Abstract: The dairy sector represents the cornerstone of Finnish agriculture but faces new challenges linked to the decoupling of farm subsidies and abolition of milk production quotas. Because of its increasing exposure to market forces, the sector must anticipate future changes in demand and deliver precisely what Finnish consumers want. This paper contributes to that goal by analyzing retroactively the drivers of demand for dairy products over the period 1975–2010 using National Accounts Data. After presenting the evolution of consumption for dairy products, we estimate a complete system of demand for food and dairy products and use it to decompose demand growth into a substitution effect, income effect, and trend effect. The analysis points to the severity of the challenges that the sector is facing. Stagnant consumption is at least partially the result of continuous but adverse taste changes, and as Finnish consumers grow more prosperous, they allocate an increasingly smaller share of their food budget to the dairy group. The low own-price elasticity of demand for dairy products also limits the benefits to the sector of growth in milk production. Hence, business-as-usual will result in the dwindling importance of the dairy sector in the Finnish food chain. Innovation and product differentiation, perhaps emphasizing the attributes of livestock production processes, are clearly required to counter this evolution.

Abstract: The data set for this study comprised 1,488,474 test-day records for milk, fat, and protein yields and fat and protein percentages from 191,012 first-, second-, and third-parity Holstein cows from 484 farms. Data were collected from 2001 through 2007 and merged with meteorological data from 35 weather stations. A linear model (M1) was used to estimate the effects of the temperature-humidity index (THI) on production traits. Least squares means from M1 were used to detect the THI thresholds for milk production in all parities by using a 2-phase linear regression procedure (M2). A multiple-trait repeatability test-model (M3) was used to estimate variance components for all traits and a dummy regression variable (t) was defined to estimate the production decline caused by heat stress. Additionally, the estimated variance components and M3 were used to estimate traditional and heat-tolerance breeding values (estimated breeding values, EBV) for milk yield and protein percentages at parity 1. An analysis of data (M2) indicated that the daily THI at which milk production started to decline for the 3 parities and traits ranged from 65 to 76. These THI values can be achieved with different temperature/humidity combinations with a range of temperatures from 21 to 36°C and relative humidity values from 5 to 95%. The highest negative effect of THI was observed 4 d before test day over the 3 parities for all traits. The negative effect of THI on production traits indicates that first-parity cows are less sensitive to heat stress than multiparous cows. Over the parities, the general additive genetic variance decreased for protein content and increased for milk yield and fat and protein yield. Additive genetic variance for heat tolerance showed an increase from the first to third parity for milk, protein, and fat yield, and for protein percentage. Genetic correlations between general and heat stress effects were all unfavorable (from -0.24 to -0.56). Three EBV per trait were calculated for each cow and bull (traditional EBV, traditional EBV estimated with the inclusion of THI covariate effect, and heat tolerance EBV) and the rankings of EBV for 283 bulls born after 1985 with at least 50 daughters were compared. When THI was included in the model, the ranking for 17 and 32 bulls changed for milk yield and protein percentage, respectively. The heat tolerance genetic component is not negligible, suggesting that heat tolerance selection should be included in the selection objectives.