Somatic cell score. New Zealand Animal Evaluation Limited, Rationale. Reduced survival from higher SCS

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1 Somatic cell score 5 th February 2013 DISCLAIMER Every effort has been made to ensure the accuracy of the investigations, and the content and information within this document. However NZAEL/DairyNZ expressly disclaims any and all liabilities contingent or otherwise that may arise from the use of the information or recommendations of this report. Rationale An increase in somatic cell score (SCS 1 ) in cow's milk is undesirable for a number of reasons: 1. higher somatic cell score cows have reduced survival 2. it increases the likelihood of a farm incurring price penalties for milk supplied above a certain threshold 3. high somatic cell scores are also an indicator of likelihood of clinical mastitis. Reduced survival from higher SCS The calculation of the economic value of survival is described in an earlier section of the document. The genetic relationship between SCS and survival (days) can be derived directly from the genetic evaluation process and this same relationship is used in the calculation of the residual survival breeding value. This genetic relationship is days reduction in survival per unit increase in SCS over an animal's lifetime. So for example, if the economic value of survival is $0.82 per day, and the discounted expressions coefficient for the survival trait is 0.18 (to make a lifetime trait comparable to a once per lactation trait), then the survival component of the economic value of SCS would be x $0.82 x 0.18 = -$9.62. Increased bulk milk tank penalties from higher SCS In the absence of readily available and detailed records of milk bulk tank SCC counts, it was necessary to use herd test records to estimate bulk tank SCC as a proxy for actual bulk tank records. By taking the average SCC across individual cows at a single herd test, we were able to emulate what the bulk tank SCC measurement would have been on that day. All herd test records 1 Somatic cell score (SCS) is obtained as a log transformation (base 2) of somatic cell count (SCC) recorded in cells per ml. e.g SCC = SCS. Breeding values are computed for SCS as these values are normally distributed. A 1 SCS unit change constitutes a very large change in SCC, and so breeding values for SCS have a very tight range.

2 Percent of milk collected New Zealand Animal Evaluation Limited, 2013 on the national database from the seasons starting 2009, 2010 and 2011 respectively were included. Total volumes of milk produced across all cows herd tested were also available. The distribution of estimated bulk tank SCC across all regions is shown in Figure 1. The frequency scale of the figure is based on total milk produced by tested cows (rather than treating low milk volume days as having the same impact as high milk volume test days), and so the fact that highest cell counts often occur in late lactation when milk production is lower is accounted for. The milk price penalties applied based on bulk tank SCC thresholds from Fonterra and Westland were considered. For Fonterra, penalties are currently applied at 5% of 90% of the opening season payout value for 400<SCC<500, 10% for 500<SCC<600, 30% for 600<SCC<800 and 100% for SCC>800. For Westland, penalties are currently applied at -4.7 cents per litre for 350<SCC<500 and cents per litre for SCC> Herd collection average SCC Figure 1: Percentage of milk from herd tested cows by herd collection average SCC ranges The distribution of herd test records over months provided a reasonable reflection of the national milk yield pattern (Figure 2).

3 Millions of litres of milk from tested cows New Zealand Animal Evaluation Limited, UNI LNI USI LSI 0 Month of herd test Figure 2: Seasonal distribution of milk from herd tested costs in each of the Forage Value Index regions An upward or downward shift in herd SCC would lead to more or less milk collections attracting price penalties. For example, the percentages of milk in key SCC categories associated with milk company payment penalties are shown in the Figure 3 based on the current population (red), or when cow average SCS are either increased or decreased by 0.05 units. The figure shows clearly how the proportion of milk in categories attracting price penalties increases as average SCS increases. Increases in SCS have a slightly more severe effect than decreases in SCS.

4 Percent of milk collected New Zealand Animal Evaluation Limited, 2013 SCS+0.05 Current SCS >800 Somatic cell count range Figure 3: Impact of changes in SCS on the percentage of milk supplied within a SCC range Economic values for the bulk milk tank penalty component were calculated based on the average price penalty of milk per litre when the average SCS of each herd test was increased or decreased by 0.05 units. The effect on milk price penalties was then multiplied by 20 (1/.05) so it was in 1 SCS equivalents, with the resulting impact -$ per litre per 1 SCS unit change upwards. The impact was a +$ per litre per 1 SCS unit downwards. Because it is expected that genetic selection will result in only modest changes in SCS, the average of the upward versus downward effects of $ is used for the economic value calculation. At a weighted average annual milk yield of 3764 litres for an average NZ cow (based on DairyNZ Statistics), the economic value of SCS as a trait considered to be expressed once per lactation is x 3764 = -$ Association between SCS and clinical mastitis Currently, there is no estimated breeding value for clinical mastitis computed using on farm mastitis records. Instead, it is possible to compute a prediction equation that generates clinical mastitis BVs as a function of milk volume yield and somatic cell score BVs. The equations presented here used genetic parameters estimated using NZ data in a study by Prof. Nicolas Lopez-Villalobos at Massey University and Dr Richard Spellman at LIC. It was estimated that clinical mastitis would increase by for every one unit increase in SCS. However, clinical

5 mastitis is also associated with the genetic level of cow milk production, and so the most effective way of incorporating clinical mastitis into the breeding objective is to construct a predicted breeding value from SCS and milk volume BVs. The economic value of mastitis was calculated based on assumptions associated with treatment including labour, antibiotics, and the cost of discarded milk. The assumptions were as follows; Table 13. Assumptions used to calculate the labour costs associated with a case of clinical mastitis Labour assumptions per treatment Time required (minutes) Treatment 5 minutes per milking x 3 milkings 15 Withholding period = 2 minutes per milking x 11 milkings = 22 minutes 22 Cases requiring additional time managing separate mob = 10 minutes 10 Total labour per treatment 47 Labour $18 per hour $14.10 Antibiotic costs were based on 3 tubes * $6/tube = $18 per incidence. It was further assumed that discarded milk would be 1.3 kg of milk solids x 6 days = $6.52 per kg of milk solids but that 20% of this could be salvaged to feed calves (i.e. while calves are still being reared on milk) so that lost milk yield was calculated as 7.8 x $6.52 x 0.8 = $39.83 The combined cost per treatment, and the economic value of mastitis is thus $ $18 + $39.83 = $ However, clinical mastitis is scored 1 for any cow that has clinical mastitis during a lactation, and so based on the assumption that 1.2 treatments are required per cow that has at least one case of clinical mastitis per lactation, the economic value of clinical mastitis is -$ The economic value of Clinical Mastitis is not currently included in the breeding objective as a trait in its own right. However, it is included as an embedded component of both milk volume and somatic cell count. As clinical mastitis has been considered as an embedded component trait in the SCS economic value (as consistent with previous approaches in the breeding objective), the contribution to the economic value of SCS is: $86.32 x = $4.92 per 1 SCS. The combined effect of the higher bulk tank penalties, reduced survival associated with SCS and clinical mastitis results in a combined economic value of $ $ $4.92 = $38.57.

6 Appendix 1. Energy costs of milk components Milk fat energy requirement MJME/kg milk fat Milk protein energy requirement MJME/kg milk protein Milk lactose energy requirement MJME/kg milk lactose These values used Mcal net energy requirements for fat, protein and lactose of 9.29, 5.71 and 3.95 Mcal/kg respectively, multiplying this by 4.18 MJME/Mcal and dividing by 59% (efficiency of conversion from net to metabolisable energy. The energy requirements associated with each milk component were further increased by 10% mirroring a maintenance loading for lactation embedded in the DairyNZ model calculations. The theoretical values for calorific efficiency and adopted previously (81%, 89% and 77% respectively) (Mertens and Dado, 1993) only account for heat produced and not other forms of inefficiency required to produce the milk component. Assuming 11 MJME/kg DM, the efficiency of converting net energy to metabolisable energy for milk (k l ) is 62% (Nicol & Brookes 2007). The New Zealand literature does not give specific component values. A recent Waghorn paper reports ME for 1kg of milk solids has increased from 68 (Holmes et al. 2002) to 77 MJ ME (Nicol & Brookes 2007). Calculating values through using the old BW assumptions based on Mertens and Dado 1993 gives a value of approximately 60 MJ of ME per kg of milk solids. Our methodology gives a value of 74 MJ of ME. Specific component energy requiremet values (MJME/k Component Current model Mertens and Dado (1993) 1 Protein Fat Lactose Journal of Dairy Science Appendix 2. Rescaling to a fixed milking platform Historic approach In the historic NBO model developed in 1995, it was assumed that all milking cows, dry cows and heifer replacements were managed on the milking platform. In reality now, the vast majority of heifer replacements NZ wide and dry cows in the South Island are grazed off the milking platform. Consequently, to accommodate trait changes that resulted in a higher feed requirement per cow, there was a larger than practical reduction in stocking rate. The feed requirements of heifer

7 replacements and dry cows had to be accounted for. Also embedded in the historic NBO model was a constant feed cost for all stock classes including dry cows and replacement heifers. This feed cost was also the same irrespective of the time of year. New approach In the current model, we have made a number of changes to the underlying assumptions to align with the industry norm: 1. All heifer replacements are grazed off 2. One half of all dry cows are grazed off the milking platform for 60 days. 3. We have adopted an opportunity cost to the value of feed using the seasonal values adopted in the Forage Value Index for the milking platform, and using dairy support values for dry cows and heifers grazed off the milking platform (see Appendix 5 below for details on feed price assumptions) represented as a weighted average. The first two points mean that when representing a trait change which increases feed requirements equally through the year (e.g. the maintenance component of cow liveweight), the accompanying reduction in stocking rate is not as much as previously used in the historical NBO formulation. The replacement heifers (22 to 24 months) and half of the dry cows feed requirements for 60 days are now not accommodated in the milking platform stocking rate adjustment. Explicit costs are assigned to the dry cow feed requirements when grazed off, based on FVI index values for the North Island, and based on dairy support grazing rates in the South Island. The cost of grazing heifer replacements is based on typical grazing off costs (discussed in more detail in the longevity economic value model description). The last point balances the previous two points in that a cow gets more penalised through high opportunity costs of feed she eats which could have otherwise been used to support milk production in another cow. Under this same increase in feed requirements scenario, we account for the lost revenue from the reduced stocking rate, but also take account for the fact that there will be many savings in per cow costs as well. i.e. a 10% reduction in cows leads to a (note that cost categories in bold below correspond directly to cost categories in DairyNZ economic summary statistics) 8% reduction in Labour costs (including for wages of management) 5% reduction in Freight and General 8% reduction in Animal Health Costs

8 10% reduction in Breeding and Herd Testing Costs 8% reduction in Electricity Costs 8% reduction in Farm Dairy Costs Many of the above assumptions about these other cost savings are consistent with the historical BW calculation and endorsed by the Standing Advisory Committee of NZAEL. Another important change in the new approach is that wages of management are included as part of labour costs. Wages of management as a proportion of per cow costs have reduced significantly over the years as farms have got bigger and use more hired labour. However, they are still significant (i.e. 40 to 50% in the North Island and 20 to 30% in the South Island) and must be included. Mathematical formulation Under the assumption that feed resources are fixed on the milking platform during milking, a trait change in a single animal which changes feed demand will result in a change to the number of predominantly lactating cows that can be carried. The change in profit per farm with a change in a trait in a single animal, under the assumption that feed resources on the milking platform are fixed, can be calculated as: d d farm d d animal d NR d animal, where animal is the profit per animal which is a function of each genetic trait T of interest, NR animal is the average net return per animal lost as the stocking rate is reduced, and is the number of cows on the milking platform. The first part of the equation above is the unscaled economic value, and the second part is the adjustment to the unscaled economic value to account for the change in net returns on the farm due to the reduction in stocking rate required to meet a constrained total amount of feed on the milking platform. The fixed milking platform feed per farm ( MPF farm MPF animal, MPF farm ) can be calculated as:

9 where MPF animal is the milking platform feed per animal prior to any genetic trait change. Under this assumption it holds that: d d d MPF d animal MPF animal where d MPF d animal is the change in feed required as a trait T increases in one animal. For example, an increase of 1kg of fat increases MPF animal by X MJME per lactation, with a MPF animal of Y. Therefore there must be proportionately X/Y less cows on the milking platform. Example calculation - rescaling the economic value of milk fat yield. The unscaled economic value of milk fat is approximately $2.15 per kg, depending on current assumptions elsewhere in the economic model. The additional mega joules of metabolisable energy (MJME) associated with a 1 kg higher fat yield is assumed to be 68.90, all of which must be consumed on the milking platform. The total average MJ of ME consumed on the milking platform per cow is calculated to be 43,489 MJ of ME (Appendix 4). Therefore, the proportional reduction in the stocking rate per cow that increases its fat yield by 1 kg is 68.90/43,489= If the average net return per animal is $276 (Appendix 3), then the rescaling adjustment is x $276 = -$-0.44, and the rescaled economic value would be $ $0.44 = $1.71. Appendix 3. Calculation of net returns per animal A key component of the above formulation is the calculation of net returns per animal. This calculation uses DairyNZ Economic Service Owner Operator profitability and expenses (an average of the last 4 years values plus next year's forecast). An example of the calculation within the new NBO model is provided in Table 14. We start with net revenues per cow (Owner Operators), which are implicitly lost when a reduction in stocking rate is incurred. From this, per cow costs are deducted based on assumed proportions of total per cow costs being saved with a reduction in stocking rate. For example, all the breeding and herd testing costs associated with an individual cow are saved with a reduction in stocking rate. However, there are fixed costs associated with a farm dairy (e.g. cleaning products) that cannot be reduced with a reduction in

10 cow numbers. Therefore, only 80% of the costs for a farm dairy can be attributed on a per cow basis. Table 14. Example calculation of net returns per animal based on milk and beef revenues after deduction of per cow costs including feed costs and market value of replacement heifers. Parameter F Total revenues per cow (milk plus beef sales) ($/cow) 1 1,893 2,233 2,708 2,664 2,130 Nominal per cow costs (excluding feed and replacements) 80% of labour (adjusted for wages of management) ($/cow) The proportion of labour from wages % of Freight and General ($/cow) % of animal health ($/cow) % of breeding and herd testing ($/cow) % of electricity ($/cow) % of farm dairy ($/cow) Total var. costs excluding replacements and feed ($/cow) Nominal total revenue per cow after adjustment for per cow costs (excluding feed and replacements) ($/cow) Real total revenue per cow after adjustment for per cow costs (CPI adjusted) ($/cow) Average over 5 years to real total revenue 1, ,459 1,809 2,266 2,225 1,693 1,607 1,955 2,408 2,247 1,693 Average per cow opportunity costs of feed based on forage value index feed prices ($/cow) 1,400 Average cost of replacements 305 Average net revenues across the year ($/cow) $276 1 Example values based on DairyNZ farm economic statistics for the whole of New Zealand. Appendix 4. Example industry summary statistics Table 15: Description of the average NZ cow as determined by model assumptions and inputs

11 Parameter Units Value Annual Production Milk Volume L/cow 3,764 Milk Fat kg/cow 180 Milk Protein kg/cow 143 Milk Lactose kg/cow 184 Milk Solids kg/cow 323 Milk Fat % 4.82 Milk Protein % 3.82 Milk Lactose % 4.90 Milk Solids % 8.68 Cow live weight kglw 453 Proportion of replacements in the herd % 0.21 Annual energy requirements Total lactation requirements MJME 40,554 Total requirements on milk platform MJME 43,489 Total dry period requirements MJME 7,968 Total period requirements MJME 48,522 Total replacement heifer requirements MJME 32,823 Total replacement heifer requirements per milking cow MJME 6,996 Total requirements per lactating cow MJME 55,517 Appendix 5. Overview of feed price assumptions Forage value index dry matter values The NBO model described here makes substantial use of economic weights derived for the DairyNZ Forage Value Index (FVI). These weights are used in the NBO calculations to reflect the opportunity cost of feed, and in particular to account for differences in the cost of feed at different times of the year. They are the basis for all of the traits which involve feed costs. The FVI economic weights are expressed as $ per kg of dry matter production. They apply to 5 distinct seasons, namely, winter, early spring, late spring, summer and autumn. Separate regional assumptions and model constructions were used for average farms in the Upper North Island, Lower North Island, Upper South Island and Lower South Island. The values currently used in the model are summarised in Table 16. These values are the weighted averages of values computed using the FVI model for the past 4 seasons, plus projected values for the 2012/2013 season. Table 16. Feed costs price assumptions ($/kg DM) as calculated for the Forage Value Index.

12 Feed costs by season Upper North Island Lower North Island Upper South Island Lower South Island NZ Weighted Average Winter Early Spring Late Spring Summer Autumn Source: Updated on 10th September 2012 based on information provided by Jeremy Bryant. NZ weighted average based on number of cows per region. Description of approach described in (Chapman et al ). Dry stock costs off the milking platform The opportunity costs of feed as described above for the FVI result in grazing costs for heifers that considerably exceed the cost of contract grazing to rear replacement heifers off the milking platform. For this reason, opportunity costs of feed on dairy support properties were derived, so that the true costs of grazing to rear heifers to different mature live weights could be modelled. In the South Island, a substantial proportion of dry cows are also managed off the milking platform during winter, as this releases extra feed in autumn and early spring that can be more profitably used for milking cows. Spring feed opportunity costs - dairy support The opportunity cost of spring feed consumption is assumed to be low because most dairy support farms have a surplus of feed available through the high growth spring period. However, some spring feed can be sold as standing silage. If we assume that 20% of spring feed on a dairy support property can be sold at a standing price of $180 per tonne of dry matter, the opportunity cost of spring feed is 0.2 x $180/1000=$0.036 per kg DM. Summer/autumn feed opportunity cost - dairy support The opportunity cost of summer and autumn feed used for dairy support is based on alternative revenues that could be obtained by finishing store lambs. If an extra kg of lamb carcase weight is worth $4.40, and 240 MJME is required to grow an extra kg of live weight, then at pasture metabolisable energy concentration of of 10.8 MJ/kg DM, the opportunity cost of summer and autumn feed is $4.40 x 10.8 /240 = $0.198 per kg of DM. Winter feed opportunity cost - dairy support 2 Economic values for evaluating pasture plant traits (2012). Paper for the New Zealand Grasslands Association. D.F. Chapman, J.R. Bryant, W.H. McMillan, E.N. Khaembah.

13 The opportunity cost of winter feed assumes 80% of winter feed is supplied by crop and the remaining 20% is silage. The cost of growing winter feed crops is assumed to be 15 cents per kg DM, but a calculation of an additional 10 cents per kg of dry matter to account for the value of lost pasture production during the crop rotation has been added on. Thus, the cost of crop available is $0.25 per kg of dry matter. Silage at $180 per tonne to buy standing, and at $240 per tonne to harvest, store and feed equates to $4.20 per kg of dry matter. Assuming 20% silage and 80% crop, both with utilisation rates of 75%, results in an opportunity cost of winter feed of $0.38 per kg of DM. Appendix 6. Cull cow dressing out % calculation To calculate an industry average dressing out percentage (DO%) for cull cows, the model assumes values from herd test breed averages by age of cow in 2010/11 (DairyNZ New Zealand Dairy Statisitcs , page 27). Also, figures from Beef + Lamb New Zealand Economic Service on New Season Outlook , page 18 were used as basis for the calculations. Assumptions are: Average live weight of cows by breed (LW) Number of tested cows by breed Number of slaughtered cows in NZ over the last five seasons, plus provisional numbers for season and estimated numbers for season (NS) Average cow carcass weights (CW) in NZ over the last five seasons, plus provisional numbers for season and estimated numbers for season (CW) Weighted average LW was calculated based on number of cows tested and LW according to breed and age of cows. LW for each breed was 491, 383 and 440 for Holstein-Friesian, Jersey and Kiwi cross, respectively. For the same breeds, numbers of cows tested are 961,198, 350,496 and 1,055,998.The average LW for New Zealand cows is 453 kg. The average CW over the last 5 years plus provisional and estimated weights for the current/future seasons is 201 kg. Numbers for this calculation can be found in Table 17. Table 17: Beef and Lamb NZ beef production (cow slaughter) Cow slaughter figures Number of cows Carcass weight (year) (kg) ,

14 , , , , p 734, e 843, Weighted average For calculation of DO% the basic equation was used: CW DP 100 DP % LW, Appendix 7. Discounted genetic expressions Account need to be taken for the fact that some traits are expressed with different timing and frequency. Traits expressed less frequently, or very late in the lives of daughters receive less emphasis that those expressed more frequently, and relatively early. In particular, a trait that affects costs of replacement heifers will be expressed much earlier than a trait that benefits the returns from cull cows. For example, if cows are culled on average 4 years later than their time of first calving, $1 earned at culling would in present value terms and a discount rate of 6% be worth only $0.80 if earned at time of culling. Similarly, some traits such as gestation length and calving difficulty affect the performance of a cow mated by a bull (and her calf when considering bobby calf value), in addition to having an impact on daughter performance (and her bobby calves). These issues are dealt with using discounted genetics expressions coefficients that are calculated using a methodology similar to that described by Amer (2001) and Berry et al. (2006). The DGE equations of Berry et al. (2006) were formulated for the dairy industry in Ireland where a substantial proportion of dairy females are mated to beef males, with a portion of the subsequent crossbred females being sold or retained for use as dams in beef production systems. Because of this, the Berry et al. (2006) DGE equations were more elaborate than those used in this project. Equations were more aligned to those described in Amer (2001) except using assumptions relevant to the New Zealand dairy industry. The DGE values were calculated for 10 generations over a 20 year planning horizon. Most genetic benefit is expressed within this period.

15 Table 18. Discounted genetics expressions coefficients derived for the NZ Dairy NBO. Discounted genetics expressions coefficients derived for the NZ Dairy NBO. Trait type Discounted genetic expressions Bulls genes per cow mated Bulls genes per cow milking Annual cow trait (e.g. milk yield) Birth trait Daughters Mates of a bull Combined Bobby calf trait 1 Daughters Mates of a bull Combined Replacement heifer trait End of cow life trait Bobby calf traits were based on birth traits multiplied by 0.6 under the assumption that 60% of all calves born become bobbies. The 60% was derived assuming that 25% of heifer calves become replacements retained or sold as surplus to requirements, 5% normal deaths, a further 3% of deaths via inductions, 5% sold as bull calves to sale yards and 2% of calves retained as beefies. Appendix 8. The cost of a replacement Rationale The costs involved with replacement heifers are important for a number of subsequent economic value calculations. In particular, the cost of a replacement is an important driver of the longevity/survival economic value, which in turn impacts on economic values for Fertility and Somatic Cell Score. The cost of a replacement heifer can be defined in two ways. In simplest terms, it is possible to take market prices and use them directly. Disadvantages of this approach include the difficulty of capturing market values, and the tendency for there to be short term fluctuations in market prices, for example when there are high prices due to a temporary shortage. The alternative is to calculate out expenses and costs associated with rearing heifers. We have taken this approach, although it is still necessary to make an allowance for the scarcity premium value of a replacement heifer calf bred by AI.

16 Equations and assumptions The total cost of rearing a replacement heifer was calculated based on a series of assumptions listed in Table 19. Costs for rearing a heifer were based on assumed grazing prices. The market value for a 4 day old heifer calf bred by AI, animal health and reproduction costs related to heifer rearing were all considered in order to provide a fair value for replacement cost. Animal s categories were segregated in line with typical dairy farm rearing practices: four day old calves, weaners (3 to 9 months of age), R1 heifers (10-22 months of age) and Spring R2 heifers (first calving heifers). As reference, the model assumes R1 at 15 months of age when the AI programme starts and heifers will be first calving at the age of 24 months.

17 Table 19. Replacement heifer costs assumptions. Assumption Unit Value 4 Day old cow calf market value $/calf $50 3 month old market value 1 $/weaner $450 9 month old market value 1 $/R1 $ month old market value 1 $/R2 $1,500 Reared calf daily milk intake 2 L/day 5 Milk feeding period 2 days 42 Milk solids composition % 8.68% Meal intake 2 kg/period 54 Grazing period for weaners weeks 32 Deaths (before weaning) % 2% Grazing period (9 to 21 months of age) weeks 52 R1 Empty rate % 3% Deaths (3- to 9 months of age) % 2% Grazing period R2 (May) weeks 13 Deaths (9 to 21 months of age) % 2% General prices Meal price $/tonne $970 Milk solids price $/kg $ to 9 months of age grazing price $/week $ to 21 months of age grazing price $/week $9 22 to 24 months of age grazing price $/week $24 Reproduction $/animal $30 Weaner animal health costs $/animal $10 R1 animal health costs $/animal $20 R2 animal health costs $/animal $20 Cull value of barren heifer $/animal $791 1 Market values of animals were used in the calculations of the costs of animal deaths. 2 The calf rearing system was based on DairyNZ Facts and Figures "Restricted Milk and Meal" regime The cost of a replacement heifer at first calving ( C R ) was estimated based on the purchase market price of a heifer calf ( HCP ) and calf rearing costs on milk and meal ( RC ). Grazing and feed costs ( FC c ), general animal costs ( A c ) including health and reproduction, losses and deaths ( L c ) and interest ( I c ) were summed over the 3 designated calf rearing periods involving grazing denoted (c =1, 2 or 3 for calf grazing, R1 and R2 rearing periods respectively). The model can be described as per the equation below.

18 C R HCP RC 3 FCc Lc Ac Ic c1 Rearing cost were based on costs for meal, milk fed as well as grazed pasture ($52, $116 and $6 respectively) totalling $175. Feed costs for each of the 3 grazing periods were based on assumed numbers of weeks and weekly grazing charges for each category. Costs of losses were based on proportions of deaths and forced culling during the time in each category and with an additional allowance for R1's to account for failure to get in calf. For example, the cost of calf losses was calculated as 2% of the Weaner market value of $450 = $9. Similarly, losses were costed at $15 per head surviving for R1's plus a further allowance of $21 to account for empty's based on lost market value of $ $791 barren heifer slaughter value at a 3% assumed empty rate. Losses were costed at $30 for R2s. For the R1 category, one of the costs considered was reproduction involving mainly synchronization, semen and AI. Interest was also included in calculations considering rates of 8% per year and calculating the cost of interest during the period for each category. The outcomes based on calculations and assumptions above are described in Table 20. Table 20. Replacement heifer costs ($/animal) for different categories. Trait Value ($) AB heifer calf market value 50 Calf rearing 174 Weaner -33 R1 614 R2 377 Total springing R2 heifer cost 1 1,433 1 This value differs slightly from the market value presented in Table 18. Because of the circular nature of the calculation, it was convenient to specify the market value of replacement heifers to determine costs of deaths, but to use a number of additional calculations as summarised in this table to ensure that the market value is consistent with typical industry costings.