Economic Values

What are Economic Values (EVs)?

An Economic Value (EV) is the estimated dollar unit based on the impact of improving a breeding trait by one unit in a dairy cow, assuming all other traits stay the same. Ten breeding traits have been identified as having a measurable economic value. This informs you how much a specific trait contributes to farm profitability.

Economic Values are based on five-year rolling averages of key costs and income streams. Calculations of economic values account for milk production, historical and current milk prices, income from culls, surplus cows and calves, the cost of feed, the cost of generating replacements and general dairy farm expenses. The economic values are applied on a 'profit per unit' basis. For example, one additional kg of protein creates an estimated $6.80 of additional profit, when all other trait values remain the same.

For some traits a one-unit increase is associated with an increase in profit, other times it is associated with a decrease in profit, for example:

Traits that increase profit

Traits where an increase in the breeding value is associated with an increase in profit are; milk fat yield, milk protein yield, fertility, functional survival, body condition score and udder overall. Higher breeding values for these traits are better for farm profit.

Traits that decrease profit

Traits where an increase in the breeding value is associated with a decrease in profit are; milk volume, liveweight, gestation length, and somatic cell count. In other words, lower breeding values for these traits are better for farm profit.

Who updates Economic Values?

To ensure Breeding Worth (BW) reflects the national breeding objective and on-farm economics, Economic Values (EV) are set and updated by NZ Animal Evaluation. The National Breeding Objective is to breed dairy cows that efficiently convert feed into profit. This determines which traits and information are crucial for farmers to enable improvements in genetic gain. Through it, new traits and data changes are established and reflected in the Breeding Worth index.

Once EV's are confirmed, the traitsBreeding Value (BV) is multiplied by its corresponding EV to calculate the BW index. Traits with higher EVs contribute more to farm profitability, so they carry greater weight in the BW calculation.

The EV’s for Production Values and Lactation Value are reviewed and updated by LIC, which owns and manages these traits.

View the latest Economic Values

Each year, the EV’s are updated to reflect the latest economic factors using five-year rolling averages, view the latest EVs in the table below:

Trait categorisation	Trait (units)	Dec 2024	Dec 2023	Dec 2022
		Economic value ($/unit change)
Production efficiency	Milkfat ($/kg)	$5.27	$4.85	$5.18
	Milk protein ($/kg)	$7.10	$6.83	$5.21
	Milk volume ($/L)	-$0.115	-$0.10	-$0.0951
	Liveweight ($/kg)	-$1.68	-$1.59	-$1.38
Robustness traits	Somatic cell score ($/SCS)	-$46.43	-$46.21	-$42.89
	Fertility ($/PR42)	$5.90	$5.77¹	NA
	Gestation length ($/day)	-$1.95	-$1.89	-$0.822
	Functional survival ($/%)	$1.90	$1.88	$2.65
	Body Condition Score ($/unit)	$174.57	$164.09	$116.93
	Udder overall²	$60.33*	$62.94	$49.21

¹From December 2023, “Fertility” was no longer calculated using CR42 (calving rate after 42 days of calving) it was replaced with PR42 (pregnancy rate after 42 days of mating) as the target trait.

²Udder overall is a nonlinear value. Read more below to understand how this is calculated.

* Updated to reflect the genetic base cow change.

How Economic Values are calculated

Calculations of economic values account for milk production, historical and current milk prices, income from culls, surplus cows and calves, the cost of feed, the cost of generating replacements and general dairy farm expenses.

For some traits a one-unit increase is associated with an increase in profit, other times it is associated with a decrease in profit.

Examples of traits where an increase in the breeding value is associated with an increase in profit are milk fat yield, milk protein yield, fertility, functional survival, body condition score and udder overall. In other words, higher breeding values for these traits are better for farm profit.

Examples of traits where an increase in the breeding value is associated with a decrease in profit are milk volume, liveweight, gestation length, and somatic cell count. In other words, lower breeding values for these traits are better for farm profit.

NZ Animal Evaluation ensure that the inputs and cost used in calculating EVs are the most current and accurate information available. The information is sourced from:

DairyNZ Statistics and Economic Survey
Fonterra
Government resources
Scientific literature

Read more about each specific trait calculation below.

Production efficiency traits

Protein yield, fat yield, milk volume

The economic values for milk fat yield, milk protein yield and milk volume account for the income associated with higher production as well as the feed costs required to produce each milk component. Economic values are calculated using five-year averages of the milksolids price paid, the volume charge and the value component ratio (VCR).

The VCR is used to partition the milksolids price into a value for milk fat yield and a value for milk protein yield.

To calculate the economic value of specific milk components, we account for:

the dollar value of milk components
the amount of energy required to produce each milk component
the feed cost required to accommodate the extra energy/feed a cow requires to produce additional milk components.

Liveweight

The liveweight economic value accounts for maintenance requirements and feed costs associated with growing and maintaining heavier animals as well as the extra income associated with cull cow value and the value of their calves.

Cow maintenance requirements – increasing liveweight can lead to higher annual maintenance feed requirements for the cow.
Heifer replacement feed costs – feed requirements are higher for maintaining and growing larger replacements.
Cull cow value – heavier cows have more value as culls.
Surplus calf value – increasing cow liveweight increases the size (and value) of surplus calves produced.

Robustness traits

Somatic Cell Score

The economic value for somatic cell accounts for decreased costs associated with less clinical mastitis, fewer penalties due to bulk tank somatic cell counts and better survival of cows with lower somatic cell counts.

The economic value for somatic cell accounts for:

Survival – cows with low somatic cell will survive longer in the herd.
Price penalties on milk supplied – low somatic cell cows help keep the bulk somatic cell count down, which avoids penalties via grades from milk processors.
Mastitis treatment costs – low somatic cell cows have fewer cases of clinical mastitis.

Fertility

The economic value for fertility includes value gained through increased longevity and value gained through earlier calving dates of more fertile cows.

The economic value accounts for:

Longevity - high fertility leads to increased longevity for early calving cows, as they have more chance to get in calf the following season (and therefore won’t be culled).
More replacement heifer calves and more high value beef calves – more fertile cows will be in-calf to high genetic merit dairy bulls and/or high genetic merit beef bulls achieving a premium.
Less natural mating bulls – with a higher proportion of the herd conceiving to artificial insemination in the first six-weeks, less natural mating bulls are required which will save costs.
Less non-pregnant heifers – better fertility means less non-pregnant replacement heifers. This includes the value of a culled heifer and the costs associated with rearing or purchasing additional replacement heifers.

Gestation Length

Gestation length EV reflects the financial benefit of cows calving earlier each year due to a shorter gestation length and more days in milk. The economic value rewards shorter gestation length and penalises those for a longer gestation length.

Economic impact of a shorter gestation can lead to:

More days in milk each season
More time for cow recovery between calving and mating
More early-born calves that usually grow better
More likely to calve earlier the following season

The economic benefit of shorter gestation length applies to −4 days. Cows with a breeding value beyond −4 days are rewarded the same as those at −4 days.

Functional Survival

The economic value for functional survival recognises that animals with better longevity independent of low production or poor fertility will reduce the requirement for replacement heifers.

The economic value accounts for:

Heifer replacements – a herd with higher functional survival requires fewer replacements. This is offset slightly by the loss of cull cow income and reduced rates of genetic gain.

Costs and revenues per lactation – cows of different ages differ in their contribution to herd profitability. The extra mature cows in a high survival herd are typically more profitable than first calvers, they are easier calving, easier to get back in calf, and produce more milk.

Body Condition Score

The economic value for BCS represents the improved profitability of an animal that can maintain body condition over her lactation.

Cows that lose body condition can incur costs in two ways:

Feed efficiency – it’s inefficient for a cow to lose condition and then have to gain it again prior to the next calving.

Days in milk – a thinner cow may have to be dried off earlier, reducing days in milk and, therefore, production and profit.

Udder Overall

The economic value for udder overall represents the improved profitability of an animal that has superior udder conformation.

Cows with poor udder conformation incur costs in three key ways:

Increased risk of developing mastitis.
Increased cost of wintering a cow whose udder deteriorates early in the season.
Increased cost of rearing a heifer to replace a cow whose udder has failed.

The difference in the profitability of a cow with an average udder vs a cow with very poor udder is much more than the difference in profitability between a cow with an average udder and a cow with a really good udder.

For this reason, udder overall has been incorporated in BW with a non-linear economic value in order to clearly show the impact of diminishing returns as udder overall improves between cows. The difference in the profitability of a cow with an average udder vs a cow with very poor udder is much more than the difference in profitability between a cow with an average udder and a cow with a great udder.

Unlike the other traits in BW where all animals have the same economic value applied regardless of their breeding value, the dollar contribution to BW from udder overall is calculated using a slightly different economic value depending on their udder overall breeding value.

By using the non-linear EV for udders, we can penalise lower breeding value animals more than rewarding higher breeding value animals.

This can be calculated using the following equation:

Dollar contribution to BW =Component A – Component Bwhere:

Component A = $60.33 x Udder Overall BV
Component B = $34.36 x Udder Overall BV x Udder Overall BV

Note: for Udder Overall BV above 0.878, the dollar contribution to BW is fixed at $26.48

Industry averages

Economic values are calculated assuming industry averages for animal production, feed requirements, and farm systems. The following table is a list of the industry averages for the key performance traits which are incorporated into the EV calculations.

Industry averages used for EVs

Milk volume (L/cow)

4,554

Milk fat yield (kg/cow)

218

Milk protein yield (kg/cow)

176

Milksolids (kg/cow)

394

Milk fat (%)

4.83

Milk protein (%)

3.89

Liveweight (kg/cow)

476

Replacement rate (%)

22

Total metabolizable energy requirement per lactating cow (MJME/cow)

62,713

Total dry matter requirement per lactating cow (tDM/cow)

5.45

Further reading

NZ Animal Evaluation