Optimizing model. 1. Insemination, replacement, seasonal production and cash flow.

Dynamic programming to solve the Markov decision process problem of optimal insemination and replacement decisions was adapted to address large dairy herd management decision problems in the US. Expected net present values of cow states (151,200) were used to determine the optimal policy. States were specified by class of parity (n = 12), production level (n = 15), month of calving (n = 12), month of lactation (n = 16), and days open (n = 7). Methodology optimized decisions based on net present value of an individual cow and all replacements over a 20-yr decision horizon. Length of decision horizon was chosen to ensure that optimal policies were determined for an infinite planning horizon. Optimization took 286 s of central processing unit time. The final probability transition matrix was determined, in part, by the optimal policy. It was estimated iteratively to determine postoptimization steady state herd structure, milk production, replacement, feed inputs and costs, and resulting cash flow on a calendar month and annual basis if optimal policies were implemented. Implementation of the model included seasonal effects on lactation curve shapes, estrus detection rates, pregnancy rates, milk prices, replacement costs, cull prices, and genetic progress. Other inputs included calf values, values of dietary TDN and CP per kilogram, and discount rate. Stochastic elements included conception (and, thus, subsequent freshening), cow milk production level within herd, and survival. Validation of optimized solutions was by separate simulation model, which implemented policies on a simulated herd and also described herd dynamics during transition to optimized structure