Comparison of relative net income with and without the application of opportunity cost

• Main Author: Smith, Bradford Bruce
• Other Authors: Dairy Science
• Format: Others
• Language: en
• Published: Virginia Tech 2014
• Subjects: LD5655.V855 1991.S652; Holstein-Friesian cattle; Income
• Online Access: http://hdl.handle.net/10919/41326; http://scholar.lib.vt.edu/theses/available/etd-03022010-020200/

This study used DHI records of 1,023,827 Holstein cows to determine the impact of adjusting measures of profit for opportunity cost and for evaluating the impact of herd-year variables and registry status on measures of profit. Relative Net Income (RNIJ) and RNI including opportunity cost (RNIOC), the revenue forfeited that could have been generated by a replacement heifer, were calculated for 48 month, 60 month, 72 month, and all lactations herdlife period. Application of opportunity cost caused a decreased value for length of herdlife. Number of lactations initiated prior to the various herdlife periods was the criteria for deciding how much information was included in each of the herdlife periods. Opportunity cost per day (OCPD), the revenue forfeited that could be earned by replacement, was calculated by regressing herd-year means for RNI and days of productive life (DPL) on overall herd means based on the number of animals in herd-years, and dividing the regressed mean for RNI by the regressed mean for DPL. RNIOC for each herdlife period (i) was calculated as RNI(i) - (OCPD(i) * DPL(i)) for each cow in a herd-year. Application of OCPD removed all of the variation due to herd and year for RNIOC. Standard deviations and means were smaller for RNIOC than for RNI. This was because there were fewer animals with extremely large values for RNIOC than for RNI. These differences increased as herdlife period advanced. The correlation of RNI and RNIOC to 72 mo herdlife was .95. This was caused by a lower correlation with DPL for RNIOC than RNI (.73 vs. .84). First lactation yield had similar correlations with both measures. Regression analysis showed all of the year within herd variance for profit measures and no error variance could be explained by herd management variables, with average first lactation milk dominating. Grade cows were lower than registered cows for profit measures within herd, and differences increased as herdlife period advanced. === Master of Science