Economics of Genetic Improvement - Why countries should invest in genetic improvement programmes Leo Dempfle International Consultant and Department of Animal Science University of Technology Munich/Germany

Performance (Phenotype) depends on Genetics and on the Environment (Management) Phenotype=f(Genetics)+f(Environment) P = G + E If interactions P = G + E + GxE P = G + E +GE

FAO-trial in Poland Comparison of 10 Black and White strains (Israel, US, Canada, Netherlands, France, Germany, NZ,...) US: kg Fat kg Protein = kg val. Solids NS: kg Fat kg Protein = kg val. Solids US: valuable solids/100 kg body weight = 66 NZ: valuable solids/100 kg body weight = 69 Their might be some interactions. Superiority of NZ was stronger at lower plan of nutrition. Israel, Germany but Irland!!

Carful of data interpretations! Compare FAOSTAT Data and what we found in our TCP! Conclusion: Level of production is mainly an indicator of environment (management) not of genetics Because of interaction it is hard to precisely predict the performance in the importing country

What is special of genetic improvement programmes? Negative side: Genetic improvement is slow with only small increments (eg 1% of the mean), except for importing genetic progress and For a private entrepreneur it is difficult to recover the costs

On the other hand, genetic improvement has some remarkable positive properties, like being permanent cumulative multiplicative which is very favorable for the economics of it

This is the result of a single cycle of selection (stopping after the first cycle). Progress is permanent! Compare that with nutrition!

Repeating the selection cycle year after year you add new genetic progress on the old genetic progress. Progress is cumulative!

Breeding is usually carried out in a small nucleus and is then multiplied. Progress is multiplicative!

Analysing one cycle of selection

The Net present value of one cycle of selection (per generation or per year) NPV = -c + )H x N x 15 c cost depends on the size of the nucleus, and on other cost factors )H measures the additional revenue per year and animals N is the size of the commercial population 15 depends on time horizon and interest rate

Who will run the nucleus? No patents No intellectual property rights Can make money by selling breeding animals only - But then you can get easily competition Private good become very quickly a common (public) good

What Solutions? Former time Germany (similar in most European countries): Animal Breeding Law Every farmer had to use a licenced bull Only a recognised breed societies could produce licenced bulls In addition Up to 3 quarters of the cost of Recording was paid by the State

Nowadays mainly AI (close to 90 %) But state is still contributing to the recording US: some support eg estimation of breeding values

NZ: Dairy industry depends most heavily on export. All dairy farmers depend on the competitiveness on the world market Very strong farmers‘ cooperatives in the whole dairy sector (factories, marketing, AI, Recording, Genetic improvement). So essentially the whole dairy industry is supporting Genetic Improvement! For a private investor I see little chance, since the private good turns quickly into a public good!!

How to start genetic improvement? In most cases the gap between a starting scheme and the leading scheme is so big that, if possible, you resort to importation of genetic progress. In many cases import of semen is cheapest – but there is a time lag! What semen to import?

There is semen of three different categories of bulls available: Test bulls: young male offspring of highly selected sires and dams (age about months) Proven bulls: selected progeny tested bulls (with about 100 daughters) used for female replacements Proven top bulls: same as proven bulls but used for male and female replacements

Curriculum of a bull YearsEvent 0Birth of Bull Use as Testbull Daughters are born Daughters calve Daughers finish first lactation, Estimation of breeding value Selection and Culling of Test Bulls Use as proven bull (onwards) 6.25-Male and female offspring born Some used as testbulls

Please note, that between semen produced as testbull and semen produced as proven bull there are about 4.5 years (sometimes even much more). In good organised breeding schemes we have anything between 50 and 120 kg genetic progress per year. With these assumption we get the next picture

Under the assumptions made we get Average Genetic level of testbull x)G = x80=7000kg Average Genetic level of a proven bull x)G+irs A = x0.9x500=7335 kg Offspring of a test bull: ( )/2=5800 Offspring of a pro. bull: ( )/2=5967 Thus we have a difference of 167 kg

Given a fixed budget of 15, US$ and price for testbull is 3.00US$/dosis and for proven bull 12.00US$ We can either buy 5000 units semen from test bulls or 1250 units semen from proven bulls Given that the local population has a mean of 4600 kg then Testbulls: ( )x800=960,000 kg milk Pro.bulls: ( )x200=273,400 kg milk

What about male offspring? Female offspring has 0 to 3 female offspring Male offspring in AI can have thousands female offspring Daughters of a bull from a testbull has a superiority of 600 kg Daughters of a bull from a proven bull has a superiority of kg

If in AI such bulls serve 35,000 cows then we have additional about 11,000x( )=918,500. kg milk The additional costs are 500x(12-3) = 4500 US$ (with cows/year served it is doubtfull if 500 doses are really needed) Thus with a limited budget use ‚cheap‘ semen for female replacement and get best semen for male replacements

Some consideration of the impact of imported genetic material Let‘s assume that the cows of Nepal (the ‚crossbreds‘) would produce 4600 kg if they get European feeding standards. Then we would have 4600 kg vs 7000 kg Europeans would produce 50 % more Offspring of Locals X European would produce 25 % more (ca 1200 kg)

The difference was analysed between two breeds (Simmental vs German Friesian) Overall the German Friesian produced about 16% more milk (ca 600 kg) However, if the material was stratified according to th yield of the Simmental the following result was obtained:

Yield of Simmental Superiority of ‚HF‘ (kg) Superiority of ‚HF‘ (%)

That means that farmers with better management profit more! Better genetics makes higher input more economic! The last two graphs show what happens if yield of crossbreds is a proportional increase or if it is more than proportional

Conclusion Do not only improve Genetics, but also management Thank You very much