There’s a phrase Gregg Doud uses that captures the economic transformation reshaping U.S. dairy: “The beef industry can rent that dairy cow uterus.”
It’s not poetic, but it’s precise. And it explains why the U.S. dairy herd has reached its highest level since 1992, why milk production is up 2.7% year-over-year, and why approximately 20% of dairy farm income now comes from beef.
As president and CEO of the National Milk Producers Federation and former chief agricultural trade negotiator, Doud has watched this transformation unfold — and he’s clear about what’s driving it.
“That growth rate is directly related to the fact that if that dairy cow is pregnant, she’s staying because of the value of the beef-on-dairy black calf, which is today somewhere in the neighborhood of $1,500,” Doud explained during a recent Farm Journal interview.
Compare that to the pre-sexed semen era: “That Holstein steer black calf was worth $150.”
That 10x increase in calf value — enabled by sexed semen technology and strategic beef breeding — has fundamentally altered dairy farm economics and driven the largest herd expansion in three decades.
Ken McCarty of McCarty Family Dairy in Kansas says the transition from Holstein bull calves to high-value beef-on-dairy crosses has rewritten their balance sheet. McCarty Family Farms was recognized as the 2025 Milk Business Leader in Technology Award winner for transforming their operation into a high-tech, 20,000-cow operation driven by innovation, data and bold decision-making.
“Bull calf sales went from something that you basically ignored in your budget to something that really today accounts for, depending on the month in the market, somewhere around 50% of our overall revenue,” McCarty says.
When half of a dairy’s revenue is tied to the beef side of the barn, the producer is no longer just a milk man — they are a high-stakes beef integrator with every incentive to meet the packer’s demand for perfection
Technology That Changed Everything
The beef-on-dairy revolution required two technologies to converge: sexed semen and genomics.
Sexed semen allows dairy producers to breed their best cows to dairy genetics with near-certainty of producing replacement heifers. That frees up the rest of the herd to be bred to beef semen — typically Angus or other high-value beef breeds.
Genomics enables producers to identify which cows have the best genetics for milk production and which don’t. The top performers get sexed dairy semen to produce the next generation of milkers. The rest get bred to beef.
The result: dairy producers can “right-size” their heifer pipeline, producing exactly the number of replacements they need while maximizing beef calf value from the rest of the herd.
“The fact that you can rent the beef industry, can rent that dairy cow uterus and do that beef-on-dairy black calf adds an enormous amount of value, which is what’s driving — I would argue — the biggest driver of the increase in milk production is the value of that calf,” Doud said.
70% Adoption: Are We at the Ceiling?
So how widespread has beef-on-dairy become?
Doud estimates that approximately 70% of U.S. dairy farmers are now using beef semen on a portion of their herds.
“We’re probably about pretty close to where that’s going to be going forward,” he said, “because the rest of that you’re using [sexed] semen to make replacement heifers, and the supply of replacement heifers in dairy is pretty tight right now.”
In other words, there’s a natural ceiling to beef-on-dairy adoption. Dairy producers still need to produce enough replacement heifers to maintain and grow their herds. With heifer supplies already tight, there’s limited room to breed more cows to beef without creating a replacement shortage.
“So I would say this is about where we’re going to be, plus or minus,” Doud concluded.
That has significant implications for future milk production growth. If beef-on-dairy adoption has plateaued at 70%, then the economic incentive driving recent herd expansion may have reached its limit.
The 20% That Matters
The financial impact of beef-on-dairy can’t be overstated: approximately 20% of dairy farm income now comes from cull cow and calf sales.
For context, dairy cow cull slaughter represents about 20% of total U.S. cull cow slaughter. With 9.71 million dairy cows in the U.S. — the highest since 1992 — and strong beef prices, that revenue stream has been transformational.
It’s also why federal policy interventions in beef markets hit dairy producers so hard.
When the Trump Administration announced it would remove tariffs on 300,000 metric tons of imported beef for 90 days, Doud did the math: “If you look at just dairy cows, that is about four and a half months of dairy cow cull slaughter.”
While that imported beef — likely Brazilian 90% lean trim — won’t directly replace dairy cull cows (it goes into different market channels), it affects market psychology and price discovery.
“What it really does more or less is it just kind of changes the psychology of the market in terms of supply hanging over the head of the marketplace,” Doud explained.
The result: depressed cull cow prices and uncertainty about beef-cross calf values, even though the fundamentals of beef-on-dairy economics remain strong.
The Expansion Decision
Perhaps more concerning than immediate price impacts is what beef market uncertainty does to long-term expansion decisions.
“If you have that heifer that you’re weaning this fall, that’s the point where you make the decision: Am I putting her back in the herd and breeding her next May, or am I sending her to the feedlot?” Doud said.
When beef prices are strong and policy is stable, the decision is easy: keep the heifer, breed her, and benefit from both milk production and future beef-cross calf sales.
But when policy creates uncertainty: “Well, if there’s going to be government intervention in the marketplace, what’s the point of me expanding and planning for the future? I’ll just put that heifer in the feedlot and take the money.”
The beef-on-dairy revolution transformed dairy economics in less than a decade, driving the largest herd expansion in 30 years and providing a financial hedge that kept operations viable when milk prices sagged. Now that model — with 70% adoption and 20% of farm income at stake — faces its first major policy test. If beef markets remain stable and expansion continues, the U.S. dairy herd could grow even larger, filling the billions in new processing capacity coming online. But if policy uncertainty persists, producers will make the rational choice: take the money today and forget about tomorrow. The $1,500 calf that built the herd could become the reason it stops growing.
