In what has been called the most significant change to global dairy trade in the last 20 years, milk fat will earn dairy farmers more than protein in the 2018/19 season.

"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."

Milk price and the relative value of fat and protein are the biggest factors in the Breeding Worth (BW) of dairy cattle.

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"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 per cent are Jersey, 5 per cent Holstein-Friesian and 25 per cent Cross-Bred (Jersey and Holstein Friesian)," Thorrold said.

"On average, Jersey bulls are increasing by $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, which is used to rank cows and bulls according to their ability to meet the national breeding objective of breeding dairy cows that will be the most efficient converters of feed into profit for farmers.

NZAEL has 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 says.

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.

DairyNZ said in a statement New Zealand was uniquely positioned to take full advantage of strong demand for fat-based milk products due to the strong influence of Jersey genes in the national herd. There was high genetic variation in the trait in New Zealand dairy cattle which enabled farmers to respond quickly to market signals.

Further changes on the way

Thorrold said the shift in consumer demand for fat and the consequent change in BW were big changes for dairy farmers.

"The milk price values we use in BW lag behind the market price because we look to smooth out short term changes – for breeding the national herd we need a long-term view. If current fat prices are maintained, then the shift in favour of high fat bulls will continue next year.

"Breeding high BW cows is vital for farm profit, so given these shifts in BW all farmers need to be thinking about their breed choice as well as individual bulls. Farmers can be confident that BW is identifying the most profitable genetics for New Zealand grazing systems, whether they are looking for the best bull team or best bull within a breed."

What this means for farmers

DairyNZ said dairy farmers would need to think about their breeding choices to ensure they have a herd capable of producing milk with higher fat content to get the best returns. Many farmers use semen from bull teams selected by breeding companies to help them breed the next generation of milking cows. The breeding companies are aware of these changes and are using them to help select the bulls they use in their teams.

DairyNZ said farmers should talk with their breeding company to see if the product they have ordered is still meeting their needs.

Michelle Burgess, a member of the NZAEL farmer advisory panel, and for whom genetics has been a lifetime passion, said she welcomed the news - she and her husband Bill were stoked that the value of fat had saved New Zealand's milk price.

"Not so long ago we had a few hard years with very low payouts, and what's also improved is the positivity around fat-based products as consumers become better educated on healthy eating.

"As we see the current value of fat and protein flow through into BW, it reiterates our goal to breed cows that produce high amounts of both fat and protein. Bill and I like to select bulls that we believe will be profitable in any given year, and I am certain that such bulls exist in all the breeds and crosses. The 2019 BW will help us identify which bulls and cows will increase our milk payouts now and in the future."

DairyNZ said farmers can log on to the DairyNZ website and check out both the current, and 2019 BW figures on the DairyNZ bull team builder (dairynz.co.nz/bullteam). Farmers can use this tool to identify the bulls in their team that will have a big shift in their BW figure in February 2019.