Hello, everyone, and welcome to the 203rd episode
of the Bullvine Podcast. I'm Bella, joined as
always by my co -host Douglas. Today, we're diving
into a fascinating market disruption that's reshaping
the dairy genetics industry. Traditional genetics
companies are being blindsided, while dairy farmers
and beef specialists are capturing a massive
portion of the beef on dairy market. That's right,
Bella. We'll be unpacking how this seismic shift
happened seemingly overnight, who the new players
are, and what it means for dairy producers across
North America. We'll look at the economic drivers,
explain why traditional companies missed the
boat, and provide some practical advice for producers
navigating this new landscape. I've heard that
traditional genetics companies now control only
about 25 % of the beef on dairy market. That's
a dramatic change from just a few years ago.
Absolutely. And we're going to explain exactly
how that happened and who's winning in this new
reality. So let's dive right in. And Douglas,
let's start with the basics. What exactly happened
in the genetics marketplace that traditional
companies didn't see coming? Well, Bella. It's
quite simple. While the main AI players were
busy perfecting their dairy genetic evaluation
systems and marketing high TPI bulls, they completely
missed the explosion of beef on dairy breeding.
They were so focused on dairy genetics that they
never anticipated how quickly dairy farmers would
shift to using beef semen. But how quickly did
this shift actually happen? Do we have any numbers
on that? According to peer -reviewed research
published in January 2023, the contribution of
dairy steers to the U .S.-fed beef supply increased
from 6 .9 % to 16 .3 % over just two decades.
That's more than doubling their market presence.
That's a remarkable increase. What drove this
change? Several factors converged. First, we've
seen declining beef cow numbers nationwide. Second,
there's been increased use of sex dairy semen,
which allows dairy farmers to produce replacement
heifers from only their best cows. And third,
maybe most importantly, Holstein bull calves
essentially became worthless around 2016. Major
U .S. beef packers were actively rejecting Holstein
-fed calves, leaving dairy farmers in a terrible
position. So, when dairy farmers couldn't sell
their Holstein bull calves, they needed an alternative.
and breeding to beef bulls provided a solution.
Exactly. It was simple economics. If you can't
sell a Holstein bull calf for a profit, but you
can sell a beef cross calf for significantly
more, the decision makes itself. What started
as a survival tactic quickly became standard
practice. It sounds like traditional genetics
companies were caught completely flat -footed
by this market transformation. They absolutely
were. They spent decades building elaborate genomic
indexes and commanding premium prices for dairy
genetics while assuming their market dominance
was untouchable. Meanwhile, innovative dairy
producers and beef -focused companies were quietly
building a parallel genetic supply chain. Let's
talk about these new players. Who exactly stepped
in to fill this market need when traditional
companies weren't paying attention? There are
really two major groups that captured this opportunity.
First, we have specialized beef genetics providers
who understood both the dairy production system
and beef quality requirements. And second, perhaps
more surprisingly, we have large dairy operations
that started producing their own genetics in
-house. Can you give us some examples of these
new providers? One fascinating example is Grimius
Cattle Company. They were primarily known as
a cattle feeding operation handling dairy steers
and heifers since the 1960s. But they've transformed
themselves into a genetic powerhouse by aggressively
acquiring premium Angus genetics. How exactly
did they do that? Rather than trying to build
a genomic program from scratch, Grimmius purchased
high -selling bulls from elite breeders, including
Hoover Angus Farm, Spring Cove Ranch, and Gardner
Angus Ranch. They went straight to proven genetics
that deliver in the feedlot, something they understand
better than most dairy -focused genetic companies
ever could. So they leveraged their practical
experience in feeding beef dairy crosses to identify
the genetics that would work best. Precisely.
But perhaps even more disruptive are the large
dairy operations that have completely bypassed
traditional genetics providers altogether. How
are they doing that? Operations like Riverview
and Faria have thousands of cows under management.
At that scale, they've determined it's more economical
to develop their own semen production facilities
than to purchase from established companies.
Faria now produces all its own beef semen, leveraging
its massive scale to justify the investment in
collection facilities and bull maintenance. That's
vertical integration in the dairy industry. What
makes this approach so economically attractive?
The economics are actually quite simple and devastating
for traditional providers. At sufficient scale,
in -house production eliminates markup, allows
customized genetic selection, and even creates
potential for additional revenue by selling excess
inventory to neighboring operations. It's a complete
upheaval of the traditional business model. Let's
talk about the impact this market transformation
has had on traditional genetics companies. How
badly have they been hurt? The financial consequences
have been severe and are getting worse. As beef
on dairy breeding has exploded, the market for
conventional dairy semen has contracted significantly.
Some estimates put the reduction at 25 to 35
percent virtually overnight. And this market
contraction coincided with inflationary pressures
that increased operational costs across the board.
So they're getting hit from both sides, selling
less product while costs are rising. Exactly.
For companies structured around high -volume
sales with substantial overhead, the math simply
doesn't work anymore. Their entire business model
was built around a specific blend of sales and
volumes that the beef -on -dairy revolution has
completely undermined. Let's see what specific
challenges do they face in competing in this
new market. Traditional genetics companies now
face higher per -unit costs for dairy semen production
because their fixed expenses, things like facilities,
bull housing, genetic testing, and staff, must
be spread across fewer units sold. Meanwhile,
their beef programs lack the specialized expertise
and market connections that give focused beef
genetics providers their competitive edge. It's
a classic disruption scenario. So their cost
structure doesn't work with lower volumes, and
they don't have the specialized beef knowledge
to quickly pivot. That's exactly right. They
were optimized for a market that has fundamentally
changed. Douglas, one thing I find fascinating
is how differently dairy farmers and beef producers
think about genetics. Can you explain that disconnect?
This is actually one of the most interesting
aspects of this market transformation. Dairy
producers have traditionally selected which cows
to breed to beef based primarily on reproductive
performance, lactation number, and milk production.
Basically, which cows aren't worthy of producing
replacement heifers. And what criteria do dairy
farmers use when selecting which beef bulls to
use? That's where it gets really interesting.
For many dairy producers, the criteria are remarkably
straightforward. calving ease, and solid black
hair coat. This black calf syndrome, as some
call it, represents both a market failure and
an enormous opportunity. So many dairy producers
are just looking for any black calf without much
concern for specific beef genetic traits. That's
right. Most aren't considering comprehensive
genetic merit that would maximize value throughout
the beef supply chain. Research shows that of
the beef breeds used in dairy herds, Angus dominates
at 89%, followed by Limison at 12%, Charolais
at 7%, and Simmental at 4%. This preference for
black -hided calves is driven by U .S. beef production
premiums for black, coat -colored calves. Healing.
But there must be significant differences between
dairy and beef cattle beyond just hair color,
right? Absolutely. Many dairy producers don't
fully appreciate the significant differences
between dairy and beef cattle carcasses. Scientific
research shows that dairy steers have lesser
dressing percentages and yield 2 -12 % less red
meat compared to beef steers. This is due to
a greater ratio of bone to muscle, internal fat,
organ size, and gastrointestinal tract weight.
Additionally, Holstein carcasses tend to be longer,
while Jersey carcasses are typically lighter
weight than carcasses from beef breeds. I understand
there have been some efforts in the industry
to address these challenges with specialized
genetic indexes. Could you explain these initiatives
in more detail? Absolutely. The beef industry
recognized this opportunity and developed specific
tools to help optimize beef on dairy breeding.
The American Angus Association, for example,
developed the Dollar Angus on Holstein Index,
commonly written as Dollar AXH, and the Dollar
Angus on Jersey Index. written as dollar AXJ.
How exactly do these indexes work? Are they similar
to the dairy indexes most of our listeners are
familiar with? In concept, yes. Just like how
the dairy industry has net merit, or TPI, that
combine multiple traits into a single economic
value, these beef on dairy indexes combine traits
that matter specifically for crossbred animals.
The $AXH index emphasizes calving ease, which
is less of an issue in Holstein crosses, but
heavily weights marbling, muscle conformation,
and appropriate carcass length to address the
specific challenges of Holstein -influenced carcasses.
And what about the Holcim index you mentioned
earlier? The Holcim index is particularly interesting
because it represents a formal collaboration
between the Holcim Association USA and the American
Cemental Association. It was specifically designed
for selecting cemental and angus -crossed bulls
for use on Holstein females. What makes this
unique is that it represents the dairy and beef
industries actually working together to solve
these challenges. With these specialized tools
available, why aren't more dairy producers using
them? That's the million -dollar question. Despite
these resources being available, adoption has
been limited. Part of the issue is that dairy
people don't think like beef people, as the saying
goes. Dairy producers are accustomed to selecting
for milk production components and health traits.
The concept of selecting for carcass traits,
feed efficiency in the feedlot, and beef quality
grade is simply outside their traditional area
of focus. Are there any success stories of dairy
producers who have embraced these specialized
indexes? While individual success stories exist,
the broader industry hasn't yet made this transition.
The peer -reviewed research shows that of beef
on dairy crosses reported by the Council on Dairy
Cattle Breeding from 2016 to 2019, 95 % used
Angus semen. But very few were using specialized
beef on dairy indexes to select those Angus bulls.
This represents a significant opportunity for
education and improvement. Let's dive deeper
into the specific differences between dairy steers
and beef steers. I know there's research on this
topic that could help our listeners understand
the economic implications better. I'd be happy
to walk through the research findings. Based
on peer -reviewed research published in January
2023, there are six key characteristics where
dairy steers differ from beef steers, and each
represents an opportunity for improvement through
optimized breeding. What's the first characteristic?
First is dressing percentage. That's the ratio
of carcass weight to live weight. Dairy steers
have a lower dressing percentage than beef steers.
However, with optimized beef by dairy breeding
strategies, producers can achieve a 2 -5 % improvement
in this metric. And what about the actual meat
yield? That's the second key difference. Red
meat yield from dairy steers is typically 2 -12
% less than from beef steers. This is considered
the baseline in the industry. With proper beef
on dairy crossbreeding, producers can see a 3
-8 % improvement in red meat yield. That's significant
when you consider the economics of beef production.
What about carcass conformation issues? The third
and fourth characteristics relate to carcass
dimensions. Holstein carcasses tend to be longer
than standard beef carcasses, while Jersey carcasses
are typically lighter weight. Both of these characteristics
can be addressed with proper sire selection.
This is where those specialized indexes we discussed
can be particularly valuable. Absolutely. The
fifth characteristic is quality grade, where
dairy steers often have more desirable scores
on average compared to beef steers. And the sixth
characteristic is performance predictability.
Dairy animals show high uniformity compared to
the more variable beef steers. Both of these
advantages can be maintained with proper genetics
while addressing the disadvantages. So with a
strategic breeding approach, dairy producers
can maintain the quality advantages of dairy
animals while improving the characteristics that
typically make them less valuable for beef production.
That's exactly right. And that's why selecting
bulls based solely on black hide color and calving
ease leave significant value on the table. There's
potential for much greater economic returns with
a more sophisticated approach. Earlier, you mentioned
five questions dairy farmers should ask when
evaluating beef genetics providers. Let's explore
these in more practical terms. How might a typical
dairy producer actually use these questions?
Let's walk through each question with a real
-world example. Imagine you're a 200 -cow dairy
operation looking to change your beef semen provider.
When meeting with potential suppliers, the first
question to ask is, beyond black hide and calving
ease, what specific genetic traits does your
program select for that will maximize my calves'
value in the beef chain? What should producers
listen for in the response? They should listen
for specific traits like feed efficiency, ribeye
area, marbling score, and red meat yield. A quality
provider will talk about these traits in economic
terms. For example, explaining that a one square
inch increase in ribeye area might translate
to $15 more value per calf. If they just talk
about better beef qualities without specifics,
that's a red flag. What about the second question
regarding feedlot performance? When asking, what
data can you provide on feedlot performance and
carcass characteristics of your sire's progeny,
Producers should expect to see actual data sheets,
not just marketing claims. A serious beef genetics
provider should have information on average daily
gain, feed conversion ratios, and USDA yield
and quality grades from actual progeny. Ideally,
they'd have comparison data showing how their
genetics perform, specifically in beef on dairy
crosses, rather than just purebred beef settings.
The third question was about specialized beef
on dairy indexes. How should a farmer evaluate
those answers? When asking if they use specific
beef on dairy indexes like $AXH or HALSIM, listen
for whether they understand the unique challenges
of beef -dairy crosses. A good answer would include
an explanation of how these indexes weight different
traits compared to standard beef indexes, and
why that matters for dairy producers. If they
dismiss these specialized indexes or seem unfamiliar
with them, That suggests they haven't really
focused on the specific needs of dairy clients.
The fourth question was about price premiums.
What constitutes a good answer there? For the
question, what price premiums are your beef on
dairy calves averaging compared to generic black
calves? Producers should look for specific dollar
amounts backed by auction data or contract prices.
A quality provider might say something like,
Our beef on dairy calves consistently bring $25
to $40 more per hundredweight than standard black
crosses at regional auctions. Vague answers suggest
they don't track this critical economic information.
And finally, what about references from other
dairy producers? This might be the most important
question. Can you provide references from dairy
producers who've seen measurable economic benefits
from using your genetics? A reputable provider
should immediately offer contact information
for existing clients with operations similar
to yours. Follow up with these references and
ask specific questions about calving ease, buyer
feedback, and price differentials. Real experiences
from other dairy farmers are invaluable in evaluating
these claims. So these questions help dairy producers
cut through the marketing hype and determine
which genetic providers are truly offering superior
value. Exactly. These five questions transform
a dairy producer from a passive buyer to an informed
consumer who can make breeding decisions based
on economic outcomes rather than just tradition
or convenience. We're witnessing a fundamental
restructuring that traditional companies simply
cannot ignore. Of the beef on dairy crosses reported
from 2016 to 2019, A staggering 95 % used Angus
semen, demonstrating just how concentrated this
market has become on one breed. What do traditional
genetics companies need to do to survive in this
new reality? They really have two options. Either
dramatically downsize their operations to match
the reduced dairy semen market, or develop specialized
beef genetics divisions that can truly compete
with focused providers. Major genetics companies
have already begun moving in this direction by
expanding their beef operations, but they're
playing catch up in a market where specialist
providers have established significant advantages.
And what about dairy producers? Will we see more
vertical integration? Absolutely. Innovative
dairy producers are likely to continue moving
toward vertical integration of their genetic
supply. The economics are simply too compelling
to ignore. Why pay premium prices for genetics
when you can produce custom -tailored semen in
-house at a fraction of the cost? Of course,
this only works for operations with sufficient
scale. What opportunities do you see for specialized
beef genetics providers? The opportunity is enormous.
By focusing exclusively on the beef on dairy
segment and developing products optimized for
this specific market niche, they can deliver
superior economic outcomes compared to generic
black calf programs. The real innovation will
come from providers who can bring dairy -style
genomic evaluation to beef on dairy breeding
decisions. As this market transformation continues,
who do you see as the clear winners and losers?
The winners are definitely the nimble, specialized
beef genetics providers who understand both dairy
production systems and beef quality requirements.
We're also seeing large dairy operations with
sufficient scale to justify in -house semen production
coming out ahead. And the third group of winners
are the innovative crossbreed specialists who
can optimize for both dairy and beef traits.
Traditional genetics companies that fail to adapt
quickly enough are the clear losers in this scenario.
The market share they've already lost is likely
gone forever. The only question is whether they
can stabilize their position or continue losing
ground. Newfall, what does this transformation
mean for the average dairy producer who might
be listening to our podcast right now? For dairy
producers, this transformation creates both opportunities
and challenges. The proliferation of genetic
sources provides more options than ever before,
but it also requires more sophisticated evaluation
of potential partners. Those who approach beef
on dairy breeding with the same analytical rigor
they apply to their dairy breeding program will
capture significantly more value than those settling
for commodity black calves. We've covered a lot
of ground today. The beef on dairy revolution
has permanently altered the genetics landscape.
What was once a market dominated by a handful
of large genetics companies has transformed into
a diverse ecosystem where specialized providers
and vertically integrated dairy operations play
increasingly important roles. That's right, Bella.
The established genetic providers were caught
flat -footed by this transformation. While they've
begun adjusting their strategies, The question
remains whether they can adapt quickly enough
to recapture market share from the upstarts who
recognized this opportunity first. For our listeners,
the message is clear. The genetic marketplace
is more competitive and diverse than ever before.
Whether you're running a large -scale operation
considering vertical integration, or a medium
-sized farm evaluating breeding options, the
days of simply defaulting to traditional genetics
providers are over. Absolutely. The genetics
industry has been disrupted, and smart producers
will leverage this disruption to capture more
value from every breeding decision. I recommend
all dairy producers take a fresh look at their
beef on dairy strategy with the same attention
they give their dairy genetics program. The economic
benefits can be substantial. That brings us to
the end of today's episode of the Bullvine Podcast.
We want to thank you for listening, and we'd
love to hear about your experiences with beef
on dairy breeding. You can reach us through our
website at www .thebullvine .com or on all major
social media platforms. And don't forget to subscribe
to the Bullvine Podcast wherever you get your
podcasts. Until next time, I'm Douglas. And I'm
Bella. Thanks for listening.