2006 Annual Report 4d.Progress report. This report serves to document research conducted under a specific cooperative agreement between ARS and Virginia Polytechnic Institute and State University (Blacksburg, VA). Additional details of research can be found in the report for the parent project 1265-31000-085-00D "Improving Genetic Prediction of Economic Merit of Dairy Animals"; research conducted under the agreement is related to objectives 4 (improved rankings for overall genetic merit) and 5 (characterization of dairy industry programs and practices) of the parent project. To model extended lactations of Holsteins, an equation was developed for predicting the average yield of cows still in milk from 1 to 999 days. An economic definition of productive life was introduced into the USDA-DHIA genetic evaluation system to replace the previous definition used since 1994. Cows now get credit for continuing in milk after 305 days of lactation and after 84 months of age. Credits are based on standard lactation curves, with highest credits at the peak of lactation and diminishing credits across the remainder of lactation. Lactation-curve credits ensure that cows with multiple lactations get more total credit than cows with just one long lactation. Inbreeding adjustments used for yield, daughter pregnancy rate, and somatic cell score evaluations since February 2005 are now used for productive life evaluations. Factors used to predict future longevity for cows still alive also were updated. Heritability of productive life was decreased slightly to 8%. The revised measure of productive life is more highly correlated to longevity traits defined by other countries. The United States has the highest average genetic correlation across countries for both Holstein and Jersey breeds, which indicates that the new productive life definition is an accurate summary of U.S. data and an excellent predictor of longevity in other environments. The new productive life definition has been incorporated into economic indexes for lifetime merit. A scientific paper on comparison of lifetime relative net income with and without adjustment for opportunity cost has been prepared for submission to the Journal of Dairy Science. A scientific paper on alternative measures of productive life and updates of life-expectancy factors was prepared, submitted to the Journal of Dairy Science, and published.