No matter how you look at it, the dairy industry has been a tough business to be a part of with razor-thin margins—and that is when dairies have been able to sell their milk at a profit at all. This has led dairy operations to continue to take advantage of the economies of scale with an eye towards ever-greater efficiency.
However, perhaps the most undervalued aspect of a dairy has been their excess calves beyond replacements, which have largely been looked on as a byproduct to freshen cows and get them back in the milking string. However, this is quickly changing.
For decades, the industry has been told that sexed semen was just around the corner, and after years of promise, it has arrived. Perhaps most importantly, it is now available at a quality level where conception rates now rival that of conventional semen.
The other technology the commercial dairy industry has been waiting for is affordable genomic tests to determine the best candidates to breed for replacements, which has also come to pass.
Beef-on-dairy crossbreeding
An example of how these technologies are being applied is represented in a large 6,000-cow dairy in Utah. They make heavy use of genomics, which allows them to select which animals to breed sexed semen to for replacements. In their case, they breed half their yearling heifers and all their genomic No. 1 first-lactation heifers to sexed semen to produce all their replacements.
The No. 1s are those cattle that rank in the approximate top quartile for a number of traits, but the primary drivers are pounds of fluid milk, solids (fat and protein), and reproduction. This leaves the manager the option to breed the rest of the herd with beef semen to make more valuable feeder cattle.
Mike De Groot of TD Beef cites that the above scenario is not uncommon. Tuls Cattle and TD Beef in New Mexico and West Texas run the largest calf ranch in the country with 200,000-head capacity. He is steeped in the dairy business with a family that runs a 4,000-cow dairy in Northern California, and his brother-in-law running another 4,000-cow dairy in New Mexico. With this perspective, he has had a front-row seat to the growing pains of the beef-on-dairy business.
[inline_image file=”0c7f83e11e05e56f33ff10695d5117e8.jpg” caption=”Mike De Groot, partner and director of TD Beef. Photo courtesy of De Groot.”]
With the start of the shift to beef-on-dairy crossbreeding, most dairies looked at beef cattle in generic terms, being mostly interested in the price of the semen. Their main criteria beyond price was to produce black hides, so the cattle would be eligible for Angus product lines. Large suppliers of semen were all too happy to accommodate them, selling cut rate semen from the bottom of their tanks on sires that in some cases might have been discarded anyway.
The results of using this cheap semen were all too predictable. Both conception rates and the resulting calves were far too inconsistent, which is how they fed and hung on the rail. The truly disastrous part of this bad start was far too many of the carcasses still had dairy conformation or carcasses too long for the rail, so they received the same discount as if they had been straight dairy cattle. However, this rough start—despite leaving a bad taste in too many people’s mouths—is giving way to a highly specialized premium product.
[inline_image file=”02b558f3422ab627b7264d21b9a550f0.jpg” caption=”Beef-on-dairy calves on feed. Photo courtesy of Select Sires, Plain City, OH.”]
The value of these beef-on-dairy crosses was brought home in the fall of 2020 when Kansas State University’s Department of Animal Science released a study of Superior Livestock Auction data, which, among other things, compared the beef-on-dairy lots with straight Holsteins from that summer’s video auctions.
Because of the wide range of weights, the average weight of lots was equalized to 615 lbs., and the results revealed that the beef-on-dairy lots returned a premium of $39.86/cwt, which is approximately $240 per head. These are the type of economics which reveal that if a dairy is not already crossing beef-on-dairy, you can be sure they are analyzing making the move to it.
Switching gears
According to Russ Penning, whose family has specialized in feeding Holsteins for years, the packers have discounted the fed cattle based on low yield, carcasses that were often too long for typical rail height, too many condemned organs slowing rail speed, and finally, inferior conformation of the carcasses and the cuts they produce.
As a feeder, he also had to consider the poor feed conversion rates of dairy feeder cattle compared to beef calves. The Pennings are well-informed, as their Summit Lake Livestock’s 7,800-head capacity confinement feedlot in southwest Minnesota has fed all classes of feeder cattle since their father, John, started feeding cattle in 1973. The operation is now run by Russ and his brother, Brian.
The Pennings source their calves from order buyers in Wisconsin and Pennsylvania. The main criteria for their buyers are calf health and conformation, and with their infrastructure able to manage up to 400 calves still nursing, they are capable of taking calves that are still on the bottle through a wide range of other feeder weights.
[inline_image file=”7a962f2e23fca4f96b3b420d6a143e32.jpg” caption=”A Holstein calf in a calf hutch, which is typically how dairy and dairy-on-beef are started. Photo by the Holstein Association.”]
This switch to beef-on-dairy crosses has been a solid move for the Pennings. They feed well and most importantly, they can market them to any number of packers, while with the Holsteins they had come to a point where there was only one packer that would take them—which eliminated their power to negotiate price.
In general, most of their fed cattle are now being harvested at the Cargill plant in Schuyler, NE. Russ markets fed cattle on a value-based grid with a negotiated base “in the meat” price (hot carcass weight). This is the best of both worlds as they get paid on the quality of the carcasses, but also the negotiated base adds to the industry’s price discovery.
Although still new in the beef-on-dairy crosses after switching from straight dairy, the Pennings are pleased with the results. They are receiving the increased dressing percentage they were expecting, and all the carcasses have gone on the grid with beef conformation—avoiding the dairy discount and opening the possibilities of acceptance into Angus product lines.
They are seeing some variability in quality grade on the various groups they have gridded. Russ is looking into finetuning his implant strategy—which he thinks may have been too aggressive on the steers—but objectively, part of the variability may be due to the unknown genetics of the feeder cattle.
New approaches
Different outfits are taking different approaches to assure calves have top genetics. One of the nation’s largest calf ranches is California-based Grimmius Cattle Company, and they have been making quite a stir within the industry, purchasing many of the country’s leading Angus bulls at sale-topping prices. These genetics are then being made available to customers with a calf buyback program.
Most credit Wulf Limousin with pioneering the beef-on-dairy crossing system, and Limousin still maintains a significant market share in the business, particularly with Jersey herds. However, Angus currently has the largest market share, and they have recently developed an index to assist in selecting bulls for use on dairy animals.
“Genetic focus needs to be beyond the color of the hide, which was the only early criteria. Instead, calves need to excel in all aspects of production including the feedlot and the rail.”
In addition, hybrid and composite seedstock appear to be gaining in popularity with many observing a rapid rise of SimAngus in the market. One of the things that make hybrid and composite herd sires attractive to dairies is that, by adding a shot of Continental blood into the cross, it helps add assurance that carcasses will have the extra musculature to avoid a discount for dairy conformation.
Sourcing calves nationwide, TD Beef has chosen to emphasize calves sired by elite terminal beef bulls. Looking back on where the beef-on-dairy crossing started to where it stands today, TD Beef’s De Groot states, “Genetic focus needs to be beyond the color of the hide, which was the only early criteria. Instead, calves need to excel in all aspects of production including the feedlot and the rail.” This focus on quality genetics has led them to source all their semen from Select Sires, with whom they have formed a strategic partnership.
TD Beef is sourcing calves nationwide that range from 1 day old, to 400 pounds. Most will enter the feedyard at 600 pounds. They have also contracted with one of the nation’s top experts in value-based marketing to assure top carcasses are receiving a premium. The calves are sire identified, and sire group data is kept on cattle.
“The genomically enhanced genetic predictions offer a low risk, high reward opportunity to create superior beef-on-dairy calves.”
Sires used in TD Beef’s partner dairies are selected based on a terminal index, yearling growth, and conception. De Groot prefers young sires because, “The genomically enhanced genetic predictions offer a low risk, high reward opportunity to create superior beef-on-dairy calves.” In the end, De Groot believes that it is about the marketability of the cattle with an integrated approach needed, which ultimately ends with the meat produced, and all of it starts with genetics.
This integrated approach has allowed TD Beef to collect data on all aspects of the supply chain from conception to grid performance and everything in between. This has allowed them to constantly improve the system for all stakeholders, which ultimately results in more profit for all involved.
[inline_image file=”fa951e9ff5fd604f96cbb74af19fe2e7.jpg” caption=”An example of a large Southwestern calf ranch. Photo courtesy of Select Sires, Plain City, OH.”]
TD Beef currently has orders out for 300,000 head of the right calves, and they expect those numbers to grow in the future. In the end, De Groot sums up the beef-on-dairy crossbreeding: “Dairies generally are large, sophisticated businesses. Further, a dairy can pivot quickly because of their use of artificial insemination, and that has caught the attention of Costco and Walmart. Dairies are used to working on slim margins, and adjusting to the pace and demand of commerce is not a new concept to them.”
HOLSim Index
A seedstock operation that is producing some of the best bulls for use on dairy is Trinity Farms in Ellensburg, WA. Run by Mike Forman and his son, Robb, they have raised Simmental cattle since 1984, and now concentrate on raising SimAngus. The longtime thrust of the operation is serving commercial producers through their annual sale of approximately 150 bulls plus an additional 50 bulls sold private treaty.
[inline_image file=”322de9d84b9ab4ab0d57d2cd788bcf55.jpg” caption=”(L-R standing) Debbie Forman, Robb Forman, Chance Forman, Paulette Forman, Mike Forman, (L-R sitting) Mackenzie Forman, Colton Forman, Chelse Freeman. Photo courtesy of Trinity Farms.”]
However, one of the things that has brought attention to their breeding program by the dairy sector is how well-represented their bulls are on the new HOLSim index that identifies the best SimAngus sires for use on Holsteins.
While a member on the board of trustees of the American Simmental Association, Mike was involved with the development of the HOLSim index. HOLSim is a collaborative effort between the American Simmental Association and Holstein USA that utilizes the IGS Feeder Profit Calculator as the foundation for identifying SimAngus bulls with specific production traits best suited for dairy producers who breed to beef sires.
[inline_image file=”830537dea08035d65c4db8575a081013.jpg” caption=”TFS Solution, a beef-on-dairy bull being used by Trinity Farms. Photo courtesy of Trinity Farms.”]
It emphasizes identifying bulls that will best complement Holstein cattle in regard to carcass length, marbling and ribeye, muscle confirmation, and calving ease. Bulls qualifying for use must be homozygous black, homozygous polled, while having a minimum 0.4 birth weight accuracy. Both the Holstein and Simmental Associations are excited about this collaboration, and its potential to improve profitability. Mike is quick to point out the excellent work Simmental’s specialist in commercial marketing, Chip Kemp, did in leading the design of the system.
Although Trinity Farms will not change its focus from serving commercial cattle producers, they will take advantage of the beef-on-dairy crossbreeding opportunities as they present themselves. With a solid representation of their bulls on the original HOLSim list getting them off to a good start, they have already leased bulls to a stud for primary use on dairy cattle.
[inline_image file=”d95de8b67cbb8530decf6f1fa8280ee7.jpg” caption=”Robb Forman sorting cattle. Photo courtesy of Trinity Farms.”]
They have also run trials with local dairies in significant numbers to identify bulls that will provide high conception rates, and their data shows that using the right bulls can increase conception 5 to 8 percent. That is a huge value to a dairy, and when combined with the extra value of a properly bred beef-on-dairy crossbred calf, the economic impact for a dairy business is significant.
In the end for the dairies, bull suppliers, calf ranches, feedlots and packers, it all comes down to profit potential. Instead of the straight dairy calves that are highly discounted throughout the system, these beef-on-dairy crosses—done right—seem to be a win-win throughout the production cycle. The exciting thing is everyone is still learning, so it should only get better.
