Over my 38-plus years servicing dairy farms in southwest Ontario, I have always been intrigued by what strategies make some dairy farms more profitable than others – fully acknowledging that profit alone does not drive all producers to make the decisions that they do.
For the fiscal year 2025, I came to the conclusion that five main factors really stood out. I will summarize these in no order of importance.
Strategy: Filling fall incentives
Using the average Ontario dairy farm with roughly 100 kilograms of quota, the 11 incentive days work out to 1,100 kilograms of free quota to fill. With an average kilogram price fall 2025 of $22.50 per kilogram butterfat, that equates to $24,750 gross income. Using a 50% expense cost to produce this extra milk, the farm generates a net income of $12,375. To accomplish this, we need the available feed and animals to produce this milk. This is not very profitable if we have to buy $5,000 fresh heifers to accomplish this.
Strategy: Producing top-quality forages
Whether you prefer to grow alfalfa, corn silage, triticale or a host of various cover crops, one key factor always comes to the forefront: Harvesting these crops at the ideal time of maturity along with putting up these forages at their own ideal moisture level. As a rule of thumb, that means harvesting alfalfa and grasses somewhere between 35% and 45% dry matter. For corn silage, that range is also quite similar (35% to 40% dry matter). Cover crops such as triticale and rye silage are usually much more of a challenge to get to that ideal moisture level, so we have come to accept that 30% dry matter is our ideal target. When I get asked which ones I prefer, my answer is a nice blend of all of them. In the last couple of years, we have come a long way in balancing rations and also knowing how to better grow and fertilize these new cover crops properly for extra yield and protein content.
Strategy: Raising too many replacement heifers
Yes, that title is correct. For many years, this practice was discouraged because we felt that it was too expensive to raise a lot of replacement heifers. We have bred a lot of our dairy cows to Angus or other beef breeds. Although that has added extra income in cattle sales, it has really depleted our supply of good-quality dairy heifers. As a result of this, I have started to notice that the herds with not enough replacements must keep every heifer that calves in to help fill fall incentives. On the other hand, the producers who have too many heifers get to keep their best ones and sell the rest on the open market. As a result, these herds have now generated very nice added income while nicely improving the genetic base of their herd. Fresh heifers this past fall were fetching around $5,000 per animal, well over the cost of raising them. On top of that, when you have excess replacement heifers, any older open heifer that doesn’t conceive by 18 months old, you are able to sell her in the beef ring for around $3,000 per animal.
Strategy: Producing the most economical milk
Of all the strategies I analyzed, this one is probably the most controversial one, simply because with our supply managed quota system,everyone in Ontario receives the same price for milk. In 2025, that was around $22.50 per kilogram. This includes the payment for butterfat, protein and other solids. Where the controversy comes in is that there are really two very distinct ways that you can produce the most economical milk.
The first way is to have a very high-producing herd with good components and fall into that top category of making 1.8 to 2 kilograms of butterfat per milk cow. This means that you only need 50 to 55 milk cows to fill quota. Even if you feed a lot of extra feed additives – including palm fat and expensive protein sources – it works out that your cost of producing a litre of milk ended up being around 21 cents per litre.
In comparison, the second group of farms are happy producing a fair bit less milk per cow and be satisfied with shipping 1.5 kilograms of butterfat per day. These herds need to milk 75 to 80 cows to fill this same 100 kilograms of quota. However, they come out very close to the top-producing herds in overall cost at 20 cents per litre. This model works best for herds that have a lot of room in the barn, milk two times per day and have acreage to produce this extra feed.
Strategy: Generating extra farm income
By far the most prominent way of generating extra income in 2025 was selling Angus cross calves along with excess fresh heifers. Since most dairy farms do not have adequate space to finish off beef animals, selling off these Angus cross calves for $2,000 per head was fast and quick income. Even Holstein bull calves got as high as $1,200 to $1,500 at a week old. When we add to this the farms that had excess fresh heifers, the profit status rose dramatically higher. In addition, cull cows have also reached an all-time high, with heavy Holstein cows selling for over $3,000 at local sale barns.
Looking to 2026
What lies in store for 2026? My personal take on this question is much of the same as it was in 2025: a strong encouragement to raise a lot of healthy replacement heifers alongside a nice supply of Angus calves to sell for quick revenue.
There have been quite a few presentations about the status of the beef herd in North America, and it looks like it will still be a few years before the beef cow herd grows, which means dairy beef will stay strong.
As for raising more replacement heifers, you definitely need space to house them. Extra forage is easy to purchase on the open market. Raise a few too many so that you have a bunch to sell. Somebody here or south of the border will be happy to buy your seconds.
