Nutrition economics

Feed costs make up 35-50% of the total cost of producing milk in the United States. Without paying attention to nutrition, cutting the feed bill can reduce profits in the long run. Indicators of nutrition economics include grain cost per ton, grain cost per cow per day, feed cost per cow per day, cost per unit of nutrient, feed cost per 100 pounds of milk, income over feed cost, feed cost as a percentage of milk sales, partitioned feed costs, marginal milk response, and feed efficiency. Factors which greatly affect nutrition economics include milk production, forage quality, heifer raising, feeding management, dry matter intake, and purchased feeds.

Feed costs make up 35-50% of the total cost of producing milk in the United States. As margins tighten on dairy farms, many producers simply want to lower the feed bill. Without paying attention to the nutrition program, cutting the feed bill can reduce profits in the long run. Fully assess your current nutrition economics first. Then, work with a nutritionist to positively impact farm profitability.

Evaluating Nutrition Economics on the Farm

Grain Cost per Ton

This is simply the price per ton for grain delivered to the farm. Often, too much focus is put on grain cost per ton. Grain price as well as the amount of grain fed and the amount of milk produced impact farm profitability. In many instances, it may be beneficial to purchase more costly, nutrient-dense grain but to feed lower amounts of grain per cow.

Grain Cost per Cow per Day

This is the price of the grain fed to the cow each day. For example, if a grain cost $185/ton ($0.20/kg) and 25 pounds (11.4 kg) were fed per day, grain cost per cow per day would be $2.31.

Feed Cost per Cow per Day

This is the cost of all feeds (grain + forage) fed to the cow each day. One goal suggested for Holsteins in the United States is to keep this cost to less than $3.50/cow/day. (Economic goals would vary slightly depending on farm location.) Of course, grain cost/cow/day and feed cost/cow/day do not consider the productive level of the cow, stage of lactation, or forage quality. If low feed costs result in low production, profitability will drop.

Cost Per Unit of Nutrient

Cost per unit of nutrient is useful in comparing costs among various feed sources. Unfortunately, simply comparing on a crude protein or energy basis is not really enough, because rations need to be balanced according to protein and carbohydrate fractions. For example, in the following table the cost of protein from soybean meal and canola meal is compared. On crude protein basis, canola meal appears to be the better deal. But, canola meal contains a higher percentage of soluble protein which is often less valuable for milk production. Least-cost ration balancing programs can be helpful in more thoroughly evaluating grains based on their nutrient analysis and the needs of the cow.

Grain % Crude Protein (As-Fed) Cost/Ton (As-Fed) Cost/lb of Crude Protein
Soybean Meal 48% $225 $0.23/lb
Canola Meal 36% $160 $0.22/lb

Feed Cost per 100 Pounds of Milk

Evaluating the dollars spent on feed (grain + forage) for the production of 100 pounds (45.45 kg) of milk puts feed costs in relation to milk production. For Holstein cows in the United States, a reasonable goal is to spend less than $4.50 on feed for every 100 pounds (45.45 kg) of milk produced. Feed cost per 100 pounds of milk is calculated by dividing feed cost by average daily production and multiplying by 100. For example, if feed cost is $3.35 and average milk production is 80 pounds (36.36 kg)/cow/day, feed cost per 100 pounds (45.45 kg) of milk would be $4.19.

Income Over Feed Cost (IOFC)

Income over feed cost reflects feed costs, milk production, and milk price. A reasonable goal for IOFC in the United States is over $5.00 per cow per day. IOFC is calculated by subtracting daily feed cost per cow per day from milk income (average pounds (kg) produced/cow/day multiplied by milk price per pound (kg)). For example, if feed cost is $3.35, average milk production is 80 pounds/cow/day (36.36 kg), and milk price is $14.00/cwt ($0.14/lb, $0.31/kg), IOFC would be $7.85.

Feed Cost as a Percentage of Milk Sales

This is the cost of feed/cow divided by the milk income/cow multiplied by 100. For example, if feed cost is $3.35 and milk income is $11.20, then feed cost as a percentage of milk sales would be 29.91%. Some may want to use total feed cost and others may prefer to use purchased feed or grain cost.

Partitioning Feed Costs

It may be helpful to separate feed costs and compare with producers in other areas and at similar production levels. Separate out costs for forage, energy supplements, protein supplements, mineral and vitamin supplements, and additives.

Marginal Milk Response

This is the extra profit expected from increasing milk production without increasing maintenance or fixed costs. If one pound of a new feed (costing $0.25/cow/day) is added to a ration and milk production increases by 4 pounds/cow/day, then marginal milk profit would be $0.31/cow/day if milk price were $14.00/cwt and no increases in labor or supply costs occurred. However, if a new feed or ingredient required extra labor or new equipment, those costs would need to be deducted from the value of the extra milk before calculating the marginal milk response.

Feed Efficiency

Feed efficiency is the pounds (kg) of milk produced per pound (kg) of dry matter consumed. A reasonable goal for Holsteins is 1.4 or greater. If a cow produces 70 pounds (31.82 kg) of milk per day and consumes 50 pounds (22.73 kg) of dry matter, feed efficiency is 1.4. Feed efficiency is not a good indicator of nutrition economics because it does not take into account the composition or cost of the dry matter being consumed. True feed efficiency depends in large part on the amount of forage in the ration and total nutrient density of the ration. For example, if a cow produces 60 pounds (27.27 kg) of milk per day while consuming 40 pounds (18.18 kg) of a costly, nutrient-dense diet, feed efficiency would be 1.5. But, the dairy producer would probably not be making much money.

The above economic parameters can be evaluated for a whole farm or for groups of cows on a farm. Goals mentioned are for whole farm situations. However, it may be more valuable, especially for on-going evaluation and troubleshooting, to evaluate nutrition economics for groups of cows on a farm. In-line milk flow meters can be used to measure production of groups. In-line milk samplers are also available. Accurately estimate dry matter and nutrient intake. Evaluate economic parameters for groups on a weekly basis to help make timely management decisions.

If you are using a record system, make sure that you understand how nutrition efficiency values are being calculated. Sometimes costs for heifers and dry cows are included. This may lead you to make wrong conclusions if you are comparing your numbers to recommendations (like those above) that do not include the same costs.

Improving Nutrition Economics on the Farm

Once a determination is made regarding the present state of nutrition economics, one must ask why the numbers are where they are and decide how improvements can be made.

1. Milk Production

A cow needs nutrients simply to maintain her body (walking, breathing, etc.). This maintenance cost is the same regardless of production level. As milk production increases this maintenance cost is diluted. In a cow making 40 pounds (18.18 kg) of milk per day about 25% of the milk income is needed for maintenance. On the other hand, in a cow making 100 pounds (45.45 kg) of milk per day, only a 10th of the milk income is needed to support maintenance functions. Low milk production can be caused by a number of factors including environment, nutrition, management, and genetics.

Because of maintenance costs, most producers have generally believed that higher milk production is more profitable. One must be aware, however, that highest milk production is not always most profitable. Economic returns generally improve with higher milk production but at a decreasing rate. For this reason, production per cow and profit per cow should be looked at together.

2. Forage Quality

Generally, better forage quality and higher forage intake will improve profitability. Cows are limited in forage intake by the amount of NDF that they can fit into their rumens. An early lactation cow typically can eat between 0.80 – 1% of her body weight as Forage NDF. This means that a 1350-pound (614 kg) cow could consume 11-13.5 pounds (5-6.1 kg) of Forage NDF. If forage contained 50% NDF, the cow could eat 22-27 pounds (10-12.3 kg) of forage per day (DM Basis).

Fiber digestibility and feeding management will primarily affect whether a cow eats 11 or as much as 13.5 pounds of forage NDF (or 22 or as much as 27 pounds of forage per day). According to Michigan State University research, increasing NDF digestibility by 1% increased dry matter intake by almost 0.40 pounds (0.18 kg). The more digestible the NDF, the quicker the rumen feels less full and the more the cow eats in a day.

Fiber digestibility affects the amount of grain needed in a ration. Formulating a ration designed for 90 pounds (40.9 kg) of milk using highly digestible forage NDF, may only require 25 pounds (11.36 kg) of grain. That same ration with poorly digestible forage NDF may require 30 pounds (13.64 kg) of grain. This can greatly impact nutrition economics. Nutrition economics can be improved by allocating the highest quality forages to those cows having the greatest nutritional needs.

3. Heifers

Profitable dairy producers calve in good-sized heifers in a timely manner. This reduces heifer-raising costs and increases dry matter intake and production in the first lactation. Heifers should freshen at 22-24 months of age. Holstein heifers should weigh at least 1300 pounds (591 kg) after calving and should be at least 55 inches (140 cm) tall. In order to achieve this, calves need to get off to a good start, young heifers need to be fed a diet with adequate protein and bypass amino acids, and good forages and growth promotants must be fed up until calving. On the same milking ration, a 1200-pound (545.5 kg) heifer is likely to consume one pound (0.45 kg) less Forage NDF and four pounds (1.82 kg) less total dry matter than a 1300-pound (591 kg) heifer. The smaller heifer will also probably produce 10 pounds (4.55 kg) less milk per day.

4. Feeding Management

Good Starts. Focusing feed dollars on pre-fresh and fresh cow nutrition can be very economical. Cows that start their lactation well will generally eat more and produce more throughout their lactation. Cows experiencing sub-clinical ketosis don’t eat very well and are susceptible to a number of health problems.

Daily Feeding - Cows needed to be tempted to eat many meals each day. Have fresh feed available throughout the day, especially right after milking. Push up to cows often. Clean out old feed from the feedbunk daily. With conventional feeding, feed forage before grain. Provide a good supply of fresh water.

Feeding Groups – Greatest feed efficiency is attained when cows are provided with the nutrients they need without excess. Provide for the nutritional needs of dry cows. Without proper dry cow nutrition, milk production will suffer for the lactation. One group TMR’s for lactating cows do not have high feed efficiency. Generally, early lactation cows are underfed and late lactation cows are overfed. Consider multiple groups or top-dressing high cows in the parlor or with a computer feeder. It can also be profitable to purchase a separate, highly dense grain to be fed specifically to early lactation cows. This allows one to save money on a base grain fed to all cows and spend money on early lactation cows that yield the greatest return. Meeting the nutritional needs of early lactation cows will help to get them off to a good start, increase forage intake, increase peak milk (1 pound (0.45 kg) of peak milk equals 200-225 more pounds (91-102 kg) for the lactation) and improve breeding efficiency.

Feeding Accuracy - Overfeeding concentrate by just 10%, can increase feed cost by 7%. With today’s rations for high cows, that’s about $0.25/cow/day. In a 200-cow dairy, that’s $50/day or $18,250/year. And that’s just feed cost. Overfeeding concentrate may also compromise health and milk production. It may also result in greater nutrient wastage and environmental problems. It is important to make sure that feeding sheets are accurate and changes in forage analysis, especially dry matter, are accounted for. Cows respond positively to ration consistency.

5. Dry Matter Intake

Milk production, forage quality, heifer growth, and feeding management all impact dry matter intake. Dry matter intake also impacts milk production and nutrition economics. Generally, an increase in dry matter intake of 1 pound (0.454 kg)/day results in 2-2.5 pounds (0.91-1.14 kg) more milk per day.

6. Purchased Feeds

Quantity Discounts – Since it costs less to deliver fewer, larger loads of feed, feed companies will generally give price breaks for larger orders. Perhaps a larger bin installed on a farm could save a significant amount of money.

Cash Discounts – Most feed companies reduce the price of feed if it is paid for within a certain amount of time. Improving money management may allow one to take advantage of cash discounts.

Bagged vs. Bulk Feeds – It costs more money to handle feed in a bag. Although most dairy producers now have bulk delivery for some portion of their feed needs, there may still be opportunities to eliminate the cost of bags for minerals, calf feeds, heifer feeds, and dry cow feeds. Totes or boxes that carry 1000 pounds (455 kg) of feed are now used.

Pellets vs. Meals - Generally, there is an additional cost for pelleting feeds. Pellets are normally considered to be more palatable. Pellets also flow better from some bins and augers. There may be a slight improvement in starch digestibility associated with the heat of the pelleting process. Feeds that contain significant amounts of fibrous byproducts are generally pelleted to increase density, reduce separation, and improve eye appeal. For many producers it may be economically beneficial to purchase a meal rather than a pellet if meal feeds can be handled and palatability issues are not great.

Feed Companies – Sometimes one feed company may be able to purchase an ingredient at a lower cost than another company. Feed companies may also change their price margins over time. It is good to compare feed prices between companies. However, always remember to compare similar feeds (“apples to apples”) and keep in mind the value of services that you receive from individual feed companies.

Commodities – The purchase of individual commodities rather than a complete feed may or may not be economically advantageous. Eliminating the middleman (the feed company) theoretically should decrease the price. But, it may not if the feed company can purchase larger quantities and has more bargaining power. Commodities vary in quality. Feed companies generally have better quality control programs than individual producers can afford. If a large quantity of a commodity must be purchased at one time, an individual producer may not be able to use it before quality deteriorates. Storage, shrinkage, and interests costs on commodities may be significant. Using a number of individual commodities on the farm may increase ration-mixing time and decrease feeding accuracy. Time will also be spent on the actual purchasing of commodities and following markets. Finally, services such as forage analyses and ration formulation may need to be purchased when only commodities are used rather than a feed from a feed company.

Feed Additives – The inclusion of various feed additives to the ration can be beneficial or costly. It is important to thoroughly research additives and understand their purpose before including them in the ration. Once in the ration, evaluate the marginal milk response. If the benefit of a feed additive currently in a ration is in doubt, discuss it with your nutritionist. If it is taken out, evaluate cow response carefully.

References:

Bethard, G. and S. Stokes. 1999. Track feed inventories to fine-tune feed costs. Hoard’s Dairyman. June 1999. Page 454.

Bethard, G and S. Stokes. 1999. Connect feed and milk info to improve margins. Hoard’s Dairyman. August 10, 1999. Page 541.

Chase, L.E. and A.N. Pell. 1993. Controlling your feed costs. In: Proceedings of the 1993 Winter Dairy Management Schools - Extension Recommends.

Hinders, R. 1995. Focus needs to be on maximizing milk income over feed costs. Feedstuffs. July 10, 1995. Vol. 67. No. 28.

Hutjens, M.F. 1995. Know where you are on feed costs. Hoard’s Dairyman. June 1995, Page 430.

Hutjens, M.F. Where are you on feed costs? Hoard’s Dairyman.

M.F. Hutjens. 1995. Identifying Limiting Nutritional Constraints to Profitability. Western Canadian Dairy Symposium.

Oba, M. and M.S. Allen. 1999. Evaluation of the importance of the digestibility of neutral detergent fiber from forage: Effects on dry matter intake and milk yield of dairy cows. J. Dairy Sci. 82:589.

Schneider, P.L. 1994. Quality forage, smart buying shave feed costs. Hoard’s Dairyman. November 1994, Page 806.

VandeHaar, M. 1995. Optimum level of milk production: Nutritional considerations. Page 135 in Proceedings of the 1995 Tri-State Nutrition Conference, Fort Wayne, IN.

Related Links:

Controlling Feed Costs on Your Dairy Farm
Rick Grant, Ph.D., University of Nebraska - Lincoln

Feeding Quality Forages to Improve Profits with Dairy Cattle
J.A. Pennington, University of Arkansas

Profitable Feeding Strategies for Dairy Cows
P.H. Robinson, Ph.D., University of California

Possible ways of reducing dairy feeding costs
R.S. Adams, Penn State University

Author

Mary Beth de Ondarza

Mary Beth de Ondarza
45 articles

Nutritional consultant for the dairy feed industry at Paradox Nutrition, LLC.

Look to Paradox Nutrition, LLC for providing:

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Dr. de Ondarza received her Ph. D. from Michigan State University and her Masters Degree from Cornell University, both in the field of Dairy Nutrition.

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Paradox Nutrition

Paradox Nutrition

Paradox Nutrition, LLC is a nutritional consultation business for the dairy feed industry. Mary Beth de Ondarza, Ph.D. is the sole proprietor.

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