Discovering Hidden Feed Costs for the Milking Herd

DAIReXNET Webinar SeriesNovember 7, 2013

Dr. Mike Broukmbrouk@ksu.edu

785-565-3434

Sources of Hidden Feed Cost

Shrink or physical loss

Variation• Feedstuffs• Mixing

Refusals

Inventory – Interest

Brian Gould, Agricultural and Applied Economics, UW Madison    

Cost Measures Based on Profit Groups

ItemAll

FarmsHigh 1/3

Medium 1/3

Low 1/3%

Difference high vs low

$ per Cwt of Milk

Feed $9.49 $8.61 $9.48 $10.37 -17%

Labor 3.40 2.44 3.13 4.60 -47

Vet 0.53 0.57 0.52 0.51 12

Dairy Supplies 1.44 1.40 1.28 1.62 -14

Marketing/breeding 0.44 0.50 0.41 0.42 19

Machinery 1.72 1.44 1.83 1.89 -24

Utilities and fuel 0.88 0.67 0.78 1.18 -43

Interest 1.68 1.41 1.65 1.99 -29

Other 0.42 0.36 0.35 0.56 -36

Dhuyvetter, 2011

Profitability Based on Profit Groups

ItemAll

FarmsHigh 1/3

Medium 1/3

Low 1/3%

Difference high vs low

Milk Production, lb/c

20,326 22,788 20,445 17,753 28%

Gross Income, $/cwt

17.87 18.11 17.94 17.57 3

Total Cost, $,cwt 20.00 17.40 19.42 23.13 -25

Net Return, $/cwt -2.13 0.71 -1.48 -5.56

Dhuyvetter, 2011

Key Factors in Determining Profitability

Variable Coefficient P-value

Cows, number of head

1.9 0.156

Milk Production, lbs/c/d

19.9 0.004

Milk Price, $/cwt 182.3 0.023

Cull rate, % -6.8 0.267

Feed, % of total cost 30.1 0.054

Labor, livestock % -8.5 0.209

Dhuyvetter, 2011

Production Cycle of the Dairy Cow

11%

5%

28%

28%

28%

Dry

Transition

Early

Mid

Late

Remove Production Barriers

Cow Comfort

Nutrition

Reproduction

Lameness

Milking Management

Know your cost!!!

Difficult economic times• Improved Management• Can’t manage, if it is not measured!!!

Rations on the farm Formulated Mixed Consumed

Can you Measure True Feed Cost?

Shrink - Amount DeliveredAmount FedDifference is Shrink

FactorsMoistureSpoilageLosses

Wind Animals

Typical Shrink Values

Uncovered Covered Closed

Ingredient Open Piles 3-sided Bay Bins

-------------------% Loss --------------------

Whole Cottonseed

10 - 20 5 - 15 ---------

Dry Meal 5 - 10 3 - 8 2 - 4

Soybean Hulls 12 - 20 5 - 10 2 - 5

Dry Distillers 15 – 22 7 – 10 3 – 5

Wet Distillers 15 – 40 15 – 40 ---------

Kertz, 1998

Feed Cost without Shrink - Formulated

Feeding Rate Cost Costlb/h/d $/ton $/h/d

CS 30 60 0.90

A Silage 12 120 0.72

A Hay 15 250 1.88

Corn 10 195 0.98

SBM 4 460 0.92

DDGS 3 225 0.34

Mineral 1.5 800 0.60

Cost 6.33

Feed Cost with Shrink

Typical Cost Reduced CostShrink, % $/h/d Shrink, % $/h/d

CS 20 1.08 10 0.99

A Silage 25 0.90 12 0.81

A Hay 10 2.06 5 1.97

Corn 6 1.03 3 1.00

SBM 8 0.99 3 0.95

DDGS 6 0.36 3 0.35

Mineral 4 0.62 3 0.62

Cost 7.04 6.69

Real Feed Cost

No Shrink Shrink Reduced Shrink

Series1 6.33 7.04 6.69

$5.88

$6.13

$6.38

$6.63

$6.88

$7.13

Feed Cost,

$/cow/d

Impact on Shrink on Feed Cost per CWT of Milk

80 70 60$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

No ShrinkNormal ShrinkReduced Shrink

Milk Production, lb/cow daily

Attitudes on Shrink Control

Lack of Data• “Can’t Manage What You Can’t Measure”

Cost of Doing Business

Out of Sight Out of Mind

Not Worth My Time

Potential Profit Opportunity

Potential Annual Change in Feed Cost

~$0.35/c/d change

• 100 cows - $12,775

• 500 cows - $63,875

• 1,000 cows- $127,750

• 3,000 cows - $383,250

Implications of Increased Shrink on Silage Cost in Diet

Assumptions:• Feeding 1000 cows• Feeding 30lbs/c/d• Cost delivered, packed, covered

$45, $55, $65

• Losses in silo 10, 15, 20, 25%

Implications of Shrink on Silage Cost

10 15 20 25 30 3535

45

55

65

75

85

95

$45/ton

$55/ton

$65/ton

% Shrink

$ per ton

Tons and Acres Required for Annual Silage Shrink

Amount of Shrink, %

5 10 15 20 25 30 35

Extra Tons

54.8 109.5 164.3 219.0 273.8 328.5 383.3Extra Acres 2.7 5.5 8.2 11.0 13.7 16.4 19.2

200 cows fed 30 lbs silage per day

Acres estimated based on a yield of 20 ton/acre

Estimated Annual Savings per 200 Cows by Reducing Silage Loss to 10%

15 20 25 30 35$0

$2,000 $4,000 $6,000 $8,000

$10,000 $12,000 $14,000 $16,000 $18,000

45

55

65

Percentage Shrink

Impact of Feeding Spoiled Silage to Steers

Item 0% Spoiled

25% Spoiled

50% Spoiled

75% Spoiled

Intake, lb 17.5 16.2 15.3 14.7% Reduction 7.4 12.6 16.0NDF Digestibility, %

63.0 59.5 56.0 51.0

Bolsen, 2004

7% Decrease in DMI = 3.5 lb of DMI = 10.5 lb of milk

Additional Benefits

Reduced loss = Increased Forage Quality• 30 lb feeding rate 66 cows/ton

10 12 14 16 18$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

1

2

3

4

5

$ / cwt of Milk

$ / ton silage

B. Perkins

B. Perkins

Where is the Shrink on Your Farms?

Cost Implications of Shrink

IngredientBase Cost

UncoveredOpen Piles

Covered3-Sided Bay

ClosedBins

---------------------- $/ton ------------------------

SBM 460 529 497 469

Corn 195 224 211 199

Mineral 800 920 864 816

4lb SBM/cow daily x 500 cows = 1 ton per day x $28/ton x 365 = $10,220/yr

Example of Shrink in a Commodity Barn

Dry Distillers• 8.4%

Canola Meal• 3.5%

Whole Cotton Seed• 5.2%

Mineral• 1.6%

Flaked Corn • 2.7%

$0.13/c/day

4,500 cows

$213,525/yr

Reduced

ShrinkInitial CostInventory

Hay Storage Method and Losses

Netw

rap/g

rou

nd

Plastic/g

rou

nd

Tw

ine/G

rou

nd

Insid

e

0

10

20

30

40

% Loss of DM

Univ of WI

Got Birds?

100,000 birds eat

24 tons/month

Feed Component Selection by Birds

% Reduction in Starch

57

38

58

Flaked Corn/Alfalfa Hay

Rolled Corn/Alfalfa Hay

Flaked Corn/CS

Other Sources of Feed Shrink

Delivery Weight Errors• Delivered Feeds and Forages• Are you getting what you pay for????

Scale Accuracy• Calibration• Certification

Cow Toy• Tossed Feed• 2.5% more loss with post-rail vs headlocks• 3 lbs of feed/c/d ~ $0.20/c/d

Refusals• Use• Sell

Other Sources of Feed Shrink

Rodents• Raised feedbunks• Silage and Feed Storage

Tires and Tracking• Wet surfaces and feeds

Feed Delivery Errors

Target Wt, lb

Loaded Wt, lb

Deviation Wt, lb

% Error

Corn Silage 9,000 9,120 120 1.3

Alfalfa Hay 3,200 3,290 90 2.8

Corn 2,000 2,020 20 1.0

SBM 800 820 20 2.5

Premix 400 430 30 7.5

Molasses 100 120 20 20.0

150 Cow Mix

Cost of Delivery Error

Deviation Wt, lb

Cost/lb,$ Cost/Mix$

Corn Silage 120 0.027 3.24

Alfalfa Hay 90 0.125 11.25

Corn 20 0.095 1.90

SBM 20 0.225 4.50

Premix 30 0.400 12.00

Molasses 20 0.060 1.20

$34.09$0.227 cow/day

$82,8551000 cows/year

Key Issues in Hidden Costs of Shrink

Level of Production• Do you get what you pay for?• Remove milk production barriers

Measure and Control Shrink• Wet Feeds• Commodity Buildings• Feed Mixing• Refusals

Thank You