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New Zealand Animal Evaluation Limited, 2013

Live weight

5th February 2013 DISCLAIMER Every effort has been made to ensure the accuracy of the investigations, and the content and information within this document. However NZAEL/DairyNZ expressly disclaims any and all liabilities contingent or otherwise that may arise from the use of the information or recommendations of this report.

Rationale

The economic value of cow live weight comprises four separate components:

Cow maintenance requirements - increasing cow live weight is expected to result in

higher annual maintenance feed requirements for the cow

Heifer replacement feed costs – there are higher feed requirements for maintaining

and growing larger replacements

Cull cow value – heavier cows have more value as culls

Bobby calf value – increasing cow live weight increases the size of bobby calves

produced

The four components are modelled discretely, as they each have different timing and

numbers of expressions in a dairy cow herd. Equations and assumptions related to the

impact on profit of changes in these components are detailed below.

Input assumptions

The key input assumptions that determine the economic value of live weight are

the daily maintenance energy required per additional kg of live weight (DMER in

MJME/ kg LW)

weighted (over breeds) average cow live weight (LW in kg)

the total daily maintenance energy required for a cow of live weight LW (TMER in

MJME/ kg LW)

the growth energy required per kg of live weight gain (GER in MJME/ kg LW gain)

weight of the heifer replacement on each day during growth (W in kg)

daily live weight gain for a replacement heifer (ADG in kg/ day)

the beef price of cull dairy cows

Other farm assumptions derived also for other economic values include


the average cost of feed for lactating dairy cows made up of milking platform and

winter grazing feed costs on sheep and beef farms (FC= $ per MJ of ME utilised by

cows). These costs are reported in Appendix 5.

Equations

Cow maintenance requirements

The un-scaled economic value of the cow maintenance component of mature weight in a

breed B and as a trait expressed once per cow per year was calculated as

2

1

4

1

5

1kj,i,kj,i

75.075.0CM D B A1_i j k

BBB LWLWLWEV

where Ai is the coefficient to convert mature weight to the power 0.75 into MJ of ME required

per day for a cow for maintenance for either a lactating cow (i=1) or a dry cow (i=2), Bj,k is

the price of feed per MJ of ME for cows (see Appendix 5 for details of these) in region j (UNI,

LNI, USI, LSI) and for season k (winter, early spring, late spring, summer, and autumn) and

D is the number of days on average for cows in a region and season by lactation state. From

standard feed requirement equations, A was assigned a value 0.56 (Nicol and Brookes,

Livestock Feeding on Pasture NZSAP Occasional Publication) for lactating and dry cows,

although this could be modified in the future, for example, if DairyNZ were to account for

higher maintenance feed costs in dry cows. It was assumed that there are 61, 62, 61, 90 and

91 days in each of these seasons respectively, that cows were lactating for 270 days, and

that of the 95 day dry period, 61 were spent in winter, and 17 were spent in each of autumn

and early spring respectively. Account was also taken for south island cows spending a

proportion of the winter off the milking platform and dairy support feed costs. With NZ

average mature cow live weights of 491, 383 and 440 for Holstein Friesian, Jersey, and Kiwi-

cross cows respectively, the resulting unscaled economic values for the cow maintenance

component of the live weight economic value were -0.93, -1.00 and -0.96 respectively.

To allow for milking platform rescaling of stocking rate, it was calculated that 32.55, 34.64

and 33.46 MJ of ME would be required during time spent on the milking platform for every 1

kg increase in mature cow live weight. With 43,489 MJ of ME required per cow on the

milking platform, and with a weighted average net revenue per cow of $276 (Appendix 3),

the rescaled economic values are -$1.14, -$1.22 and -$1.17 per kg of live weight for Holstein

Friesian, Jersey, and Kiwi-cross cows respectively. Weighting across breed proportions of

0.46, 0.14 and 0.40 for Holstein Friesian, Jersey, and Kiwi-cross cows respectively gives a


final rescaled cow maintenance mature weight component economic value of -$1.16

expressed per lactation.

Heifer replacement requirements

The total feed costs to rear a heifer replacement to heavier live weight targets up until 725

days-of-age were calculated using standard DairyNZ recommended feed allowances for

replacement heifers by age band and breed (see Table 1 below).

Table 1. Heifer replacement feed requirement and cost assumptions

1Up until 3 months of age based on lost revenue from milk solids fed to calves and price of meal, for 3

to 21 months of age based on calculations of opportunity costs of feed on dairy support properties

and from 21 months until 24 months of age based on dairy support feed price values for the South

Island (0.40), and winter forage value index prices for the North Island (0.29 for upper North Island

and 0.37 for lower North Island).

Based on these values, the feed required for a replacement heifer to reach 90% of her

mature weight were $1404, $1058 and $1240 for Holstein Friesian, Jersey, and Kiwi-cross

cows assumed to have mature weights of 491kg, 383kg and 440kg respectively. It was

assumed that the remaining 10% of mature weight would be gained at the end of the first

and second lactations in Autumn and forage value index feed prices were used for this

assuming that 3.9 kg of DM are required for a cow to gain 1 kg of mature weight in late

lactation. The 3.9 kg of DM is based on 41 MJ of ME per kg of LW gain from Rattray,

Brookes and Nicol (2007) pg. 161, Table 16.

Based on differences in feed costs for Jersey replacements versus Kiwi-cross replacements

relative to their mature weight difference, the economic value for the heifer rearing feed cost

component of the mature weight economic value was -3.17. A very similar value was found

kg DM/head/day

Age% Target of

MWFriesian Jersey Kiwi cross days in period

Feed price $/kg

of DM1

3 months 20% 3.6 2.7 3.2 90 0.68

6 months 30% 4.6 3.5 4.1 90 0.20

9 months 40% 5.7 4.2 5.0 90 0.20

15 months 60% 7.6 5.7 6.6 180 0.29

18 months 73% 8.7 6.5 7.6 90 0.04

21 months 86% 10.3 7.7 9.0 90 0.20

24 months 90% 11.2 8.4 9.9 90 0.29 , 0.368, 0.38


from the contrast of replacement feed costs between Holstein-Friesians and Kiwi-cross

relative to their mature weight, resulting in a final economic value of -$3.17 per kg of mature

weight expressed once per heifer replacement.

Cow cull value

Heavier cows result in more cull value for those cows that do not die prior to slaughter. Note

that the cows dying before slaughter are taken into account in the calculation of the

appropriate discounted genetic expressions coefficient. Thus, simplistically the economic

value can be taken as 0.445 (dressing out %; as calculated in Appendix 6) multiplied by the

price premium per kg of carcase weight for cull cows. Lighter cows capture a lower price per

kg, and so an increase in cow live weight can lift carcase returns through both a higher price

per kg, and also through heavier carcases. Table 7 below summarises cull cow prices by

carcase weight bracket for recent years.


Table 7. Beef and lamb NZ cull cow values ($/kg)

1CPI adjusted

A within breed coefficient of variation of 15% of cow mature weight was assumed, and a

dressing out of 44.5% (as calculated in Appendix 6). Using these values and breed average

mature weights, we were able to simulate the expected average price per kg carcase weight

for each breed. The larger breeds get a higher price per kg of carcase weight on average,

because they have higher proportions of cull cows in the higher price categories. These

weighted average prices per kg were then multiplied by the breed average carcase weight to

work out the average value of a cull cow for each breed. These values were $626, $459 and

$549 for Friesians, Jerseys and Kiwi-cross respectively.

The same exercise was repeated with the mature size of each of the breeds increased by

10kg. This resulted in average cull cow values of $641, $475 and $564 for the three breeds.

The increase in carcase value divided by the 10kg increase in mature live weight gives cow

cull value component economic values for mature live weight of $1.46, $1.60 and $1.53 for

Friesians, Jerseys and Kiwi-cross respectively. The higher values for the smaller breeds

reflects that they have more to gain from increasing the proportion of culls achieving the

higher price brackets, relative to Friesians, the majority of which are already culled into the

higher price bracket.

Across breeds, the weighted average economic value component was $1.51 expressed

once in an animal’s lifetime.

Bobby calf value

Heavier cows produce heavier bobby calves. As for live weight, heavier classes of bobby

calves receive both a higher price per kg, and more kgs of carcase weight. The relationship

CW band (kg)

Season < 145 kg 145-170 kg 170.5-195 kg 195.5-220 kg > 220 kg

Carcass price ($/kg)

2006/07 2.00 2.25 2.31 2.39 2.49

2007/08 1.78 2.06 2.21 2.28 2.37

2008/09 2.06 2.32 2.53 2.60 2.70

2009/10 1.93 2.17 2.36 2.41 2.49

2010/11 2.78 3.04 3.14 3.19 3.24

2011/12 2.72 3.07 3.14 3.20 3.27

5yr average1 ($/kg) 2.25 2.53 2.68 2.74 2.82


between mature cow liveweight and bobby calf weight was derived based on the standard

DairyNZ relationship of 0.078 kg of birth weight per kg of mature live weight. The dressing

percent of bobby calves was assumed to be 53.7%.

Recent trends in bobby calf prices by carcase weight band are presented in the table 8

below.

Table 8. Bobby calf prices in $ per kg of carcase weight over recent years and by carcase

weight band

1CPI adjusted

Bobby calf live weight was calculated to be 34.2kg as a weighted average of birth weights

across breeds. The standard deviation of bobby calf live weight was assumed to be 5.5kg.

Based on the mean and standard deviation of bobby calf live weights, a distribution of

carcase weights was simulated and the proportion of calves in each carcase weight band

computed. From this it was possible to compute an average bobby calf slaughter value of

$31.94 based on the CPI adjusted, 5 year average prices in the Table 8.

The above calculation was repeated, but with all bobby calf live weights assumed to be

increased by 1kg. This resulted in an average bobby calf slaughter value of $36.25. The

difference in weighted average bobby calf value due to the extra 1kg of live weight was

$4.31. This was multiplied by 0.078 kg of additional bobby calf live weight per kg of cow

mature weight to get a bobby calf component economic value for cow mature weight of

$0.34.

CW band (kg)

Birth year 11.0 to 13.5 13.6 to 18.5 over 18.5

Carcass price ($/kg)

2005 0.55 1.13 2.47

2006 0.84 1.24 2.47

2007 0.87 1.32 2.50

2008 0.57 0.80 2.33

2009 0.71 0.84 2.26

2010 0.50 0.85 2.24

2011 0.78 1.29 2.53

2012 1.10 1.80 2.10

5yr ave ($/kg CW)1 0.73 1.12 2.29


Discounted genetic expressions

The combining of the economic impacts of each of the component changes (above),

resulting from increasing mature weight by 1kg, requires that the different timing and

frequency of expressions of the different components in a dairy cow herd is taken into

account (Appendix 7). For example, associated increases in maintenance energy

requirements for the cow are expressed per calving interval by cows in the herd, while

expressions of additional cull cow value are expressed only once at the end of the cows life.

Discounted genetic expression coefficients are calculated relative to traits expressed per

calving interval, with a planning horizon of 20 years after which any economic benefits (these

are trivial) are ignored. Thus the cow mature weight component is multiplied by 1, the heifer

replacement component by 0.27, cull cow value component by 0.18, and the bobby calf

component by 0.67. The bobby calf discounted genetic expressions coefficient reflects the

fact that only one half of the cows genes are expressed in its calf, but also accounts for the

surplus bobby calves that are generated from bull matings in the process of generating cows

to become herd replacements. The description of how they are combined into a single

weighting for the live weight BV can be found in Appendix 7.

Combined live weight economic weight

The final economic value for live weight is calculated as the sum of economic values for the

components multiplied by their corresponding discounted genetic expressions coefficient.

This calculation is summarised in Table 9 below.

Table 9. Summary calculation of the combined economic weight for live weight.

Live weight component

Economic value

($/unit change)

Discounted genetic

expression (DGE)

Component economic

weight ($/unit change) Cow maintenance -1.16 1.00 -1.16Bobby calf value 0.34 0.67 0.23Replacement cost -3.17 0.27 -0.86Cull cow carcase value 1.51 0.18 0.27Combined economic weight -1.52


Appendix 1. Energy costs of milk components

Milk fat energy requirement MJME/kg milk fat 68.90

Milk protein energy requirement MJME/kg milk protein 42.35

Milk lactose energy requirement MJME/kg milk lactose 29.29

These values used Mcal net energy requirements for fat, protein and lactose of 9.29, 5.71 and

3.95 Mcal/kg respectively, multiplying this by 4.18 MJME/Mcal and dividing by 59% (efficiency of

conversion from net to metabolisable energy. The energy requirements associated with each milk

component were further increased by 10% mirroring a maintenance loading for lactation

embedded in the DairyNZ model calculations. The theoretical values for calorific efficiency and

adopted previously (81%, 89% and 77% respectively) (Mertens and Dado, 1993) only account for

heat produced and not other forms of inefficiency required to produce the milk component.

Assuming 11 MJME/kg DM, the efficiency of converting net energy to metabolisable energy for

milk (kl) is 62% (Nicol & Brookes 2007).

The New Zealand literature does not give specific component values. A recent Waghorn paper

reports ME for 1kg of milk solids has increased from 68 (Holmes et al. 2002) to 77 MJ ME (Nicol &

Brookes 2007). Calculating values through using the old BW assumptions based on Mertens and

Dado 1993 gives a value of approximately 60 MJ of ME per kg of milk solids. Our methodology

gives a value of 74 MJ of ME.

Specific component energy requiremet values (MJME/kg).

Component Current modelMertens and

Dado (1993)1

Protein 42.35 31.8

Fat 68.90 56.2

Lactose 29.29 25.01 Journal of Dairy Science


Appendix 2. Rescaling to a fixed milking platform

Historic approach

In the historic NBO model developed in 1995, it was assumed that all milking cows, dry cows and

heifer replacements were managed on the milking platform. In reality now, the vast majority of

heifer replacements NZ wide and dry cows in the South Island are grazed off the milking platform.

Consequently, to accommodate trait changes that resulted in a higher feed requirement per cow,

there was a larger than practical reduction in stocking rate. The feed requirements of heifer

replacements and dry cows had to be accounted for. Also embedded in the historic NBO model

was a constant feed cost for all stock classes including dry cows and replacement heifers. This

feed cost was also the same irrespective of the time of year.

New approach

In the current model, we have made a number of changes to the underlying assumptions to align

with the industry norm:

1. All heifer replacements are grazed off

2. One half of all dry cows are grazed off the milking platform for 60 days.

3. We have adopted an opportunity cost to the value of feed using the seasonal values

adopted in the Forage Value Index for the milking platform, and using dairy support values

for dry cows and heifers grazed off the milking platform (see Appendix 5 below for details

on feed price assumptions) represented as a weighted average.

The first two points mean that when representing a trait change which increases feed requirements

equally through the year (e.g. the maintenance component of cow liveweight), the accompanying

reduction in stocking rate is not as much as previously used in the historical NBO formulation. The

replacement heifers (22 to 24 months) and half of the dry cows feed requirements for 60 days are

now not accommodated in the milking platform stocking rate adjustment. Explicit costs are

assigned to the dry cow feed requirements when grazed off, based on FVI index values for the

North Island, and based on dairy support grazing rates in the South Island. The cost of grazing

heifer replacements is based on typical grazing off costs (discussed in more detail in the longevity

economic value model description). The last point balances the previous two points in that a cow

gets more penalised through high opportunity costs of feed she eats which could have otherwise

been used to support milk production in another cow.


Under this same increase in feed requirements scenario, we account for the lost revenue from the

reduced stocking rate, but also take account for the fact that there will be many savings in per cow

costs as well.

i.e. a 10% reduction in cows leads to a (note that cost categories in bold below correspond directly

to cost categories in DairyNZ economic summary statistics)

8% reduction in Labour costs (including for wages of management)

5% reduction in Freight and General 8% reduction in Animal Health Costs

10% reduction in Breeding and Herd Testing Costs

8% reduction in Electricity Costs

8% reduction in Farm Dairy Costs

Many of the above assumptions about these other cost savings are consistent with the historical

BW calculation and endorsed by the Standing Advisory Committee of NZAEL. Another important

change in the new approach is that wages of management are included as part of labour costs.

Wages of management as a proportion of per cow costs have reduced significantly over the years

as farms have got bigger and use more hired labour. However, they are still significant (i.e. 40 to

50% in the North Island and 20 to 30% in the South Island) and must be included.

Mathematical formulation

Under the assumption that feed resources are fixed on the milking platform during milking, a trait

change in a single animal which changes feed demand will result in a change to the number of

predominantly lactating cows that can be carried.

The change in profit per farm with a change in a trait in a single animal, under the assumption that

feed resources on the milking platform are fixed, can be calculated as:

animal

animalfarmNR

d

d

d

d

d

d

,

where animal is the profit per animal which is a function of each genetic trait T of interest,

animalNR is the average net return per animal lost as the stocking rate is reduced, and is the

number of cows on the milking platform.


The first part of the equation above is the unscaled economic value, and the second part is the

adjustment to the unscaled economic value to account for the change in net returns on the farm

due to the reduction in stocking rate required to meet a constrained total amount of feed on the

milking platform.

The fixed milking platform feed per farm (farmMPF ) can be calculated as:

animalfarm MPFMPF,

where animalMPF is the milking platform feed per animal prior to any genetic trait change. Under

this assumption it holds that:

animal

animal

MPFd

MPFd

d

d

where

d

MPFd animal is the change in feed required as a trait T increases in one animal.

For example, an increase of 1kg of fat increases animalMPF by X MJME per lactation, with a

animalMPF of Y. Therefore there must be proportionately X/Y less cows on the milking platform.

Example calculation - rescaling the economic value of milk fat yield.

The unscaled economic value of milk fat is approximately $2.15 per kg, depending on current

assumptions elsewhere in the economic model. The additional mega joules of metabolisable

energy (MJME) associated with a 1 kg higher fat yield is assumed to be 68.90, all of which must be

consumed on the milking platform. The total average MJ of ME consumed on the milking platform

per cow is calculated to be 43,489 MJ of ME (Appendix 4). Therefore, the proportional reduction in

the stocking rate per cow that increases its fat yield by 1 kg is 68.90/43,489=0.00158. If the

average net return per animal is $276 (Appendix 3), then the rescaling adjustment is -0.00158 x

$276 = -$-0.44, and the rescaled economic value would be $2.15 - $0.44 = $1.71.


Appendix 3. Calculation of net returns per animal

A key component of the above formulation is the calculation of net returns per animal. This

calculation uses DairyNZ Economic Service Owner Operator profitability and expenses (an

average of the last 4 years values plus next year's forecast). An example of the calculation within

the new NBO model is provided in Table 14. We start with net revenues per cow (Owner

Operators), which are implicitly lost when a reduction in stocking rate is incurred. From this, per

cow costs are deducted based on assumed proportions of total per cow costs being saved with a

reduction in stocking rate. For example, all the breeding and herd testing costs associated with an

individual cow are saved with a reduction in stocking rate. However, there are fixed costs

associated with a farm dairy (e.g. cleaning products) that cannot be reduced with a reduction in

cow numbers. Therefore, only 80% of the costs for a farm dairy can be attributed on a per cow

basis.

Table 14. Example calculation of net returns per animal based on milk and beef revenues after deduction of per cow costs including feed costs and market value of replacement heifers.

Parameter 2008 2009 2010 2011 2012 F

Total revenues per cow (milk plus beef sales)

($/cow)1 1,893 2,233 2,708 2,664 2,130

Nominal per cow costs (excluding feed and replacements)

80% of labour (adjusted for wages of management)

($/cow)1 284 278 276 275 276

The proportion of labour from wages1 0.549 0.595 0.609 0.625 0.628

50% of Freight and General ($/cow)1 9 8 9 9 9

80% of animal health ($/cow)1 57 55 66 62 60

100% of breeding and herd testing ($/cow)1 42 38 46 45 44

80% of electricity ($/cow)1 26 28 29 30 31

80% of farm dairy ($/cow)1 17 16 17 18 17

Total var. costs excluding replacements and

feed ($/cow)434 424 442 439 437

Nominal total revenue per cow after adjustment for

per cow costs (excluding feed and replacements)

($/cow)

1,459 1,809 2,266 2,225 1,693

Real total revenue per cow after adjustment for per

cow costs (CPI adjusted) ($/cow)1,607 1,955 2,408 2,247 1,693

Average over 5 years to real total revenue 1,982

Average per cow opportunity costs of feed based

on forage value index feed prices ($/cow)1,400

Average cost of replacements 305

Average net revenues across the year ($/cow) $276


1Example values based on DairyNZ farm economic statistics for the whole of New Zealand.

Appendix 4. Example industry summary statistics

Table 15: Description of the average NZ cow as determined by model assumptions and

inputs

Parameter Units Value

Annual Production

Milk Volume L/cow 3,764

Milk Fat kg/cow 180

Milk Protein kg/cow 143

Milk Lactose kg/cow 184

Milk Solids kg/cow 323

Milk Fat % 4.82

Milk Protein % 3.82

Milk Lactose % 4.90

Milk Solids % 8.68

Cow live weight kgLW 453

Proportion of replacements in the herd % 0.21

Annual energy requirements

Total lactation requirements MJME 40,554

Total requirements on milk platform MJME 43,489

Total dry period requirements MJME 7,968

Total period requirements MJME 48,522

Total replacement heifer requirements MJME 32,823

Total replacement heifer requirements per milking cow MJME 6,996

Total requirements per lactating cow MJME 55,517


Appendix 5. Overview of feed price assumptions

Forage value index dry matter values

The NBO model described here makes substantial use of economic weights derived for the

DairyNZ Forage Value Index (FVI). These weights are used in the NBO calculations to reflect the

opportunity cost of feed, and in particular to account for differences in the cost of feed at different

times of the year. They are the basis for all of the traits which involve feed costs. The FVI

economic weights are expressed as $ per kg of dry matter production. They apply to 5 distinct

seasons, namely, winter, early spring, late spring, summer and autumn. Separate regional

assumptions and model constructions were used for average farms in the Upper North Island,

Lower North Island, Upper South Island and Lower South Island.

The values currently used in the model are summarised in Table 16. These values are the

weighted averages of values computed using the FVI model for the past 4 seasons, plus projected

values for the 2012/2013 season.

Table 16. Feed costs price assumptions ($/kg DM) as calculated for the Forage Value Index.

Source: http://www.dairynzfvi.co.nz/fvi-understanding/economic-values; Updated on 10th

September 2012 based on information provided by Jeremy Bryant. NZ weighted average based

on number of cows per region. Description of approach described in (Chapman et al. 20121).

Dry stock costs off the milking platform

The opportunity costs of feed as described above for the FVI result in grazing costs for heifers that

considerably exceed the cost of contract grazing to rear replacement heifers off the milking

platform. For this reason, opportunity costs of feed on dairy support properties were derived, so

that the true costs of grazing to rear heifers to different mature live weights could be modelled. In

the South Island, a substantial proportion of dry cows are also managed off the milking platform

during winter, as this releases extra feed in autumn and early spring that can be more profitably

used for milking cows.

1 Economic values for evaluating pasture plant traits (2012). Paper for the New Zealand Grasslands

Association. D.F. Chapman, J.R. Bryant, W.H. McMillan, E.N. Khaembah.

Feed costs by

season

Upper North

Island

Lower North

Island

Upper South

Island

Lower South

Island

NZ Weighted

AverageWinter 0.29 0.37 0.43 0.38 0.35Early Spring 0.46 0.45 0.40 0.43 0.44Late Spring 0.18 0.14 0.29 0.21 0.20Summer 0.38 0.32 0.15 0.09 0.28Autumn 0.39 0.30 0.27 0.24 0.32

http://www.dairynzfvi.co.nz/fvi-understanding/economic-values


Spring feed opportunity costs - dairy support

The opportunity cost of spring feed consumption is assumed to be low because most dairy support

farms have a surplus of feed available through the high growth spring period. However, some

spring feed can be sold as standing silage. If we assume that 20% of spring feed on a dairy

support property can be sold at a standing price of $180 per tonne of dry matter, the opportunity

cost of spring feed is 0.2 x $180/1000=$0.036 per kg DM.

Summer/autumn feed opportunity cost - dairy support

The opportunity cost of summer and autumn feed used for dairy support is based on alternative

revenues that could be obtained by finishing store lambs. If an extra kg of lamb carcase weight is

worth $4.40, and 240 MJME is required to grow an extra kg of live weight, then at pasture

metabolisable energy concentration of of 10.8 MJ/kg DM, the opportunity cost of summer and

autumn feed is $4.40 x 10.8 /240 = $0.198 per kg of DM.

Winter feed opportunity cost - dairy support

The opportunity cost of winter feed assumes 80% of winter feed is supplied by crop and the

remaining 20% is silage. The cost of growing winter feed crops is assumed to be 15 cents per kg

DM, but a calculation of an additional 10 cents per kg of dry matter to account for the value of lost

pasture production during the crop rotation has been added on. Thus, the cost of crop available is

$0.25 per kg of dry matter. Silage at $180 per tonne to buy standing, and at $240 per tonne to

harvest, store and feed equates to $4.20 per kg of dry matter. Assuming 20% silage and 80%

crop, both with utilisation rates of 75%, results in an opportunity cost of winter feed of $0.38 per kg

of DM.


Appendix 6. Cull cow dressing out % calculation

To calculate an industry average dressing out percentage (DO%) for cull cows, the model

assumes values from herd test breed averages by age of cow in 2010/11 (DairyNZ – New Zealand

Dairy Statisitcs 2010-11, page 27). Also, figures from Beef + Lamb New Zealand Economic

Service on New Season Outlook 2012-13, page 18 were used as basis for the calculations.

Assumptions are:

Average live weight of cows by breed (LW)

Number of tested cows by breed

Number of slaughtered cows in NZ over the last five seasons, plus provisional numbers for

season 2011-12 and estimated numbers for season 2012-13 (NS)

Average cow carcass weights (CW) in NZ over the last five seasons, plus provisional

numbers for season 2011-12 and estimated numbers for season 2012-13 (CW)

Weighted average LW was calculated based on number of cows tested and LW according to

breed and age of cows. LW for each breed was 491, 383 and 440 for Holstein-Friesian, Jersey

and Kiwi cross, respectively. For the same breeds, numbers of cows tested are 961,198, 350,496

and 1,055,998.The average LW for New Zealand cows is 453 kg. The average CW over the last 5

years plus provisional and estimated weights for the current/future seasons is 201 kg. Numbers for

this calculation can be found in Table 17.

Table 17: Beef and Lamb NZ beef production (cow slaughter)

Cow slaughter figures

(year)

Number of cows Carcass weight

(kg)

2006-07 676,000 205

2007-08 652,000 202

2008-09 856,000 200

2009-10 819,000 199

2010-11 856,000 198

2011-12p 734,000 204

2012-13e 843,000 202

Weighted average - 201.2

For calculation of DO% the basic equation was used:


, 100

LW

CWDP %5.44100

6.452

2.201DP


Appendix 7. Discounted genetic expressions

Account need to be taken for the fact that some traits are expressed with different timing and

frequency. Traits expressed less frequently, or very late in the lives of daughters receive less

emphasis that those expressed more frequently, and relatively early. In particular, a trait that

affects costs of replacement heifers will be expressed much earlier than a trait that benefits the

returns from cull cows. For example, if cows are culled on average 4 years later than their time of

first calving, $1 earned at culling would in present value terms and a discount rate of 6% be worth

only $0.80 if earned at time of culling. Similarly, some traits such as gestation length and calving

difficulty affect the performance of a cow mated by a bull (and her calf when considering bobby calf

value), in addition to having an impact on daughter performance (and her bobby calves). These

issues are dealt with using discounted genetics expressions coefficients that are calculated using a

methodology similar to that described by Amer (2001) and Berry et al. (2006). The DGE equations

of Berry et al. (2006) were formulated for the dairy industry in Ireland where a substantial

proportion of dairy females are mated to beef males, with a portion of the subsequent crossbred

females being sold or retained for use as dams in beef production systems. Because of this, the

Berry et al. (2006) DGE equations were more elaborate than those used in this project. Equations

were more aligned to those described in Amer (2001) except using assumptions relevant to the

New Zealand dairy industry. The DGE values were calculated for 10 generations over a 20 year

planning horizon. Most genetic benefit is expressed within this period.


Table 18. Discounted genetics expressions coefficients derived for the NZ Dairy NBO.

1Bobby calf traits were based on birth traits multiplied by 0.6 under the assumption that 60% of all

calves born become bobbies. The 60% was derived assuming that 25% of heifer calves become

replacements retained or sold as surplus to requirements, 5% normal deaths, a further 3% of

deaths via inductions, 5% sold as bull calves to sale yards and 2% of calves retained as beefies.

Discounted genetics expressions coefficients derived for the NZ Dairy NBO.

Discounted genetic expressions

Trait typeBulls genes per cow

mated

Bulls genes per

cow milking

Annual cow trait (e.g. milk yield) 0.81 1.00

Birth trait

Daughters 0.40 0.50

Mates of a bull 0.50 0.62

Combined 0.90 1.12

Bobby calf trait1

Daughters 0.24 0.30

Mates of a bull 0.30 0.37

Combined 0.54 0.67

Replacement heifer trait 0.22 0.27

End of cow life trait 0.15 0.18


Appendix 8. The cost of a replacement

Rationale

The costs involved with replacement heifers are important for a number of subsequent economic

value calculations. In particular, the cost of a replacement is an important driver of the

longevity/survival economic value, which in turn impacts on economic values for Fertility and

Somatic Cell Score.

The cost of a replacement heifer can be defined in two ways. In simplest terms, it is possible to

take market prices and use them directly. Disadvantages of this approach include the difficulty of

capturing market values, and the tendency for there to be short term fluctuations in market prices,

for example when there are high prices due to a temporary shortage. The alternative is to calculate

out expenses and costs associated with rearing heifers. We have taken this approach, although it

is still necessary to make an allowance for the scarcity premium value of a replacement heifer calf

bred by AI.

Equations and assumptions

The total cost of rearing a replacement heifer was calculated based on a series of assumptions

listed in Table 19. Costs for rearing a heifer were based on assumed grazing prices. The market

value for a 4 day old heifer calf bred by AI, animal health and reproduction costs related to heifer

rearing were all considered in order to provide a fair value for replacement cost.

Animal’s categories were segregated in line with typical dairy farm rearing practices: four day old

calves, weaners (3 to 9 months of age), R1 heifers (10-22 months of age) and Spring R2 heifers

(first calving heifers). As reference, the model assumes R1 at 15 months of age when the AI

programme starts and heifers will be first calving at the age of 24 months.


Table 19. Replacement heifer costs assumptions.

1Market values of animals were used in the calculations of the costs of animal deaths.

2The calf rearing system was based on DairyNZ Facts and Figures "Restricted Milk and Meal"

regime

The cost of a replacement heifer at first calving ( RC ) was estimated based on the purchase

market price of a heifer calf ( HCP ) and calf rearing costs on milk and meal ( RC ). Grazing and

feed costs ( cFC ), general animal costs ( cA ) including health and reproduction, losses and

deaths ( cL ) and interest ( cI ) were summed over the 3 designated calf rearing periods involving

grazing denoted ( c =1, 2 or 3 for calf grazing, R1 and R2 rearing periods respectively). The model

can be described as per the equation below.

Assumption Unit Value

4 Day old cow calf market value $/calf $50

3 month old market value1 $/weaner $450

9 month old market value1 $/R1 $750

21 month old market value1 $/R2 $1,500

Reared calf daily milk intake2 L/day 5

Milk feeding period2 days 42

Milk solids composition % 8.68%

Meal intake2 kg/period 54

Grazing period for weaners weeks 32

Deaths (before weaning) % 2%

Grazing period (9 to 21 months of age) weeks 52

R1 Empty rate % 3%

Deaths (3- to 9 months of age) % 2%

Grazing period R2 (May) weeks 13

Deaths (9 to 21 months of age) % 2%

General prices

Meal price $/tonne $970

Milk solids price $/kg $6.38

3- to 9 months of age grazing price $/week $5.50

9 to 21 months of age grazing price $/week $9

22 to 24 months of age grazing price $/week $24

Reproduction $/animal $30

Weaner animal health costs $/animal $10

R1 animal health costs $/animal $20

R2 animal health costs $/animal $20

Cull value of barren heifer $/animal $791


3

1cccccR IALFCRCHCPC

Rearing cost were based on costs for meal, milk fed as well as grazed pasture ($52, $116 and $6

respectively) totalling $175. Feed costs for each of the 3 grazing periods were based on assumed

numbers of weeks and weekly grazing charges for each category.

Costs of losses were based on proportions of deaths and forced culling during the time in each

category and with an additional allowance for R1's to account for failure to get in calf. For example,

the cost of calf losses was calculated as 2% of the Weaner market value of $450 = $9. Similarly,

losses were costed at $15 per head surviving for R1's plus a further allowance of $21 to account

for empty's based on lost market value of $1500 - $791 barren heifer slaughter value at a 3%

assumed empty rate. Losses were costed at $30 for R2s.

For the R1 category, one of the costs considered was reproduction involving mainly

synchronization, semen and AI. Interest was also included in calculations considering rates of 8%

per year and calculating the cost of interest during the period for each category.

The outcomes based on calculations and assumptions above are described in Table 20.

Table 20. Replacement heifer costs ($/animal) for different categories.

1This value differs slightly from the market value presented in Table 18. Because of the circular

nature of the calculation, it was convenient to specify the market value of replacement heifers to

determine costs of deaths, but to use a number of additional calculations as summarised in this

table to ensure that the market value is consistent with typical industry costings.

Trait Value ($)

AB heifer calf market value 50

Calf rearing 174

Weaner -33

R1 614

R2 377

Total springing R2 heifer cost1 1,433

live weight - dairynz · pdf fileweight band 1cpi adjusted bobby calf live weight was...

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