Replacing a dairy cow has always been an economic decision. What makes the decision particularly interesting now is that several of the variables have moved at once.
Cull-cow values remain historically strong, dairy replacement heifers are in short supply and selling for record prices, and beef-on-dairy calves are commanding substantial premiums. At the same time, milk prices have softened from their early-2026 highs.
That creates a deceptively simple question for veterinarians and their dairy clients:
When is a cow worth more in the herd than she is on the market?
For Dr. Mike Overton, Global Dairy Platform Lead at Zoetis, answering that question starts with changing how producers think about the replacement decision.
“The biggest challenge I see is that producers and consultants both, unfortunately, make replacement decisions more from a cost perspective versus an opportunity perspective,” he says.
A cow that is still alive and producing milk has an obvious value. The harder part is recognizing the value of the opportunity created when that cow leaves and another animal takes her place.
The Hidden Cost of Waiting
Replacement is one of the largest costs of dairy production, so reducing the replacement rate can seem like an obvious way to improve profitability. The problem comes when a lower replacement rate is achieved simply by keeping cows that would otherwise have left the herd.
Overton uses a hypothetical herd with a historically consistent 38% annual replacement rate. If that rate falls to 34% without a corresponding improvement in the underlying health and management, the cows that should have been removed are retained longer. In his example, those animals remain in the herd about 113 additional days, continuing to occupy a cow slot while their production declines.
The cost isn’t necessarily visible as a replacement expense. It is the potential production the dairy could have generated if a more productive animal had occupied that slot.
That is opportunity cost.
“The idea is not focusing on how long each individual cow lives, but what’s best for the overall productivity of the cow slot,” Overton explains.
The distinction is important when evaluating marginal cows. The question isn’t whether a cow is still producing enough milk to ‘cover her costs’ and justify keeping her, but whether she is the best animal available to occupy that slot.
The Culling Threshold May Come Earlier Than Expected
This is where Overton’s economic modeling challenges conventional thinking.
Consider a cow that has already been identified as a do-not-breed animal. Producers may continue to keep her while she produces a modest amount of milk, particularly if replacement heifers are expensive or unavailable. Assuming herd-average production at 90-100 pounds of milk per day, a common answer Overton receives when he asks a producer ‘at what level should a do-not-breed cow be replaced?’ is often around 40 pounds.
His modeling suggests the economic decision to replace should occur much earlier:
“The economically optimal timing of that replacement, if a replacement heifer is available, is usually quite higher than the production level of ‘covering her cost’. It’s typically about 55-60 pounds or more, depending on other economic assumptions.”
The point isn’t that every do-not-breed cow producing less than 65 pounds should automatically leave the herd. The appropriate threshold depends on the replacement cost, milk price, expected production of the replacement, mortality risk, salvage value and other assumptions.
The example illustrates how easily a producer can wait until a cow looks like an obvious cull and miss an earlier opportunity to improve herd productivity. The economic decision may have occurred months earlier.
A Strong Beef Market Changes the Value of Waiting
The value of the cow leaving the herd is another important piece of the calculation.
Cull-cow prices have fallen from their 2026 peak, but remain well above year-ago levels. In the Southern Plains, auction prices peaked around $187/cwt before declining to about $172/cwt in early August. National average cutter-cow values declined from roughly $156 to $142/cwt over the same period. Tight cattle supplies and strong beef demand continue to support prices, although seasonal declines are expected later in the year.
That creates an interesting counterweight to high replacement costs.
A dairy may be reluctant to replace a cow when a good replacement heifer costs thousands of dollars. Yet retaining the cow isn’t free. She remains exposed to mortality, condemnation and additional health problems while potentially producing progressively less milk. Her salvage value can also decrease if she loses condition or develops a problem that makes her harder to market.
“What people tend to forget when simply focusing on the acquisition cost is the rest of the equation – the market value of the cow being replaced and we commonly refer to that as salvage value,” Overton says.
Overton’s approach incorporates future salvage value, mortality risk and the time value of money to estimate the net cost of replacement. That creates a more useful comparison than simply looking at today’s heifer price.
The Replacement May Be Expensive
The other side of the equation is the animal coming into the herd.
Dairy replacement inventories have fallen sharply as producers have increasingly used beef semen to capitalize on strong beef markets. CoBank estimates that the number of dairy heifers weighing at least 500 pounds declined 19% from 2016 to 2026. Tight supplies have pushed dairy replacement prices above $3,000 per head, with top-quality replacements bringing $3,400 to $4,400 in some Minnesota and Wisconsin auction markets this spring.
That makes indiscriminate culling difficult to justify. If a dairy doesn’t have a suitable replacement available, the economically ideal culling decision may not be feasible.
The situation is different when a dairy has an adequate supply of high-quality replacements. The value of keeping a marginal cow depends partly on what can realistically replace her.
Beef-on-Dairy Adds Another Layer
Beef-on-dairy has also changed the value of what a dairy cow produces beyond milk.
At a Pennsylvania auction in March, 80- to 89-pound beef-on-dairy calves averaged $1,706 per head, compared with $1,330 for purebred dairy calves. The premium for beef-on-dairy calves had grown to more than $420 per head by February 2026.
CoBank reports that beef sales now account for 12% to 15% of revenue on many dairy farms, with some operations approaching 20%. The shift toward beef semen has also contributed to the shortage of dairy replacements.
For culling decisions, that doesn’t mean a valuable beef-cross calf should automatically justify keeping a marginal cow. It does mean the expected value of another pregnancy and calf has become an additional consideration when evaluating what the cow could contribute if she remains in the herd.
A healthy, fertile and productive cow may have several valuable future outputs: milk, a calf and eventually salvage value. A cow with chronic health problems or poor reproductive performance may have a much shorter list.
The Threshold Moves With the Market
The value of milk is another moving piece. USDA’s August 2026 outlook forecasts an average 2026 all-milk price of $19.85/cwt, down 15 cents from the previous forecast. Milk prices also moved substantially during the first half of the year, illustrating how quickly the economics can change.
Overton’s model demonstrates why those changes matter. When milk becomes more valuable, it takes less marginal milk to pay the replacement cost and the bar or threshold for replacement rises. Meanwhile, if milk value falls, the production threshold for retaining a marginal cow decreases, meaning that cows should be retained a bit longer. Changes in beef or salvage value and replacement cost can shift the threshold as well.
The practical implication is that a culling threshold shouldn’t be treated as static. The cow’s age, production, reproductive status and health history may not change overnight, but the economic value assigned to those characteristics can. Consequently, it is important to ensure that sufficient replacement heifers are available to allow more timely replacement of cows destined to be culled.
Yet the economically optimal decision isn’t always financially feasible.
“Sometimes because of cash flow crunches, producers can’t act when they need to, knowing they’re going to hurt long-term profitability,” Overton says.
That distinction is important for veterinarians working with producers. An economic model can identify the theoretically optimal culling point, but the producer still has to make the decision within the realities of cash flow, replacement availability and herd management.
That creates an opportunity to bring a different question into culling conversations. Instead of simply asking whether a cow is still productive enough to keep, ask what the dairy gains by keeping her and what it gives up by doing so.
That may mean looking at expected milk production, reproductive potential, health risk, current salvage value and the quality and cost of the replacement available to take her place.
The goal isn’t to cull more cows. It isn’t to cull fewer cows, either.
It is to recognize when the economics have shifted enough that the best place for a marginal cow is no longer in the herd.
