1. Economics of Longevity Willem Burger Farmer support and Development: George Dairy Information Day 28 August 2012

2. Outline of Presentation 1.Introduction 2.Reasons for cows leaving the herd 3.Peak production and consistency of production 4.Relationship between replacing ratio and calf mortality 5.Factors effecting voluntary culling and longevity 6.Factors effecting optimal age of cow’s 7.Factors effecting the economics of longevity 8.Conclusion

3. Analysing factors that have the biggest influence on the economics of dairy farming: -Pasture production -Stocking rate -Concentrate feeding and -Reproduction Optimum age of dairy cattle has become important due cost of raising heifers Longevity: -Long life of service or production -Number of lactations before been replaced by an heifer 1.Introduction

4. Cost of raising or purchasing heifers is much higher than cull value of cow to be replaced. Beneficial for an cow to stay longer in the herd. For a cow to avoid been culled is called survivability. Average lactations cows stays in the herd: -Wisconsin: 3.3 3.6 -UK optimum lifespan between 4.3 and 4.9 1.Introduction (Cont.)

5. Major contribution to involuntary culling is endemic and metabolic diseases and infertility. Dairy Cattle are kept for profit 2.Reasons for cows leaving the herd Culling is motivated by economic considerations

6. Cows adapted to specific farming conditions is the most likely to avoid been culled. It is not necessary the highest producer but more consistent producer. 2.Reasons for cows leaving the herd (Cont.) High culling rate in new herds or animals bought from different areas

7. Cows peak normally from Lactation 3 to 4. Farmers tend to cull before they reach their peak. Cumulative Cash flow from Lactation 1 to 10 including cost of raising heifer. 3.Peak production and consistency of production No reason for involuntary culling: Keep Cow as long as possible as long as profit is positive (Income – Variable Cost) No reason for involuntary culling: Keep Cow as long as possible as long as profit is positive (Income – Variable Cost)

8. Calf mortality must be kept at acceptable levels especially when the herd is growing or selling of heifers is part of the business 4.Relationship between replacing ratio and calf mortality The minimum calf mortality at different replacement ratios to keep cow numbers constant High mortality will influence the availability of heifers for replacement Declining cow numbers – lower income Unprofitable cows are kept longer Purchace Heifers: Adaptibility issues – High culling rate Purchace Heifers: Adaptibility issues – High culling rate

9. 4.Relationship between replacing ratio and calf mortality (Cont.) The Effect of calf mortality and replacement ratio on herd growth over a 10 year period Calf Mortality Cow Replacing Ratio 10%15%20%25%30% 10%1263%1000%793%631%505% 15%1140%900%712%566%451% 20%1025%807%637%505%402% 25%918%720%567%448%357% 30%818%640%502%396%315%

10. Cost of raising heifers – R6,780 Raising all and introduce into herd can be costly. Not necessary increase profits 5.Factors effecting voluntary culling and longevity Replacement of 15% Selling surplus Heifers: Profit Between R359 – R430 per Cow per annum Profit per Heifer: Price and raising cost Profit per Heifer: Price and raising cost

11. 5.Factors effecting voluntary culling and longevity (Cont.) Increase in profits by increasing the average age with one Lactation: After 5 Lactations – R236 per cow per annum After 6 Lactations – R203 per cow per annum In Growth phase the cost of culling a cow and replace with heifer is higher Keep cow as long as it pays for itself

12. 6.Factors effecting optimal age of cow’s Considering future profits: Production level (15 to 18 litre) Milk price (R3-60 to R4-00 per litre) Cost of replacing heifer (R4,000 – R8,000) Production level (15 to 18 litre) Milk price (R3-60 to R4-00 per litre) Cost of replacing heifer (R4,000 – R8,000) High producing Cows: Optimum after 4 th Lactation Replacement ration of 25% Type of production system 5 5 4 4 5.8 to 5.9

13. 7.Factors effecting the economics of longevity First consideration will be if there is a replacement available. Culling a cow without replacement available – reduction in income Keep cow as long as it can pay for itself (Income – direct variable cost)

14. 7.Factors effecting the economics of longevity (Cont.) Heifer available – Opportunity cost play a role. Tools – Partial Budgeting CostIncome Cow to be replaced Loss of Profit from cow: R2,052 (12.1 l) Cull value: R3,159 Heifer Cost of Heifer: R6,751 Profit from Heifer: R5,737 (15.3 l) Total R8,801R8,897 Difference R95 Cows are kept much longer in the herd Favour low ranking cows and not always older cows

15. 7.Factors effecting the economics of longevity (Cont.) Alternative Method considering the following: Determine the difference between cost of heifer and income from Cull: Cost of heifer – income from cull R6,751 – R3,159 = R3,592 Daily cost: R3,592/305 = R11-80 Desired return on investment: R11-80 X 0.30 = R 3-50 Cost of heifer – income from cull R6,751 – R3,159 = R3,592 Daily cost: R3,592/305 = R11-80 Desired return on investment: R11-80 X 0.30 = R 3-50 Heifer Production Replacement cost Cull cow price Desired return on investment Heifer Production Replacement cost Cull cow price Desired return on investment

16. 7.Factors effecting the economics of longevity (Cont.) Opportunity cost is R3-50 per day Determine the difference from milk income between Heifer and Cow: 15,2 l – 14.2 l = 1 l per day l l X R3-60 = R3-60 15,2 l – 14.2 l = 1 l per day l l X R3-60 = R3-60 When the Milk production from cow is under 14.2 l, cull cow

17. Different reasons for cows leaving the herd. Involuntary culling is normally before optimum age – therefore cost to the business. Adapted cows stay longer in the herd – Highest lifetime production. Voluntary culling decisions – economic basis -Future milk production -Current daily production 8.Conclusion

18. 8.Conclusion (Cont.) Decision process: Keep cow (with no other defects) to at least peak production When in a growth phase a cow will be kept as long as it pays for itself and reproduce. When no heifers are available for replacement, cows are kept as long as they are paying for themselves. When decisions of keeping a cow for another lactation, using partial budget method as a decision tool At a specific time cows can be evaluated to be replaced using opportunity cost method.

19. Other Considerations -High heifer mortality can be costly when the herd is in a growth phase or replacement ratios are high. -When herd numbers are constant, raise only enough heifers to keep herd constant. (R1,688 per cow per annum) Therefore culling the right cow at the right time will save costs in the business. 8.Conclusion (Cont.)

20. Thank you