ing is interpreted the same as with the low response function. A posi- 

 tive value of the change in net income resulting from a 500 pound in- 

 crease in grain feeding per cow indicates that such an increase will 

 increase net income. A negative value indicates that the change in 

 grain feeding would reduce net income. The optimum level of grain 

 feeding for each milk function is at the point where these signs change 

 from positive to negative. 



Comparison of the three milk response functions shows that a 

 cow of high milk production ability can be expected to return annually 

 between $31 and $38 more than a cow of the medium production 

 ability, and between $90 and $119 more than a cow of the low pro- 

 duction ability if each is fed its optimal level of grain feeding. A cow 

 of medium productive ability will return between $59 and $81 more 

 than a cow of low productive ability. 



Break-Even Price Differentials Between Cows of Different 

 Production Abilities 



The difference in net income resulting from a difference in 

 production per cow can be interpreted as an addition to or subtrac- 

 tion from the annual net return of the dairy cow. 



If the quality of the offspring from cows of different milk re- 

 sponse functions is not considered, then the excess of the price of 

 a high response cow over a low response cow must be accumulated 

 over the expected herd life of the animal. For a herd life of 4 years 

 the break-even price between cows of different milk responses must 

 be computed by discounting the increased net return over 4 years. 

 The following formula gives the break-even price differential be- 

 tween two cows of different milk response: 



^ fi i-] 



i \ (l+i)n/ 



V » , ..^ 



Where V = the break-even price differential between cows 



R ^ change in annual net income associated with a 



change in milk response 

 i = desired rate of return 

 n =^ herd life of cow 



An example of this computation is as follows: 



.^ssume: Milk price = $5.00/ cwt. 



Desired rate of return = 15% 



Change in net income with cow of high milk 



response = $36 

 Change in net income with cow of low milk 



response =■ -$69 



39 



