Farm Management Update, April1997
By Frank E. Smith
Introduction
Traditionally, dairy farmers in southwestern Virginia have raised their own dairy replacements. But as dairy farming becomes more specialized and more competitive, dairy farmers are trying to find ways to become more efficient in supplying replacements for their dairy herds. The main alternatives to raising their own replacements are purchasing and/or contract or custom rearing of replacements.
Advantages of Raising Own Replacements
1. Maintain control over supply.
2. Better control over herd genetics.
3. Maintain a closed herd and better control over herd health.
4. Utilization of underutilized labor and facilities.
5. Ability to market excess home grown feeds, feed bunk sweepings and slightly
lower quality feeds that are inappropriate for high producing cows.
6. Utilize unused pasture such as a cleanup group for controlled grazing
systems.
7. Young family labor can be trained and gain economic and production experience.
8. Hassles of purchasing economical, quality replacements and/or dealing
with contract growers.
Disadvantages of Raising Own Replacements
1. Increased labor supply to spend on more important management items.
2. Increased investment in youngstock which will not contribute to farm
income for a few years.
3. Opportunity cost for feed and facility resources.
4. Utilization of already inadequate facilities and home grown feed supply.
5. Difficult to change poor herd genetics.
6. The opportunity to purchase or custom feed heifers at prices or costs
less than raising own replacements.
Estimating Costs Required to Raise Replacement Heifers
To determine whether to raise replacements, farmers need to know what it costs them to raise heifers. Washington state studies indicate that replacement animals account for 15-20 percent of total milk production costs, which ranks second only to feed outlays. Other U.S. studies indicate that average cost range from $1,150 to $1,250. The range in individual herd costs may be as low as $950 while some poorly managed herds may average above $1,300. By utilizing pasture, total costs in Georgia are calculated at $700. These differences emphasize the importance of calculating actual costs. The Replacement Heifers worksheet can be printed and used to help estimate costs.
Conclusions
After determining the costs and considering the advantages and disadvantages of raising replacements, it will be possible for a producer to make a reasonable, justifiable decision. When making the decision, the fixed cost associated with the enterprise cannot be overlooked. Many farmers tend to count only the variable costs of the enterprise and allow some other enterprise such as the milking herd to pay for the "DIRTI 5" (Depreciation, Interest, Repairs, Taxes, and Insurance).
The farm business manager should not make the decision based solely upon the costs of raising replacements. One may be able to raise replacements economically, but may need to utilize production inputs such as a limited feed or labor with the milking herd or in crop production.
References
Cady, Roger A. and Smith, Terry R. Economics of Heifer Raising Programs.
James, Bob, and Bethard, Greg. Heifer Supply Options.
Shirk, Glenn A.,
and Heinrichs, Jud. Dairy Herd Replacement Options: Raising Your Own
Versus Contracting Versus Purchasing.