DEVELOPMENT OF ECONOMIC INDEXES FOR NET MERIT, FLUID MERIT, AND CHEESE MERIT

Authors: Vanraden, Paul; Hubbard, Suzanne

Submitted to: American Dairy Science Association Abstracts
Publication Type: Abstract Only
Publication Acceptance Date: 6/1/1998
Publication Date: N/A
Citation: N/A

Interpretive Summary:

Technical Abstract: Price formulas for fluid milk, protein yield, and cheese yield have been applied to US genetic evaluations since 1971, 1977, and 1984 to calculate milk-fat dollars (MF$), milk-fat-protein dollars (MFP$), and cheese yield dollars (CY$) indexes. Since 1994, net merit dollars (NM$) has combined economic values of productive life and somatic cell score with net value of milk, fat, and protein. Selection based on net prices results in higher profits than from selection based on gross prices if feed and other costs are not proportional to revenues. Feed costs were assumed to equal 30% of each component's value for NM$. New indexes for fluid merit dollars (FM$) and cheese merit dollars (CM$) were developed by substituting fluid milk and cheese yield prices for protein yield prices in NM$ and retaining NM$ values for productive life, somatic cell score, and feed cost. For FM$, protein value was negative because each kilogram of protein requires feed but yields no revenue. For CM$, a single formula for all breeds was used instead of the 2 current USDA breed formulas for CY$. A group of 8514 Holstein bulls born since 1990 were used to compare indexes. Correlations between cheese and fluid pricing were lowest (.92 between MF$ and CY$ and .86 between FM$ and CM$). Correlations between cheese and protein pricing were highest (.99 between MFP$ and CY$ and .98 between NM$ and CM$). Correlations were .97 between MF$ and FM$, .98 between MFP$ and NM$, and .94 between CY$ and CM$. The merit indexes could replace MF$, MFP$, and CY$. Commercial producers should choose an index that incorporates the net price formula that is closest to the price expected in about 5 yr. Suppliers of seed stock should select for long-term national or global demands instead of short-term local prices.