Longevity versus Production: Analyzing Economic Trade-offs in Dairy Cow Replacement
Department of Agricultural & Applied Economics
University of Wisconsin - Madison
Wednesday, November 1, 2017
Taylor-Hibbard Seminar Room (Rm103)
12:00 pm-1:30 pm
Dairy cow milk production has increased about 3-4% annually largely due to genetic selection on milk production traits by dairy breeders. The negative consequence of this policy has been shorter and shorter productive life, and currently about 80% of US dairy cow exit is because of a health problem, infertility, or death. In this preliminary work, I present two research questions for understanding whether the production gains outweigh these health costs. First, how do replacement rules change subject to cow mortality and disposal costs? Second, how profitable are current breeding strategies given these replacement rules and implied costs? Focusing on the first question, I construct a structural model of dairy cow replacement that improves upon the model of Miranda and Schnitkey (1995) by including mortality and disposal costs. I demonstrate how high disposal cost decreases the replacement age, especially at low profit margins. Finally, I present a simulation of the model on pseudo-data to show how this model can explain puzzling results found in Miranda and Schnitkey (1995). This model can be empirically tractable on DHIA data given recent advancements in dynamic discrete choice estimation.