Summary

A study of trends in consumption of dairy products in Canada indicated continuing reduction in demand for fat relative to protein. An optimization technique was used to determine appropriate long-term breeding goals to meet this shifting market. Resulting indexes put a negative emphasis on milk and fat yield, and positive emphasis on protein yield, though overall yield of milk, fat and protein per cow will still increase along with efficiency of production and profitability. An excess of fat production will result, which could be donated to countries with a deficiency of fat for human needs.

Introduction

Breeding of dairy cattle is a long-term exercise. The average replacement generates income to the dairy herd from 3 to 9 years after the choice of which bull should be her sire. A sire analyst with the job of choosing the next generation of young bulls to enter progeny testing knows that it will be 10 to 15 years before they have a large impact on the milking population. Also, their daughters will themselves produce daughters, pushing genetic improvements even further into the future. Thus, selection decisions today should be designed to meet the management and marketing conditions many years into the future. This poses few problems when conditions are constant over time, but makes definition of breeding objectives difficult when conditions are continually changing.

Historically, Canada has been almost unique in the Western world in producing an excess of dairy protein while most other markets produce an excess of dairy fat. Consumer demand has, however, been changing in Canada. For the first time in the history of our dairy market, the amount of fat and protein produced by our dairy cows almost equals the demand by Canadian consumers. The question is, "What will be the relative demands for dairy fat and protein in the future?" In an attempt to answer this question, a variety of economic forecasting techniques were applied to predict future demand for fat and protein in Canada (LeRoy, 1994). Making such predictions is a notoriously difficult exercise and it was found that different forecasting techniques gave widely different predictions about the absolute amount of fat and protein that would be consumed in Canada. A consistent feature of all the predictions was, however, that the demand for fat relative to protein would decrease at roughly 1% every year. In today's market, for every 1 kg of dairy protein consumed, about 1.16 kg of dairy fat is consumed. It is predicted that about 16 years from now for every 1 kg of dairy protein, we will consume 1 kg of dairy fat. Thus, 16 years from now, unless management or genetics changes the milk production characteristics of our cows, about 16% of the milk fat produced in Canada will be surplus to requirements if supply is balanced with regard to protein demand. Trends in management have been pretty constant in Canada over the past 20 to 30 years, increasing output of milk, fat and protein per cow by about 1% per year. It seems likely that these trends will continue into the future. The possibility that changes in management techniques might lead to a substantial reduction in the fat:protein ratio cannot be ruled out, but seem rather unlikely given the economics of efficient milk production. Given these projections of future market demand and management conditions, the question for dairy cattle breeders is, "What is the optimum balance to be placed on milk, fat and protein yield to make the most profitable cow in the future?"

Materials and Methods

Most animal breeding theory assumes that we are aiming for some stable future conditions. In the present situation, however, we are breeding for a continually moving target. This is a complex problem which can only be solved by non-linear optimization techniques. A general method of solving these non-linear optimization problems in animal breeding was developed recently by Dekkers, Birke and Gibson (1995). To solve the current problem, we designed a computer model of the Canadian dairy cattle breeding and production population based on gene flow methods, which describe how genetic improvement moves through the population. This model takes into account the changing market demands for dairy products over a 20 year period, and assumes that Canada will continue to remain self-sufficient for dairy products. As production per cow increases over time due to genetic and management improvement, the total number of cows in the population is adjusted so that no imports of dairy protein are required. Selection of sires and dams is based on an index of milk, fat and protein. These indexes are based on the appropriate economic value of genetic improvement of milk, fat and protein in each of the 20 years of selection. The optimization program finds the economic weights of milk, fat and protein in each of the 20 years of selection (ie. 60 different values) which maximize net profit to the whole industry over a 20 year horizon, starting 5 years after the first selection decision.

Results and Discussion

A wide variety of management and market demand scenarios were investigated. Results are represented here only for the situation that seems most likely for the future, which is a continuing decrease in demand for fat relative to protein of about 1% per year and a continuing increase in management expertise leading to an increased production of milk fat and protein per cow of 1% per year. In this situation, the optimum indexes lead to substantial improvement in milk and protein yield per cow and a moderate improvement in fat yield per cow. The indexes that achieve this are fairly constant over the 20 year time horizon and place heavy positive emphasis on protein yield, substantial negative emphasis on milk volume, and a slight negative emphasis on fat yield.

The trends in demand and production for milk fat are shown in Figure 1. The current indexes recommended in Canada (the LPI and the TEV) both put positive emphasis on protein and on fat. If they continue to be used over the next 20 years, they will result in the production line labelled current index in Figure 1. We see from Figure 1 that the current index would lead to a predicted 50 million kg excess of dairy fat production in Canada 20 years from now. In contrast, the optimum index based on the present study would lead to about a 25 million kg excess of dairy fat.

It is interesting to note that the optimum index does not lead to an exact balance between production and demand of fat and protein in the future (in which case there will be no excess fat production). It is certainly possible to produce an index which would lead to an exact balance between production and demand for fat and protein in the future, but such indexes lead to considerably lower total production per cow which leads to lower economic efficiency. The optimum index, in contrast, finds an optimum balance between the desire for maximum biological efficiency of production of milk components with the financial value of those milk components, which is determined by their relative demand. It turns out that it is economically much more efficient and profitable to aim to produce a 25 million kg excess of dairy fat than to exactly meet future market demand. According to the Food and Agriculture Organization of the United Nations, there is a global shortage of fat production for human consumption. A 25 million kg excess of dairy fat can therefore be seen not just as an optimum strategy for profitability in the Canadian dairy industry, but also as a contribution to global food security. The excess fat could be donated as aid to those countries in greatest need.

Implications

The current weightings on milk fat and protein (expressed in kg) in the lifetime profitability index (LPI) are approximately 0 to 1.6 to 10. Optimized index weights, in contrast, are 0.07 to 0.9 to 10.0. We suggest that use of the relative weights in the optimized index would better meet future needs to the Canadian dairy industry than current indexes. There is, however, a need for accurate predictions of the extent to which nutritional management of dairy cows will be altered to meet changing demand for fat and protein. This will ensure that we do not attempt to breed for a problem that will be solved by other means.

Acknowledgements

This project was financed by Dairy Farmers of Canada and the Ontario Ministry of Agriculture, Food and Rural Affairs.