Technical Abstract: Permanent differences in environment have led to the distinct cattle races. Bos indicus cattle evolved in the tropical areas of southern Asia, and are heat-tolerant. The major dairy breeds in the USA are Bos taurus cattle, which evolved in temperate environments, that are less heat tolerant but which generally have higher reproductive rates, higher milk production, and better meat quality attributes. Differences in milk production have made the Holstein the preferred breed in much of the USA, including the South where cows may be subjected to heat stress during much of the year. The relative economic value of changes in various dairy traits may be different in hot Southern climates compared to temperate northern climates. Major determining factors are the market prices of milk, feed, and replacement animals. In the southeastern USA with its fluid milk markets, the value of protein is nil while the value of skim milk is greater than in the North. The biological efficiency of milk production may be less under heat stress. The lack of quality premiums in much of the South reduces the value of changes in SCC. On the other hand, changes in fertility, productive life, body size, and calving ability are likely worth more in the southern than the northern USA. A light coat color and slick hair would also have some value in hot climates. Direct selection for heat tolerance is possible within breeds, but could compromise overall performance. There is also variation within breeds to reduce the negative effects of heat stress, for example by putting more emphasis on functional traits. Crossbreeding may also overcome some of the negative effects. However the associated reduction in emphasis on milk production should be carefully considered, especially in southern markets with higher milk prices. Dairy farmers in hot climates whose dairy cattle experience heat stress should value the relative value of traits differently than dairy farmers in temperate climates.