September 11, 2018

 

Higher value of milk shifts to fat

 

 

The value of milk fat has overtaken that of protein, such that it will give dairy farmers more earnings in the 2018-19 season, according to DairyNZ, which described this development as the most significant change to global dairy trade in the last 20 years.

 

"Fat has been a low value milk component but has seen a steady rise in recent seasons due to consumer-driven market value," DairyNZ Strategy and Investment Leader Dr Bruce Thorrold said.

 

"That's a welcome change for New Zealand dairy farmers who are set to receive a strong 2018-19 milk price, buoyed by the value of milk fat", he added.

 

Milk price and the relative value of fat and protein are the biggest factors in the Breeding Worth (BW) of dairy cattle. Breeding Worth is the index used to rank cows and bulls according to their ability to meet the national breeding objective (NBO) of breeding dairy cows that will be the most efficient converters of feed into profit for farmers.

 

"The changes in fat price have produced large shifts in BW both between and within breeds. Of the top 200 bulls by BW in 2019 (BW2019), 70% are Jersey, 5% Holstein-Friesian and 25% Cross-Bred (Jersey and Holstein Friesian)," Thorrold said.

 

Jersey bulls increasing

 

"On average, Jersey bulls are increasing by NZ$23 BW, while Holstein-Friesian decrease by $28 BW. Cross-bred and Ayrshire bulls are relatively unchanged (-$4 and -$3 BW). Within breeds, individual bulls will shift up or down by as much as $40 BW relative to their breed average shift."

 

New Zealand Animal Evaluation (NZAEL), a wholly owned subsidiary of DairyNZ, administers a BW index, and recently finalised the economic factors that will be used to calculate BW from February 2019.

 

"Due to the sizeable shift in fat and protein value, BW2019 is being published early for all sires enrolled with NZAEL. This will give farmers insights into which bulls can add the most value to their breeding programme in a market where fat is a high value component. The calves that are born in spring 2019 will have the BW2019 values," Thorrold said.

 

The economic values for fat and protein are calculated by partitioning the milksolids price into a value for fat and protein, and then accounting for the cost of producing each component. The value of fat relative to protein has been increasing for the past three seasons and this trend is forecast to continue.

 

"If current fat prices are maintained, then the shift in favour of high fat bulls will continue next year", Thorrold said.