Managing Feed Cost

Vinicius Moreira  |  10/4/2004 4:23:41 AM

Dairy cows can produce milk using a variety of feedstuffs, but dairy producers have to provide them with a ration formulated to meet their nutritional requirements.

Year in and year out, feed prices fluctuate for a variety of reasons, such as weather or simple supply and demand. Besides feed, milk price also changes through time. These changes also may force producers to adjust the ration to maximize the farm’s profitability. The article draws attention to feed cost as one of the many factors that affects dairy farm profitability.

An important factor in dairy farm profitability is ration quality, meaning how well the nutrient density and quantity and the physical presentation of a diet meet the cow’s requirements. The cost of a feed is related to its nutritional value, and it is important to realize that feeds compete against each other for a place in a ration when using lowest-cost formulation techniques. The ability to relate the cost of a feedstuffs to its nutrient content is the first step in managing feed costs. For example, corn ($130 per ton) is obviously less expensive than soybean meal ($320 per ton); however, corn has only 9% crude protein, making each point of protein worth $130 ÷ 9%, or $14.44; whereas soybean meal has 44% crude protein, making each point of protein worth $320 ÷ 44%, or only $7.27. So, when evaluated on the basis of protein, soybean meal is a much better value.

Feedstuff dry matter also should be considered in its appraisal when wet feedstuffs are used. This is the basis for least-cost formulation. A computer program will balance to produce the least expensive diet with a large number of feedstuffs and/or nutrients, allowing the user to find the best ration from a wide range of options.

The prices of most commodities are usually indexed to the standard feed ingredient they would replace in a ration. For example, the prices of high energy commodities, such as grain sorghum or hominy, tend to rise and fall with the price of corn. It makes sense then that the nutrient content of these commodities should be compared with the nutrient content and price of the standard ingredient before making purchasing decisions. For example, corn and grain sorghum have similar amounts of protein, but each pound of corn has .93 megacalories of net energy, whereas each pound of grain sorghum has only .84 megacalories, or about 10% less. With this number in mind, the top price to pay for sorghum would be about 90% of the price of corn. These types of calculations are critical to making smart buying decisions for all types of feedstuffs available to the farm.

After arriving at the least expensive and practical ration, the next step is to maximize intake of that particular ration. Maximizing dry matter intake is the key to maximizing milk production without losing body condition, especially in early lactation cows. As a rule, for each additional pound of dry matter intake, an extra 2 to 2.5 pounds of milk can be expected.

Another important way to analyze feed cost is to compute ration changes on a cost per cow per day and cost per cwt of milk produced basis. This is useful, because ration quality can affect both the nutrient density of the ration and feed intake. In a situation where ration quality and thus feed intake are maximized, the feed cost per cow appears to be higher, but the feed cost per cwt of milk should be lower when compared to a low quality ration that has reduced feed intake. An example of this effect is shown in table 1 where cows are consuming two hypothetical rations of either low or high quality. Even though cows fed the high quality ration have a higher daily feed cost, their income over feed cost is higher than that of cows fed a low quality ration. Therefore, the extra expense is clearly justified. Although the benefit to cost ratio slightly favors cows on the low quality ration, cows on the high quality ration will bring more dollars into the farm and more money will be on hand to pay the rest of the expenses.

In this example, the efficiency of converting feed to milk reflects the optimum usage of available resources by cows fed the high quality ration. Cows can convert feed nutrients to milk only after having met their body’s nutrient needs. The higher feed intake of the cows on the high quality ration meant that a much greater proportion of the feed nutrients they consumed could be used to produce milk. Also, it is interesting that cows on either ration are costing about the same amount in relationship to their income. Income over feed cost can be magnified with time. If these early lactation cows produce these levels of milk for at least 60 days, cows fed the high quality ration will generate an additional $83/cow of profit above the $354/cow produced by cows on the low quality ration.

SUMMARY AND APPLICATIONS

Ration quality and the level of feed consumed both play important roles in maximizing dairy farm profitability. The cost of a ration per ton is not the only way of calculating feed expenses. The milk production expected from a specific diet also should be considered when making feeding decisions. The economic value of a feedstuff is related to its own nutritional characteristics, as well as those of the other feed components. Feedstuff analysis allows better appreciation of real cost and should be considered in ration formulation. Feed efficiency should be calculated and monitored to identify the most profitable cows of the herd and to evaluate the nutritional programs more closely and accurately.

Table 1. Feed cost analysis of low and high quality corn silage rations fed to early lactation cows.

Item Low Quality Ration High Quality Ration



Dry matter intake, lbs/d 45 50
Ration dry matter,% 60 60
Milk production, lb/d 80 100
Efficiency, milk/feed 1.78 2.00
Milk price, $/cwt 13.00 13.00
Ration cost, $/ton as fed 120 137
Feed cost, $/d 4.50 5.71
Income, $/day 10.40 13.00
Feed cost, % of income 43.27 43.92
Benefit ratio1 1.31 1.28

1Income over feed costs / feed costs.

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