Raising replacement heifers is a major investment, with costs ranging from an estimated $2,700 to $3,500 before an animal enters the milking herd. But her genetics, growth and future milk production all contribute to the return on that investment.
Dr. Mike Overton, veterinarian and Zoetis industry lead with Precision Animal Health, says producers should look beyond raising costs and consider the value heifers bring to the herd.
“These replacement heifers represent an opportunity to upgrade the herd, not just a source of cost,” Overton says.
During a Dairy Signal discussion, Overton explored how much producers should invest in heifer development and where that investment can pay off.
What Is a Replacement Heifer Worth?
Genetic progress is one reason replacement heifers bring more to the herd than their raising cost alone suggests. According to Council on Dairy Cattle Breeding data presented by Overton, U.S. dairy cattle made average annual gains of $81 in Net Merit from 2016 to 2024. Average genetic gains also included 118 lb. of milk, 9 lb. of fat and 5 lb. of protein each year.
“We’re still making significant genetic gains. This just continues to kind of amaze me, the way we’re producing better heifers,” Overton says.
As genetic potential improves, producers can raise their expectations for herd performance. Heifers entering the milking string may outperform some older cows, creating more room to cull cows that fall short of production targets.
“If I really ramp up the quality of the heifer coming in, I’m saying to the existing cows, ‘You’ve got to produce, or else there’s a good quality animal waiting in the wings to take your place,’” he says.
But having enough replacements to make those decisions requires planning. USDA estimated the U.S. dairy herd at 9.7 million cows in August 2026, alongside about 3.6 million dairy heifers. Heifer numbers had increased by roughly 100,000 head from July 2025, while the heifer-to-cow ratio remained largely unchanged.
Overton says producers need to consider both the number and quality of heifers available. A shortage can limit the ability to remove cows with declining production, while raising more replacements can give dairies greater flexibility.
“If we produce a few more heifers, we have the opportunity to actually practice some of these more selective replacement strategies,” he says.
The Cost of Raising Heifers
Overton estimates the average cost of raising a replacement heifer ranges from $2,700 to $3,500, depending in part on the value assigned to the calf at birth.
The value of a calf isn’t just what it costs to raise her. It also includes the income a dairy gives up by keeping her as a replacement. The farm could have sold her as a dairy heifer calf or bred her dam to beef and sold the resulting crossbred calf instead.
“If you don’t assign a value to that calf at birth, then you’re totally ignoring the opportunity you would have of selling that heifer to someone else, or selling a beef-cross calf in her place,” Overton says.
The average cost of raising a heifer may not reflect what it costs to raise a few additional animals. If a farm has extra barn space and equipment already in place, those expenses are covered by the current herd. As long as there is room to add animals without compromising their health or welfare, the additional heifers can cost much less to raise.
“The existing heifers have already, quote unquote, paid for the housing and the other kind of fixed cost, but raising just a few more are the least expensive heifers to raise,” Overton says.
Overton estimates raising additional heifers can cost about $700 less per animal than the average. Feed, calf value and health expenses still apply, but the dairy avoids the full cost of added housing, equipment and labor until more capacity is needed.
Savings can disappear if additional heifers lead to overcrowding or require more labor and resources. Producers still need to consider how many animals the farm can properly manage.
The value of the cow leaving the herd also affects replacement costs. Net replacement cost is the expense of raising or buying a heifer minus the money received from selling the cow she replaces.
“People are all familiar with the high cost of heifers these days, what their values are. But yet the net replacement cost is really not much different because we’ve got such good, strong beef cow market values,” Overton says.
Salvage value varies with market conditions, weight, condition, age and health. Younger cows generally bring more per pound than older cows of similar weight, giving producers another reason to evaluate whether they are keeping cows beyond their most productive years.
When Does Spending More Pay?
Cutting heifer-raising costs can look good on paper, but lower expenses may come at the expense of future performance.
Overton compared two heifer-raising scenarios in a model. The lower-cost approach saved $136 per heifer, but those animals weighed about 100 lb. less at first calving, and three percentage points fewer returned to the herd. The model also projected at least 1,000 lb. less milk during first lactation, with the production gap continuing into the second lactation.
Over an expected 2.5 to 3 lactations, the lower-cost heifers were projected to generate about $90 less annual income over cost per cow.
“This $136 savings looks really good, but you got a lighter heifer and you have 3% fewer heifers returned,” Overton says. “Now all of a sudden, that savings is not so attractive if you actually consider the quality and look at it from a future productivity perspective.”
The True Cost of Contract Heifer Raising
The same question applies when dairies use contract growers. Commercial heifer raisers can develop efficiencies in labor, facilities and feeding which are difficult for some dairies to match. But the contract structure influences the type of animal a dairy receives.
A flat per-day rate can encourage a grower to fill available space and manage feed expenses closely. If the rate is too low, there may be little room to support the growth and health performance the dairy expects. Cost-plus or performance-based arrangements can give growers more flexibility to feed and manage heifers toward specific growth targets, although the final bill may be higher.
“Don’t assume that just because you’re raising them on the farm, you can always do it cheaper than a heifer raiser,” Overton says. “They have gotten very good at efficiencies that it’s very difficult to achieve on a commercial dairy”
He cautions dairies against expecting a low daily rate to deliver both rapid growth and low health and mortality rates. Producers should understand what is included in the agreement, how growth is measured and how health events are reported. A contract should reward the development of a sound replacement, not simply the lowest daily expense.
Keep the Flexibility to Make Better Decisions
The number of heifers a dairy raises also affects its options when deciding which cows to keep and which calves to sell. Producers with enough replacements can retain their preferred heifers and market less desirable animals as springers.
“If they can now selectively sell some of their, I won’t say the worst, but some of the less desirable, and keep the best, that’s actually the best of both worlds,” Overton says.
Overton sees value in maintaining some flexibility in replacement numbers, even if it means passing up higher returns from beef-cross calves in the short term.
“I am thoroughly convinced that you can continue to produce a few extra heifers to give you that flexibility and forsake some of those beef-cross calves, and you’ll be better off in the long, long term,” he says.
Producers can use herd records to evaluate whether their replacement program is delivering the expected return. Overton suggests reviewing cows designated do not breed, production leading up to dry-off and average daily milk production during the final 30 days of lactation. For cows sold after peak production, looking at production around 150 to 200 days in milk can help identify when a cow’s output no longer justifies keeping her.
The same review can help identify cows held too long and determine whether additional replacements would allow more selective culling.
Looking Beyond the Cost of Raising Heifers
Ultimately, the right investment depends on a dairy’s facilities, labor, feed resources, herd performance and replacement needs. Cutting costs makes sense, but not at the expense of heifer growth, health or care. Spending more doesn’t guarantee a better heifer, either.
Overton says producers should focus on getting the most out of what they’ve already invested. Good feed, housing, nutrition and management help heifers enter the milking herd ready to produce.
“If we’re willing to do those things, we need to think about protecting our investment in the replacement effort by trying to provide better quality feed, nutrition, housing, management, so we can get more of that investment we’ve already made out faster when she comes to the herd as a producing cow,” he says.
The goal is to find where costs can be trimmed without hurting future performance and raise enough healthy replacements to meet the herd’s needs.
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