Broad breeding goals and production costs in dairy farming

Breeding goals for dairy cows have typically emphasized production traits such as milk and meat yields. We estimate the effects of genetic progress in different traits on variable costs of production. A variable cost function that is augmented with indices of dairy cows’ genetic merit in different groups of traits is estimated by using farm-level panel data. Our results show that a genetic progress of one standard deviation in production and functional traits reduces variable costs by 0.4 and 0.6 %, respectively. The cumulative variable cost reduction from genetic progress in functional traits between 1999 and 2007 is about 1 % for the average farm. Genetic change is permanent, and the discounted perpetual cost reduction because of genetic progress in functional traits is about NOK 160 million for Norwegian dairy farms.