Controlling Feed Costs for Dairy Cattle

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Source: Ohio State University

Dr. Maurice Eastridge, Extension Dairy Specialist, and Dr. Bill Weiss, Dairy Nutrition Specialist, The Ohio State University

Feed costs account for the greatest portion of the variable costs of producing milk. The increase in corn prices driven by ethanol production, the subsequent rise in other commodity prices, limited supply of forage in many areas of the State due to growing conditions, and the increased cost (especially fuel costs) of growing feedstuffs have substantially increased the cost of feeding dairy cattle during recent months, and this situation will not change anytime soon. The following of corn prices by other commodities has been stronger than expected, including the price of distillers grains, and the slower than projected construction of ethanol plants has not yet resulted in an imbalance of supply and demand for distillers grains. Due to these economic forces, the cost of feeding dairy cattle has increased 5 to 30%. While this can strip away profitability when milk prices are high, it can quickly place a farm in financial hardship when milk prices are moderate to low.

There are different ways of assessing feed costs, and these methods are addressed in this article for lactating cows only. Feed costs usually range from $0.06 to 0.08/lb of dietary dry matter (DM), and thus the cost per cow per day will then depend on DM intake. To relate the feed cost to milk yield, we calculate feed costs per hundredweight of milk, which generally should be < $4.50/cwt. However, the value of the milk will depend on its protein and fat composition (plus some quality indicators). Therefore, we stress the importance of monitoring income over feed costs (IOFC). The goal for IOFC is to be at least > $6.00/cow/day. Feed efficiency on dairy farms affects IOFC. One common method to calculate feed efficiency is: 3.5% fat-corrected milk (FCM, lb) / DM intake (lb) and 3.5% FCM (lb) = 0.432 x lb milk) + (16.23 x lb milk fat). The desired range for this feed efficiency is 1.4 to 1.6. Our goal is usually to increase DM intake, but if the intake increases without a response in milk yield, then some other positive response (for example, improved body condition) should be occurring or the increase in feed costs is not making an economic return.
Using the scenarios presented in Table 1, some suggestions for controlling feed costs are provided.

  • Scenario A: At the onset, our greatest concern may be the increased cost of the ration, as illustrated by a 15% increase in feed costs resulting in $53/day less IOFC for 100 cows. Strategies to keep ration costs under control without affecting performance are: 1) working with the nutritionist to develop rations using less costly ingredients, including adjusting the portions of forage and concentrates as needed, 2) improve feeding management to reduce losses from storage and refusals (e.g. use good silo management to reduce spoilage, feed for 1 to 2% refusals and clean out refusals every other day and then feed to lower production group or heifers), and 3) contract for feed commodities to lock in favorable prices.
  • Scenario B: A 15% drop in milk price resulted in a $240 decrease in IOFC for 100 cows. Although our initial reaction may be “there is nothing I can do about this”, on second thought, there are some things to consider: 1) Are milk fat and protein concentrations normal for the respective breed? If not, the feeding program may be causing these milk components to be too low, resulting in a loss of revenue. 2) Is the somatic cell count low? If not, you are loosing milk yield and may be either getting deducts per hundredweight or losing out on milk premiums.  3) Maybe you need to find a new buyer for your milk.
  • Scenario C: A 15% drop in feed efficiency (lower milk yield and higher feed intake which is a potential scenario with over feeding byproducts) resulted in a $181 loss in IOFC for a 100-cow herd, but the factors affecting the change in feed efficiency may be more under your control than the change in milk price in Scenario B. Housing, health, feeding, and DETAILS will need to be investigated for the cause of this change.
  • Scenario D: One strategy at times is to improve cash flow by reducing costs. Reducing feed costs in this scenario reflects that milk production will most likely decrease, resulting in a $188 drop in IOFC. Although there is less cash outflow for feed, there is a net loss in IOFC.  So, the message is that improving IOFC is not as simple as reducing the daily feed costs.

Even with the high current feed costs, profits are still generally strong because of the high milk price; however, this is unlikely to continue and you should not become complacent.  As illustrated in the scenarios, the impact of higher feed costs is going to be severe at lower milk prices and when decreases in feed efficiency occur. As we look to the future (months) when milk prices are likely to fall and feed prices remain high, the impacts can be overwhelming (Scenario E = A + B), necessitating changes in management now to reduce price risks later and improve the present financial standing of an operation.

Table 1. Comparisons of income over feed costs with changes in milk price, milk yield, dry matter intake, feed efficiency, and feed costs.

Scenario
Milk Yield
(lb/day)
Milk Income
($/day)
DM Intake
(lb/day)
Feed Efficiency
(Milk/DMI, lb/lb)
Feed Costs
($/day)
Feed Costs
($/cwt milk)

IOFC
($/day)

Change in IOFC 100 cows ($/day)
Baseline ($20/cwt milk, $0.07/lb DM)
80
16.00
50.0
1.60
3.50
4.38
12.50
XXX
(A) 15% increase in feed costs ($0.0805/lb DM)
80
16.00
50.0
1.60
4.03
5.03
11.98
-53
(B) 15% decrease in milk price ($17/cwt)
80
13.60
50.0
1.60
3.50
4.38
10.10
-240
(C) 15% decrease in feed efficiency via lower milk and higher DM intake
72
14.40
53.0
1.36
3.71
5.15
10.69
-181
(D) 15% decrease in milk and DM intake
68
13.60
42.5
1.60
2.98
4.38
10.63
-188
(E) = A + B
80
13.60
50.0
1.60
4.03
5.03
9.58
-293