Economic Values

The EVs for Milk Fat yield and Milk Protein yield reflect both the income generated from increased production and the feed costs required to produce each milk component. Milk fat and protein are the key components used to produce high value dairy products.

Economic Values are calculated using five-year rolling averages of the milksolids price paid and the value component ratio. This ratio is used to split the milksolids price into separate values for milk fat yield and milk protein yield.

To calculate the EV of Milk Protein and Milk Fat, we account for:

• The dollar value of each milk components
• The energy required to produce each milk component
• The feed cost required to meet the extra energy demand a cow requires to produce additional milk components

The EV for Milk Volume reflects the income from increased production and the feed costs required to produce each milk component. In New Zealand, milk volume has a negative economic value this means that producing more liquid milk (volume) slightly reduces income from milk.

This is because producing more milk volume without increasing milksolids means:

• Higher transport and processing costs(more volume to handle)
• Diluted milksolids (less fat/protein per litre)

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

• the dollar value of milk volume,
• 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 lactose components,
• the dollar value of milk lactose.

The introduction of lactose into Milk Volume EV

Lactose was included in BW by primarily adjusting the Milk Volume EV in December 2025. This reflected the strong correlation with lactose yield and the revised Fonterra payment scheme. Rather than adding a new trait, lactose is captured primarily through Milk Volume EV.

This means cows that produce more lactose will be rewarded more in BW than they were previously. The change slightly reduces the negative weighting on Milk Volume and ensures BW reflects the milk payment structure. In other words, incorporating lactose has introduced a small positive weighting within the milk volume EV, making it less negative than previously.

Overall, this reduced the negative weighting from -$0.115 to -$0.082.

Why is lactose important in milk processing?

Lactose is a sugar produced in the mammary gland and is a major carbohydrate in dairy milk. It maintains the osmotic balance, the process that regulates water content in the mammary gland. Lactose is important in milk processing, as it plays a key role in milk powder stabilisation and dairy product formulation. Because of this, some dairy companies have introduced a lactose payment, but milk fat and milk protein continue to be the main drivers of milk income. NZ Animal Evaluation has responded to the industry and has incorporated lactose into the National Breeding Objective - to breed dairy cows that efficiently convert feed into profit. This ensures it continues to reflect the economic returns received by New Zealand dairy farmers.

Why is lactose important to BW? 

Genetic selection decisions made today take several years to be reflected in the herd. These routine updates ensure that our independent evaluation stays current with the latest industry statistics, reflecting an important balance between accuracy and transparency. This helps farmers make better breeding decisions that improve herd performance and profitability under current economic conditions. 

How does the inclusion of lactose in Milk Volume impact breeding decisions?

With the introduction of lactose into BW, the focus for breeding decisions should remain on fat and protein - as these are the key contributors to on-farm profit and are the basis of milk payments. Continuing to focus on these traits in breeding decisions helps you maximise profitability.

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.

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 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.

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.

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.