Cattle breeding goals and production circumstances

This thesis gives the results of a study on the relationship between cattle breeding goals and production circumstances. The relationship between breeding goals and production circumstances mostly arises from the influences of production circumstances on the economic values of geneticimprovement of animal traits. The economic value of a trait expresses to what extent economic efficiency of production is improved at the moment of expression of one unit genetic uperiority of that trait. Economic values are used in defining the breeding goal (to aggregate genotypes for several traits to a so called 'aggregate genotype') and also in calculating economic revenues of breeding programmes (to value predicted genetic superiorities).The objects of this project are to study:- the methodology of deriving economic values;- the economic values of milk production traits, beef production traits and feed intake capacity of lactating cows;- the extent to which production circumstances influence economic values,Further to the latter object, three issues are to be discussed:- the important production circumstances in defining breeding goals and calculating revenues of breeding programmes;- the need for adjustment of breeding goals when structural and lasting changes in production circumstances occur;- the need for diversification of breeding goals because of heterogenity of and uncertainty about future production circumstances.MethodologyThe choice of a methodology of deriving economic values includes choices on five aspects:1. an economic versus a biological definition of efficiency;2. an interest of selection: maximize profit, minimize cost price or maximize revenues on investment;3. the definition of the production system:- level: animal, farm or national,- size or base of evaluation: fixed number of animals, fixed input of a production-factor or fixed output of a product;4. the planning term: strategic or tactical;5. the method: positive or normative approach, the latter including efficiency equations and bio-economic modelling.Literature on these aspects is reviewed in chapter one. In chapter six, the concepts of economic production theory for different perspectives (combinations of interests of selection and bases of evaluation) are given. These concepts are derived by elaboration of the influences of genetic improvement on costs and revenues, using general equations on costs and revenues of a dairy farm.In this study, efficiency of production is considered to be economic efficiency as money is the standard for measuring value.Concepts of economic production theory denote that derivation of economic values according to a specific perspective implicitely assumes a certain use of production- factors saved due to genetic improvement. Consequently, economic values derived according to different perspectives will differ when values of productionfactors differ between alternative uses. However, imposition of three conditions will lead to equal values of productionfactors and to equivalence of perspectives. These conditions are: (1) oneproduct situation or revenues of other products are negative costs, (2) equilibrium in a purely competitive industry, and (3) all costs are variable per unit product. Applicability of these conditions in now-a-days agricultural industry is limited. Practically, the individual producer's interest of selection has to be chosen, which is profit maximization, for the individual producer is the principal decision- maker in animal breeding. In general, the production circumstances, imposed by governments or the individual producer's situation, will determine the practical choice of a base of evaluation.Genetic improvement is an area of technical development, and long term effects of implementation of new techniques will be, among others, change in market prices. To include these future price changes, the theoretically appropriate level to be used in deriving economic values is the national level. In this study, modelling at farm level is used, allowing acquirement of basic knowledge on the sensitivity of economic values towards production circumstances.The choice of a planning term should be included in deriving economic values regarding (1) the choice of (exogeneous) price parameters and (2) the distinction between variable and fixed costs. In this study, a strategic planning is used: all costs are considered to be variable in time, fixed costs include only costs that are fixed with respect to the size of the farm.Derivation of economic values concerns (1) quantification of the levels of changes in physical amounts of inputs and outputs of the system as a result of a change in genetic merit, and (2) valuation of these changes in physical amounts. In this study, bio-economic modelling (using multi-equation models) is used to derive economic values. This offered good opportunities to consider a large number of elements and relationships in both quantification and valuation of changes in physical amounts.Economic valuesChapter two describes the dairy farm model used to derive economic values of milk and beef production traits and feed intake capacity. This static and deterministic model describes quantitative relationships between levels of genetic merit for the considered traits and levels of inputs and outputs of the farm, in relation to production circumstances. Inputs and outputs of the farm are calculated from feed costs, labour cost, costs of buildings and other variable and fixed costs, and revenues of selling milk and animals (beef). Intake of roughage and concentrate by lactating cows is based on the ratio between energy requirement and dry-matter intake capacity. Improvement of genetic merit of milk and beef production traits results in increase in milk and beef revenues per animal, respectively, and in increase in feed costs per animal. The economic value of feed intake capacity is derived assuming that increase in feed intake capacity allows for a cheaper composition of energy intake (an exchange from concentrate to roughage intake; chapter five). In the basic situation, the economic values of carrier, fat and protein are -.13, 7.97 and 11.27, respectively; the economic values of birth weight and mature weight are 7.35 and -.92; the economic value of feed intake capacity is 3.71 Dfl -1. cow -1.year -1.kg -1.Production circumstancesChapter three and four give the results on the sensitivity of economic values of milk and beef production traits towards production circumstances in situations without and with limitations, respectively. Chapter five deals with the results on the sensitivity of the economic value of feed intake capacity. The production circumstances considered in this study are: input and output limitations, product and production-factor prices, production levels, herd composition and roughage quality.In general, economic values are found to be mainly sensitive to production circumstances that (1) determine the possible use of production-factors saved due to genetic improvement or (2) determine the value of productionfactors for a given use. In situations without output limitations, prices of products and production-factors are of decisive importance in determining economic values of milk and beef production traits. Production levels and feed quality have no noteworthy influence on economic values of milk and beef production traits. The main result of an imposition of milk output limitations is a decrease in economic value of carrier. The imposition of roughage input limitations mainly causes a decrease in economic values of beef production traits relative to the economic values of milk production traits. Simple product output limitations strongly influence relative economic values of production traits. In situations with limitations, economic values are sensitive to product and production- factor prices, milk production level and level of mature weight. The economic value of feed intake capacity is highly sensitive to feed factors (roughage quality) and animal factors (production levels) influencing feed intake of dairy cows. Moreover, the level of the economic values of feed intake capacity is largely determined by the difference between roughage price and concentrate price.The sensitivity of economic values towards production circumstances implies that (1) production circumstances influence level of revenues of breeding programmes, and (2) losses in revenues of breeding programmes occur when circumstances used in defining the breeding goal are incorrect with regard to actual production circumstances at the moments of expression of genetic improvement. In chapter seven, these effects are quantified for two sets of aggregate genotype traits, including milk production traits, feed intake capacity and live weight, and 24 situations of production circumstances (including output limitations, milk production level, energy content roughage and product and production-factors prices). The assumed structure of the breeding programme corresponds to the situation of the total Dutch dairy cattle population.The type of output limitation is of main importance in determining the levels of economic revenues of cattle breeding programmes. Compared with a situation without limitations, imposition of milk and fat output limitations decrease revenues by 23 and 36%, respectively. In situations without limitations, milk prices and feed prices are the main circumstances to consider in determining levels of economic revenues. In situations with milk output limitations the main circumstances are milk production level, milk prices and roughage price. In situations with fat output limitations the main circumstances are milk production level and roughage price.Predicting a situation without an output limitation while actually a milk or fat output limitation exists, will lead to losses in economic revenues of 13-15 or 3-4 Dfl.cow -1per selection round, respectively. In situations with milk output limitations, adjustment of cattle breeding goals by breeding organisations is needed when considerable changes in milk production level and milk prices are observed. In situations with fat output limitations, adjustment is needed with changing milk production level and roughage price.Incorrect prediction of limitations on product output may lead to losses in economic revenues from 1 to 6% of maximum revenues. Losses for incorrect prediction of other circumstances (milk production level, milk prices, feed prices and roughage quality) are 0.0 to 1.3%. These levels of losses are, at least for reasons other than differences in output limitations, too low to justify complete diversification of dairy breeding goals within a cattle breeding programme. Future research on diversification of cattle breeding goals, including aspects of costs, should focuss on differences in output limitations, as a different circumstance between groups of farms or as an uncertain production circumstance.