Amir SohailDENVER, (ZM Newswire) — The U.S. dairy herd has reached its largest size in 30 years, but one critical subset of the herd — replacement heifers that represent the next generation of milk cows — remains historically low. The number of heifers available to enter the milking herd has fallen sharply, dropping to the lowest level since 1978. The decline comes as strong financial incentives are prompting dairy farmers to produce calves destined for the beef supply rather than milk production.
According to a new report from CoBank’s Knowledge Exchange, replacement heifer supplies are projected to shrink even further in 2026 before beginning to rebound in 2027. With replacements in short supply, producers are retaining adult dairy cows that would have typically been culled, contributing to the overall increase in the U.S. dairy herd. At the same time, producers are making more beef-on-dairy calves, further tightening dairy replacement heifer supplies. This has pushed heifer prices into record territory, well over $3,000 per head.
“On most dairy farms, net margins are currently being driven by the beef check, not the milk check,” said Corey Geiger, lead dairy economist with CoBank. “Five years ago, calf and cull cow sales accounted for 5% of a dairy farm’s bottom line while milk sales represented 95% of their revenue. Today, beef sales account for 12% to 15% of revenue on many farms, with some operations approaching 20% when measured on a per hundredweight basis. That shift is reshaping the U.S. dairy herd, most notably through the decline in replacement heifers.”
CoBank’s modeling indicates that dairy replacements entering the milking herd between last year and this year are shrinking by a combined 796,000 head, followed by a rebound of 360,200 head in 2027 and 2028. The projections are based on semen sales data from the National Association of Animal Breeders and assume average annual rates of conception, pregnancy loss and other key reproductive measures.
Strong consumer demand for high‑quality protein has placed dairy farmers in a unique position to capture growing revenue streams from both beef and milk sales. However, the timing of those revenue streams differs significantly. Raising dairy replacements requires a two‑year investment, while selling beef‑on‑dairy cross calves provides immediate income.
The economic incentive for dairy farmers to produce more calves destined for the beef supply is rooted in the historic contraction in the U.S. beef cattle herd, which currently stands at a 75-year low. Tight beef supplies and strong demand have driven beef cattle prices to record highs, prompting dairy farmers to dramatically increase their use of beef semen. In 2025, 82.7% of all U.S. beef semen units were purchased by dairy operations.
Dairy farmers are increasingly using gender‑sorted semen, genomics and beef‑on‑dairy strategies to optimize breeding for both production and profitability. Semen purchases have consolidated into two primary categories: gender‑sorted dairy semen for producing replacement heifers and beef semen for producing beef‑on‑dairy calves. From 2020 to 2025, beef‑on‑dairy semen sales rose 62%, and gender‑sorted semen sales increased 53.6%. Meanwhile, conventional dairy semen sales fell 47.4%.
Abbi Prins, agricultural commodities economist with CoBank, said the surge in beef semen sales to dairy farmers in 2023 will continue to suppress replacement heifer inventories this year due to the three-year biological cycle from conception to first calving.
“Our modeling shows 438,800 fewer replacement heifers entering dairy herds this year. That trend will begin to reverse in 2027 with 285,400 dairy replacements projected to enter the milking herd. Over time, we expect dairy farmers will continue rebalancing their breeding programs to optimize production for both beef and dairy markets. But dairy will continue to play a significant role in the beef supply for the foreseeable future, as rebuilding the beef cattle herd will take several years.”
Read the report, Dairy replacements should begin a slow rebuild in 2027 and 2028.
About CoBank
CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving almost 80,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
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