the tight supply of heifers impacting their values and how are those values impacting dairy producers’ breeding decisions moving forward?

The latest USDA data from early October shows the average price for a replacement heifer is about $3000 per head. We have seen auction prices in California, Minnesota and Pennsylvania that are upwards of $4,000 per head for premium dairy heifers.

Those prices really impact the bottom line for dairy producers at the end of the day because that's a huge line item cost. If that's what dairy replacement heifers are going to cost and that value remains – because we're not seeing any rebound until probably 2027 – that price is highly likely to continue to go up.

Does the shortage of replacement heifers threaten growth in US milk production?

Right now, I don't think so. I mentioned that $10 billion worth of processing assets coming online by 2027 or 2028. Regionally, we could see some shortage because we're waiting for more milk cows to get into these areas to be able to ramp up with production capacity. I think for the time being, that piece of it could be a little bit short.

Cory Geiger, our lead dairy economist at CoBank, and I have done a lot of research on milk components. We're really focused on being able to manufacture these dairy products like cheese, butter, and sour cream. You need butter fat and protein to be able to supply all of that rather than just that total fluid volume of milk production. We see a lot of growth in components here in the US. So dairy's definitely a bright spot in agriculture, and we're pretty bullish about what's going on.

Do you think the beef on dairy trend is here to stay and if so, how might dairy producers balance the beef market opportunity with the need for more cows entering the milking herd?

I definitely think that trend is here to stay, and it is not going to go away anytime soon. I mentioned it's probably the third largest revenue source for dairy producers now. And we've seen that it really impacts the producers’ bottom line, especially when we're looking at profitability.

We've seen milk futures come down a little bit in recent months and if you have that $1,000 calf or $1,200 or $1,500 per head at just a day or a week old then you're going to keep staying with that revenue stream. I don't think that's going to go away anytime soon.

We've also taken a look at what semen sales are doing and that is what really sparked this report with the modeling that we did to be able to forecast. We're going to see more replacements in 2027 as opposed to 2025 or 2026.

Looking at that semen sales data there’s more of the gender-sorted semen coming from the dairy side and the rest is being supplied by beef. Plus, we're seeing a really big drop-off in conventional semen, meaning you don't know if you're going to get a heifer or a bull calf. That big shift has really changed the dairy industry, and I think it's a permanent one.