Hedonic Pricing of Dairy Bulls - An Alternative Index of Genetic Merit

Abstract

This study investigates the use of hedonic pricing to identify the value of relevant production and type traits for dairy bulls in Alberta. A hedonic pricing model is estimated that models semen price as a function of individual production and longevity characteristics for a sample of Holstein bulls. This model corrects for sources of statistical bias in the data (i.e., censored data and endogenous supply problems). The results suggest that the most important characteristics in valuing dairy bulls are milk volume, protein and fat content, general conformation, body capacity, the popularity of the bull, and the probability that the bull's semen may be in short supply. This methodology may be used to establish a method of forecasting semen prices for newly proven bulls. The valuation procedure may be easily updated and adjusted as producers' breeding objectives change over time due to the changing economic environment. Further extensions of this method may be done to incorporate other characteristics and/or to assess shifts in producer breeding objectives over time. The results of this analysis suggest that hedonic pricing may be a superior method of placing a value on production and type characteristics for dairy bulls than the Lifetime Profit Index, currently being used by the Canadian dairy industry.