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Stay in the ‘black’: How to maintain a premium for dairy-beef cross calves

Larry Corah for Progressive Dairy Published on 24 May 2021

The use of beef semen in dairy cows over the past three years has simply been amazing. A recent National Association of Animal Breeders (NAAB) report on semen usage indicated that nearly 7 million units of beef semen were used with dairy cows in 2020.

Since it takes three to four units of semen to create a pregnancy in dairy females, this would imply that starting in late 2020 and the first nine months of 2021, we should see between 1.7 to 2 million beef-on-dairy cross calves born. That number could easily exceed 3 million in the next two years.

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What drove this change? Obviously, the greater usage of sexed semen created a large number of replacement heifers, leaving uterine capacity for use of beef genetics. Not to be overlooked was the impact of three major packers moving away from harvesting Holstein steers, decreasing straight Holstein calf prices.

To further illustrate that point, Kansas State research workers recently completed a summary of how beef-on-dairy cross calves are selling on Superior Livestock Auction. That data showed that these calves at 550 to 600 pounds sold for $15 per hundredweight (cwt) under straight Black Angus type calves. However, straight Holstein steer calves were $40 per cwt under the beef price.

Bottom line: Beef-on-dairy calves brought about $80-$90 more per head than Holstein steers.

Three years ago, many dairy producers simply sought “cheap” semen that would produce a black calf. Semen companies responded by cleaning out tanks of old, marginal genetic semen. Sadly, this created the cattle we have been seeing in feedlots and packing rails the past year or so. As a result, the feeding/packing sector has started to push back by pricing these cattle at the same value as a Holstein steer.

What does using ‘good’ semen and using ‘good’ genetics really mean?

A dairy producer may then be left wondering which traits to focus on to increase the value of a cross calf. Dairy producers have always put a high priority on fertility and calving ease, and that will never change because both are so economically relevant at the dairy operation. But, what will change is their focus on other traits that also create value for those buying the calves later in the supply chain.

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Let’s start with the beef breed used. At the 2019 Beef Improvement Federation meeting, we asked 20 industry leaders what breed of bull should be used on dairy cows to create the ideal cross calf. One hundred percent said either Simmental-Angus, Charolais or Limousin. No one said Angus. Ironically, our estimate suggests that about 60% of beef semen used by dairy producers today is Angus.

Why Angus? That is what the feeding/packing industry is asking for, and they are willing to pay premiums for those hitting quality grade thresholds. Today, nearly all packers have Angus brands, thus, focusing on the “black hide” is still important. That, along with the fact Angus cattle grow equally well as so-called “growth” breeds, has made this a popular choice.

What else must be considered? Answer: calf health. Just as the dairy industry understands the importance of using quality colostrum and good calf starter rations for replacement dairy heifers (because of its later impact on milk production), the same applies to these newborn beef-on-dairy calves heading to calf ranches. Calves that get sick early in life will grow more slowly throughout their lifetime and have a reduced quality grade when hung on the rail. Hence, just as with replacement heifers, quality colostrum and quality calf starter diets are a must.

Consider these other genetic traits

Just as the dairy industry for years has used genetic indicators to improve milk production per cow, years of genetic research has provided the beef industry with similar indicator traits, called expected progeny differences (EPDs). They are an estimate of how genetically superior calves will perform compared to average or below-average EPD calves.

Let’s look at three important traits a dairy producer should consider when selecting beef semen:

1. Growth. I’d argue the first trait to consider is growth. Calves with superior growth have greater value to the calf ranch or feedlot. There are a number of growth indicators, but I like to look at yearling-weight EPD numbers. Since Angus is a popular breed of choice, let’s look at simple illustrations using Angus genetic EPDs.

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The current Angus yearling EPD average is +99, while those in the upper 1%, which many A.I. companies now have available, is +153. (If targeting the top 5%, that number would be +138.) At a year of age, this suggests a genetically superior calf is 54 pounds heavier. At the calf ranch, that could easily be an extra quarter pound per day, or over 150 to 180 days, an extra 37 to 40 pounds. Take that times market price, and you quickly realize why growth traits are important. For the feedlot, the daily gain difference could easily be .3 pounds per head, per day. Beef-on-dairy calves may spend up to 220 to 250 days at the feedlot, which means another 65 to 75 pounds. Take that times today’s market price of $1.15 per pound, and we can see why growth indicators will be very important.

2. Quality grade. As mentioned earlier, quality grade is important because nearly 75% of all beef cattle are sold on a grid or formula today, and grade is where premiums or discounts can exist. Unlike Holstein steers often being sold on a live-weight basis, most beef-on-dairy cross steers will be sold on a grid. Marbling, which is the key quality grade driver, is very heritable, so genetic selection can have a big impact. Again, using Angus values, the breed average for marbling is .51, but the upper 1% is 1.37. This equates to nearly a full quality grade difference. That said, if the industry average today is low Choice, genetically superior calves could move to nearly low Prime. Keep in mind that a grid I looked at recently had a $18 per cwt carcass difference between Prime and Choice. Take for example a typical 900-pound steer carcass. That is a difference of $162. This is why genetics is important.

3. Muscling. With straight Holsteins, one important criticism is their poor dressing percentage, so another trait to consider is muscling. Again, using Angus data, the best indicator of muscling is ribeye area (RE). The Angus breed average for RE EPD is .53 square inches, and the top 1% is 1.17 square inches. That difference of over half a square inch RE could certainly have an impact on dressing percentage.

There are, of course, other traits to consider, such as frame score, as we don’t want cattle too tall or to have too much fat cover, since yield grade is important.

I’d also like to encourage dairy operations to consider using RFID ear tags to ensure genetic verification as calf ranches, feedlots and packers will consider them an important piece of the puzzle. In most cases, these tags will be a key part of A.I. companies’ supply chain brand protocols.

Space will not allow much discussion of where the beef-on-dairy programs will go in the future, but one idea I want to plant is that just as the past three years saw beef semen usage grow, in the next three to four years, we will start to see embryos being placed in the dairy uterus instead of semen. That will create yet another value-added twist to the operation and some exciting changes along with it.

To summarize, remember this: Dairy producers know the importance of focusing on the market value of milk, and now they also need to consider the value of the day-old wet calf, as this will become an important profit center for growing overall operation profitability. Don’t get hung up on a $1 or $2 difference in a unit of semen when you could be impacting your wet-calf value by $30 to $40.  end mark

Larry Corah
  • Larry Corah

  • Emeritus Professor
  • Kansas State
  • Retired VP of Supply Chain
  • Certified Angus Beef
  • Email Larry Corah

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