Welcome to The Select Sires Podcast, talking Your Success, Our Passion. Starting in three, two, one.
Ethan Haywood
Hello and welcome back to The Select Sires Podcast. I'm your host, Ethan Haywood, and today we're excited to talk about managing replacement costs and completion rates of dairy heifers here in the U.S. With me today to talk about this topic is Lyle Kruse, retired VP of U.S. market development for Select Sires, Inc. Lyle, thank you so much for taking the time to be here with us today.
Lyle Kruse
Thanks, Ethan. Looking forward to talking about this with you.
Ethan Haywood
We've talked a few times on this topic, Lyle, and this is a topic that you're very passionate about. Will you explain a little bit of your background, your roles in the past and your current position and some of the work you've done to compile data for our topic here today?
Lyle Kruse
I got to tell you that in the background of my work with Select Sires, I've always had a passion for dairy data and helping dairymen look at ways they can be more profitable. I was basically drilled in during my time at South Dakota State University in Brookings, South Dakota, that, you know, would certainly be something that I think could benefit the industry, and I've worked hard to advance my skills in that area, like a lot of our trusted advisors. I started out in the fall of 1980 or winter 1980 taking a job for Select Sires as the first rep in North and South Dakota for Select Sires. I was in that role for a couple of years, and then I moved into management, and when we started the cooperative in Minnesota in 1986 I became the first manager there. I was there about 22 years. And then in 2008, I became and moved into the role that I was in until I retired. So about 16 years as the vice president of U.S. market development. And last summer I backed into a very limited role, more of retirement. So that's kind of the background. I still work with a few of the large herds here in Arizona, just kind of for fun because I like working with them and really good people here and there's a lot of opportunity.
Ethan Haywood
You've had a lot of stops along the way and have seen a lot of different angles as this dairy industry here domestically has evolved. And we're kind of in a really unique place now as far as looking at our current heifer inventories and cull rates and the trends that we're seeing. To set the stage for our conversation today, what does the U.S. heifer inventory look like and what kind of cull rate does that support the way it is today?
Lyle Kruse
Yeah, there's a lot of background that I could add to that question, but I'll just start out by saying we've seen a continual decline in replacements available to replace current lactating animals. I think estimates aren't out yet for 2025, but it looks like we'll start the year with about 2.5 million heifers that could calve in 2025. And a total of 4 million total replacements realizing that when they're born, we need a couple of years to get them in the herd. So that's quite a change. That's down about a half million from just like six, eight years ago. Really where that's, you know, just to lay some background to how we got to this point, we've gone through several, I call it paradigm shifts in the industry where we basically kept every heifer that we could generate and hoped we had enough to replace the herd. And herd culling was as high as probably 40% in some years. And now it's well under 30%, I think, on average, probably 34% to 35% at the most, maybe closer to 33%. So it's been a lot of improvements in terms of cattle management, facilities, how we can keep lactating cows in the herd and producing at a high level. And then we went through a period of time where we had too many heifers because we hadn't fully made the paradigm shift yet towards managing heifer inventories. And so then we saw years of forced culling because we had a lot of heifers that needed a slot in the barn. And so to make room for them, we'd get rid of some older cows that may have been actually pretty profitable yet. I'm not sure what the right number is for replacements and all that, but I just know that there's not a surplus of them and the prices recently have reflected that.
Ethan Haywood
For sure. As you say, the market price has recently reflected that we are probably looking more at a shortage than a surplus. And you can look at the local auction yard or an online forum and see what they're selling for and that price continues to creep up. We saw some pretty high peaks in 2024. And that really shifts the focus to these animals have a lot of value, whether they're going into your herd as replacements or you're selling them and has brought up the topic of the overall cost to raise those heifers as well as the survivability throughout that process so you can maximize your return on it. What does the survivability indicate to you as far as overall dairy farm profitability?
Lyle Kruse
Yeah, I think the most comprehensive look at the economics of different factors in management. It's probably from a study that Zoetis and Compeer Financial worked on years ago. They started that and it's been out in several versions, and then recently they updated the data. So the 2024 data would indicate that Net Herd Replacement Costs is by far the highest correlated factor to profitability in dairies. And included in that data are two things that directly relate to our topic here, heifer survival rate and number of heifers. So those two factors, you know, are part of the 10, what they call highest correlated relationship for net farm income. I think there's a lot there that we don't need to really dig into today, but the bottom line is management of heifer replacement costs is a key area to focus on in the future for a lot of dairies yet.
Ethan Haywood
And managing that cost is done on both sides, trying to manage the input cost and do a good job while saving as much money as possible, but also the output on that side of the equation, trying to get as many full-grown healthy heifers through a system as efficiently as possible. When we look at some of the data that you've compiled on heifer survivability, where does that data come from and what are you seeing within the data here domestically for survival rates and variances?
Lyle Kruse
Yeah, it's a good question. We started maybe as many as 12 years ago, maybe even longer, doing some initial replacement needs calculating for dairies. So we started seeing the onset of potentially using beef on surplus cows or pregnancies that were surplus to the operation, making beef calves, cross calves from those. And at that time, you know, one of the factors that we looked at was heifer non-completion rate or completion rate, if you want to do the inverse, the bottom line is once you tag a heifer as a live heifer, what percent of those actually come into the herd as a replacement? And, you know, it's amazing when you start seeing the wide swings in data from different herds. About four years ago, we got the idea to survey our trusted advisors from around the country and ask them, okay, what are you seeing? Send me some specific herd data from herds you worked with recently on inventory calculations. And so we compiled that data in the fall of 2021, I put that together. It was from about 325 herds and then I knew that we had made some improvements since then, so I resurveyed the group and ended up with data from about 180 herds last fall. And so we got two data sets or some of the same herds in the two data sets. But the bottom line is initially we've seen about a 12.6% non-completion rate in the data we had from 2021. And then this year was 12.1% from the data from last fall. So we've seen a slight improvement. But, you know, the next question is, what is too low? Where do we utilize improvements in that area to make better decisions? We can talk more about that. But the bottom line is I also surveyed the group initially on early calf loss, which is typically mortality from basically the day they're tagged until six months of age, what percent of those are we losing? And the average from that initial data set was about 7.5%. When I resurveyed the group I ended up with just over 6% so a nice improvement there but the bottom line is there's still opportunities. That data set for calf loss in the first six months if you start looking at the individual herds in that data we see a range of 1-2% on the low side and the high side as much as 25%, so if you can imagine having some really valued potential replacements and you're losing one out of every four, certainly an opportunity to impact profitability on the operation.
Ethan Haywood
It seems like it would have a very large impact indeed. And as you look at what is possible, we see that 12.5% or so for loss throughout the system and a very large chunk of that being young animals. What would you set for a basic goal as far as what your survivability rate should be, what you should strive to achieve and in both of those sectors? And as we've seen in the data, quite low is quite possible for some of our more intensive management systems.
Lyle Kruse
Yeah. I think you could argue that there's a sweet spot for every operation. It might be different, but if you want to set a goal on survivability and non-completion rate, you're looking at maybe 10%. I think that's actually the Dairy Calf and Heifer Association Gold Standards that they publish once in a while from experts throughout the industry on calf raising and dairy heifer calf development. I think they have a 10% or less as a goal for non-completion rate there. And so to me, that's a really good goal to reach. I see herds as low as 3-5% and that's outstanding. One of the things that we'll talk about as we go forward on this is should we look at maybe saying 10-12% is good but I'm going to manage that number so I'll actually artificially keep it up a little bit with more strategic choices on which replacements I bring to the herd. So that's another area I think we can see more of in the future.
Ethan Haywood
Definitely within that number, if we can increase the number of those animals that are voluntary culls versus an involuntary cull would have a large impact and potentially there's some revenue there still. What are the top reasons within the data that we see heifers leaving as far as involuntary non-genetic culls?
Lyle Kruse
Yeah, for sure the number one driver of that is the early calf mortality, and there's several very susceptible periods. The first week of age is by far the biggest concern. Post weaning is also a spike in data that we look at. And then the biggest area after that is reproductive failure. And then the one thing that we talk about with dairies is instead of breeding these heifers eight or nine times and having some really over-aged heifers calving in for the first time let's make some more aggressive decisions on not breeding heifers after so many attempts. I think that's another area that will continue to refine. I got herds today that I've analyzed data for that won't breed a heifer more than three times and you know they have a pretty strong system in place for heifer reproduction and can get away with that but it requires that you not miss opportunities along the way. We still got some dairies that really struggle with heifer heat detection just because it's not enough of a primary focus for them.
Ethan Haywood
It does seem really key to hone in on those three key areas and it's really interesting to see some of the graphs that you have with those spikes, the young ones, the weaning age, and the breeding age. As far as the survivability and completion rates within the entire data set, do you see differences in where and why heifers leave according to herd size or breed or other factors outside of the system?
Lyle Kruse
Non-completion rate was pretty consistent through the different herd sizes, but there was a slight advantage in herds under 1,000 cows. They had the lowest percent on non-completion, which was like the 11% average. And then we see it going up as high as 13-14% in one of the really large operations. There's a slight difference in breeds, and the data that would show that Jerseys tend to be a little higher in non-completion rate. And we have heard from Jersey producers that have both breeds that they struggle keeping a few of their Jersey calves alive. So there could be some of that in that breed, but the reality is it's not a big difference in data and there's still opportunities in both Holstein and Jersey operations to do a better job with calf raising for sure.
Ethan Haywood
We talked with Kevin Souza of Victory Farms in a previous episode about leveraging calf wellness dollars and some of those calf health traits coupled with management to try and get calves through those early stages and weaning stages. Shifting our focus to that breeding age stage. What changes and improvements have you seen over the years in heifer reproduction? And then what challenges do we continue to face in heifer reproduction, a large focus area where we're losing some of the survivability?
Lyle Kruse
I go back a long way over four decades of working with dairy data and dairy producer’s opportunities, if you will. We went through a span where we couldn't get cows pregnant worth a darn. A lot of herds struggling to get to a 15% preg rate. Even some struggling to get to 10% in cows. And we've seen just a tremendous shift in cow reproduction to where we're at 23-25% preg rates today are pretty common. I would just tell you that along the way, I think what got lost in the shuffle a little bit was heifer reproduction, because frankly they conceive at a little higher percent, and they're typically pretty easy to find in heat, and all those things combined, it was just like, well, we're not really too worried about getting heifers pregnant, but the reality is if you really want to be efficient in your heifer operation, there's potential for some to put more focus in that area. Especially in terms of heat detection, weekly preg checking on heifers has proven to be a real benefit. Basically some herds now start heifer first service systems with a Lutalyse or a prostaglandin shot to really get things rolling a lot more opportunity there. One of the metrics I use in heifer reproduction is let's get all the heifer pregnancies within 100 days of when we start to breed them. I want to see a lot of heifers pregnant in the first cycle when we start to breed on them. And I'm not suggesting there's a set age when we want to breed them. There's some herds that function very well at waiting until 14 months of age, 15 months to start. Some start as early as 12. It depends on the growth and the system in place. Typically we tell people that we want heifers to calve in at 85% of their mature weight. That's really the one guideline that seems to survive all the different opinions out there. But the reality is that some are 13, 14 months, most herds start at. Getting that heat detection rate, which is typically the percent of what's the percent of heats detected in each cycle, if you will. So 21 day cycles. And if you look at that, we see a lot of herds still under 50% and heat detection rate on heifers, which means we're missing a lot of opportunities to get them pregnant. So that's an area that I struggle with in some dairies for sure yet. And you know, some of this is out of their hands a little bit. We've seen real growth in custom heifer raisers and the ones that are getting it done at a high level will have heat detection rates at 60-70% and pregnancy rates at 45%, 40-50%. That's not unusual today. And so that really helps reduce this Net Herd Replacement Cost because we're bringing these heifers in in a very efficient fashion and all within about the same age.
Ethan Haywood
As we talk through some of these problems, you've mentioned a few times that it depends on the herd for the correct answer to many of these challenges. Whether that question and challenge is how much conventional versus sexed versus beef semen do I use? How do I make my decision-making model as far as who in the herd am I breeding to make my replacements for? As a farm is trying to navigate this and make sure that they're setting themselves up to have the right number of the right replacements for the future. What do you advise them to do to make sure that they're not just taking a stab in the dark here?
Lyle Kruse
Yeah. So first thing is to have a plan and we've put a lot of effort across the federation and Select Sires and through World Wide Sires in helping dairies plan using the data available. We've actually had to coach some on making sure they're recording the data so we have it to make those estimates. But we want to start out with a plan. And I should back up and say that as a longtime industry, involved in the industry, I guess I would just say that I do believe strategic breeding is here to stay. I think we'll continue to pick the animals that get specific types of semen use and different products and we'll need that data every month or two to sit down with the dairies and say here's where we're at, here's what we need to do to continue to meet your goals and so it's a big picture and I think really, it's been fun to see the evolution of our trusted advisor group and their ability to help customize this for every operation because that's a really important part of it.
Ethan Haywood
And the tools that our trusted advisor group is utilizing to help do planning and forecasting for breeding decisions, which result in the replacement inventories that we have, rely on a lot of input data that you're looking at. And when you're looking at the heifer survivability and the calf loss and the repro loss on dairies what data do you commonly see is not being recorded correctly and maybe we need to make sure we're focusing on?
Lyle Kruse
Well I would just say that one thing I coach up pretty hard when I go through data is if we don't have good data on how heifers are leaving the herd and how cows are leaving the herd, just understanding the events that really impact why animals leave the herd is pretty critical data. And then as we sit down to plan the inventory, there's four or five things that we're looking at pretty closely as key metrics. You know, what is the cull rate? What is the data we have, does that reflect what we think it will be or should be? Because I've had herds, we'll go in and show them a 38% cull right now so well that's not going to be the norm let's plan for a 34% or 32% on the other side we've seen them some that'll be at 28% and they want they say wow let's move it up a little bit I want to make a little more aggressive culling in some groups and then of course the heifer non-completion rate is an important metric. What percent of heifers tagged actually we can count on to be replacements in the future and then what is our current age of calving for first lactation cows? So we can plan for that. And then the calving interval in the lactating herd is also an important metric and we bolster all this data. But the first question we should be asking is what is your future herd size? Is it gonna be where it's at today? Are you gonna plan to grow it? So those are all things that go as part of the basics of that. And then we use all the data we can to really make a good analysis of the opportunities and how to plan for what they want to do. That basically will outline four to five services on cows and heifers and say, okay, we're going to use sexed semen in this group. We're going to use beef semen in this group. We're going to use this many services of sexed semen and conventional semen here. And so it's a very strategic approach to use the different products available to really get after it. We even can funnel in things like embryo use or sorted beef semen. Those are all things that are part of the calculations that we provide data on.
Ethan Haywood
It really is quite a large system with a lot of moving parts, especially as dairies get more sophisticated and we try and do more genetic selection while using more different tools and pieces. And so working with a trusted advisor and having access to the technology that they can utilize to forecast is a lot of data going in on the input side. But speaking from experience, it's so satisfying when you look at your forecasted heifer calves to be born and your two-year-olds to freshen in and you've got flat lines with no bumps and slugs as well as a consistent number that you were shooting for and then you're able to maximize your income with beef semen on the animals you didn't need a replacement from so it's really cool how much data goes into that system.
Lyle Kruse
Yeah it's been fun to see the evolution of the consultative work at Select Sires. I think it's probably been in place at some level for a long time but it's really become a more pinpoint focused area. We advise people on cow and heifer reproduction to maximize their opportunities with that, but also really help them basically set their future in place. And it's fun to see how much we've become a part of the planning team for that operation, a very important part of the planning team. So it's been fun to see all that.
Ethan Haywood
Repro and heifer survivability are really things that you're managing to manage your future, and it seems like digging into those topics stimulate some larger discussion and larger questions. As you advise on repro and look at these records, what other management areas may you examine to try and help farms make sure that they're maximizing everything that they can do management-wise?
Lyle Kruse
One thing that comes to mind there for me is just looking at heifer loss, calf loss, and really what's good there, what needs to be improved. I've worked with herds again, losing as much as one out of four heifers in the first six months of age. And what can we do to improve on that? Select Sires has a very robust shelf in terms of product solutions and systems in place to really manage that first, not only the first day and the successful passive transfer, but also the first 21 days and then beyond. Different systems in place do really get past all the potential hurdles. And one thing that's interesting, I know I've seen studies on this, you probably have as well, but the heifers that survive have to be of good health so they're not impacted their whole lives. Especially with lung damage that we see in some heifers that have been exposed to pneumonia events. And they survive, but they're basically compromised throughout life because of that. So those are all things we really want to avoid. I think every dairyman out here is constantly aware that they could have a bad run where things just really fall apart for a short time and calf loss, and so they're always ready for that. But having a game plan, okay, here's what we gotta do if that should happen. And here's some things we can do to maybe negate the effect of all that. That's for sure one area. I also still think as we look at data what can we do to get heifers pregnant in a really efficient fashion once we decide we're going to breed and that's still an area that we're challenged with in some operations.
Ethan Haywood
The way the industry is poised today with the demand for both heifers and fresh cows, the demand for product, the limited inventories, coupled with the demand for beef on dairy calves that continues to grow and get more specific and looking for demand and increased prices with beef on dairy calves with a genetic value. This is all a large moving machine with a lot of different parts that we're going to continue to keep our eyes on and you're going to continue to work with producers with. Lyle, thank you so much for your time today. Is there anything else you would like to add in about heifer survivability or anything other than to encourage producers to do things mathematically and work with a trusted advisor?
Lyle Kruse
Well, the first comment I should have, I should have brought this up earlier. It isn't just the heifer calves we're concerned about, but getting those beef cross calves off to a really good start is important. And one of the things that I'm hearing from calf buyers is they basically know almost which operations their calves come from by how they do right away. So it's obvious that first day of age on these beef cross calves is a critical thing as well. I wouldn't scrimp on those. Bottom line is you're probably selling those a day or so after they're born, so maybe you don't have them around a long time, but they're still leaving an impact and a potential future impact on your operation if you don't have the kind of calf health those calf buyers need to really reduce any loss on their end. The other thing I would just add is that in conversations recently with dairies, we've kind of shifted our focus. Once heifer calf non-completion rate throughout the system has been addressed and we feel like we've done all we can there, now we're into discussions about do we intentionally raise a few extra heifers and then have them in the operation so that we can make strategic choices on when to sell them if we decide we got extras. And I think that's been a growing direction for some. I'm a big advocate of having genomic data to make culling decisions because we know that some of these heifers, while we used what we thought were really good inputs on the sire side, we still end up with some heifers that are way in the bottom curve of the herd, in the bottom 10-15% in terms of genetic prediction. And with that genomic data, we can decide which of those we don't want to invest varying costs in. And so I think that's another phase of this. It appears that there's going to be a day when there's a surplus again on replacements, because the industry only can get so large based on having decent milk prices and all that. So somewhere in that 9.5, 9.4 million dairy cows in the United States, that's kind of the number that seems to work for the prices we need to have a profit. And so I do think, though, that there'll be a point in the future where heifer prices will drop some. And then you have to weigh out, okay, am I better off having surplus heifers that cost me $2,400-$2,500 to raise? Am I better off having those in the operation or not? If there's surplus to the operation, when is a good time to remove those? And those are all things that, again, become very individualized. But I do think that's an area we're going to continue to see as some potential wiggle room in terms of having a little bit of a surplus to make more decisions with.
Ethan Haywood
The heifer inventory is like any other agricultural input. We tend to see it ride in waves and try and do things strategically, encourage our producers that we're partnering with to make sure that we're utilizing programs that we can strategize for their customized future and achieve their goals. So Lyle, thank you so much for your time today. This has been so interesting and a topic that we'll continue to dig deep into with you as you work with your producers and learn more.
Lyle Kruse
Yeah, thanks Ethan.
Ethan Haywood
Thank you for all our listeners out there. We're very excited to bring you more information on these topics in the coming podcast episodes as we talk about specific programs that you can leverage with your trusted advisor to help plan the future of your herd.