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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.

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economics of genetic improvement why countries should invest in genetic improvement programmes
Economics of Genetic Improvement -Why countries should invest in genetic improvement programmes

Leo Dempfle

International Consultant


Department of Animal Science

University of Technology Munich/Germany


Performance (Phenotype) depends onGenetics and on the Environment (Management)Phenotype=f(Genetics)+f(Environment)P = G + EIf interactionsP = G + E + GxEP = G + E +GE


FAO-trial in PolandComparison of 10 Black and White strains (Israel, US, Canada, Netherlands, France, Germany, NZ, ...)US: 197.2 kg Fat + 182.7 kg Protein = 379.90 kg val. SolidsNS: 206.0 kg Fat + 180.1 kg Protein = 386.10 kg val. SolidsUS: valuable solids/100 kg body weight = 66NZ: valuable solids/100 kg body weight = 69Their 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


For a private entrepreneur it is difficult to recover the costs

On the other hand, genetic improvement has some remarkable positive properties, like being




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!
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
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
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
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 15-18 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
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

4600+30x)G = 4600+30x80=7000kg

  • Average Genetic level of a proven bull

4600+25.75x)G+irsA = 4600+2060+1.5x0.9x500=7335 kg

Offspring of a test bull: (4600+7000)/2=5800

Offspring of a pro. bull: (4600+7335)/2=5967

Thus we have a difference of 167 kg

Given a fixed budget of 15,000.00 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: (5800-4600)x800=960,000 kg milk

Pro.bulls: (5967-4600)x200=273,400 kg milk

what about male offspring
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 683.50 kg
If in AI such bulls serve 35,000 cows then we have additional about

11,000x(683.50-600)=918,500. kg milk

  • The additional costs are

500x(12-3) = 4500 US$

(with 35000 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
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:

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

Do not only improve Genetics, but also management

  • Thank You very much