Tight cattle supplies and unwavering consumer demand for beef have pushed cattle prices to new record highs. Dairy producers have taken notice of these higher cattle prices and accelerated the use of beef genetics on their dairy cows over the past seven years. According to the National Association of Animal Breeders, 7.9 million units of beef semen were sold to dairy farmers in 2024, trailing the top category of sex-sorted dairy semen, which sold 9.9 million units. This marks back-to-back years that U.S. dairy farmers purchased a record number of beef semen units to use on their dairy herds.
Roughly 20% of the beef supply originates from the U.S. dairy herd, and with the lowest U.S. beef cattle numbers since 1951, that percentage is inching higher. As dairy farmer mindsets shifted from producing extra replacements to producing more calves primed for the beef supply, U.S. dairy-bred fed slaughter has grown to be more than 4 million head annually, and over half are beef-on-dairy, according to CattleFax. The cattle herd is shifting to fewer purebred dairy animals and more dairy-beef crosses, with more details in a new report by CoBank, Beef-on-Dairy Data Suggests Opportunity for Feedlots and Processors.
Replacement heifer versus crossbred beef
The dairy industry’s primary source of income comes from selling milk, followed by cull cow sales, then selling dairy-beef calves. Multiple sources have described 1-week-old dairy-beef calves being sold for $600 to $800 per head; some even touch $1,000. On the flip side, the cost to raise dairy replacement heifers remains rather stiff at well over $2,000 per head from birth until she enters the milking string. With growing beef-on-dairy numbers, dairy replacements have become tight, and values to purchase have pushed over $3,000 per head.
This dilemma presents a strategic opportunity for dairy producers to determine which heifers and cows, and how many of them, will be bred to produce the next generation of replacement dairy heifers while the rest are bred to beef semen to capture market premiums for dairy-beef crosses.
High-quality proteins are in strong demand
Consumer protein demand has been exceptional in recent years, and a major reason is quality. Dairy cattle traditionally produce top-quality meat that grades Prime and Choice, as well as dairy products like butter, cheese, milk, and yogurt. Beef cattle ranchers have also worked collectively in delivering high-quality beef.
A “prime” example is the top grade of beef, USDA Prime. One decade ago, only 4.4% of U.S. beef production graded Prime. In 2024, Prime-grade beef was 9.6% of total production at 2.02 billion pounds. Choice beef grew 20% and makes up over three-quarters of market share with 15.77 billion pounds produced in 2024. Production of lower grade meat like Select was cut by 37% from 2014 to 2024 to end at 3.17 billion pounds.
This upward movement in high-quality dairy and beef protein production has been in response to and preparation for strong consumer demand. The dairy industry can continue capitalizing on high prices in the cattle market with dairy-beef calves and through traditional dairy products until those cows enter their second career in the cull cow market.
