Consider All the Factors When Reducing Feed Costs
July 2, 2020
Times are continuing to be challenging for dairy producers. Just when the markets were finally showing some bright spots, world events quickly altered any bullish trends of the market and left many farms reeling financially. With continued market volatility, farms need to focus on the best ways to reduce costs. Evaluating the profitability of various feeding strategies and feed additives needs to remain an emphasis for dairy farms.
Feed is typically the greatest expense on a dairy farm. Since a large proportion of monthly expenditures do go towards feed purchases, reducing money spent on feed is often the first area many farms look at when needing to reduce costs. Individual feed additives often become the target area when reducing costs, but just removing an additive or two from the ration may or may not be a good way to help make the farm more profitable.
When evaluating opportunities to save money on feed, there are a few principles that need to be kept in mind. The most important principle is that reducing feed costs is only beneficial if the change does not cause any detrimental impact on the cows that reduces income to a greater extent than the savings. In challenging financial times, too much emphasis is often given to reducing expenses to improve current cash flow instead of focusing on making truly profitable decisions.
Another important principle to remember when it comes to saving money on feed is that forages are the base of a lactating cow’s diet and have a significant impact on overall feed cost. The quality of the forages in the diet not only have a direct impact on cow health and performance, but they also influence what other feed ingredients need to be fed, resulting in a direct link to the overall daily feed cost. Also, forages typically have the greatest shrink losses of any feed ingredients being fed. Reducing shrink results in direct feed savings to farms and is a piece of the total feed cost that is often not considered nearly enough.
Understand Feed Costs
Understanding the different ingredients that make up the ration and how much they contribute to the overall feed cost is beneficial to help make good decisions. Much of the time, discussions around feed cost focuses on the prices of specific feed additives and how much expense they are contributing to the farm on a daily basis. Although a nutritional additive may be increasing the price being paid for feed each month, it is important to put overall ration costs into perspective.
Purchased feeds and feed additives have a major impact on the cash flow of a dairy operation, but they are often a small piece of the feed puzzle. When it comes to profitability from a feed standpoint, the cost of the entire ration needs to be considered and not just additives or purchased feed costs. As most dairy rations are 45 to 65% forage on a dry matter basis, the forage components of a ration contribute a large portion of the overall feed costs. Based on a ton of wet feed, forages are typically considered quite inexpensive. However, forages usually comprise 30 to 40% of the overall feed cost on a daily basis. Next, let’s consider corn or other grain supplements. If corn is the main grain and is priced at $3.50 bushel, the inclusion of corn in the ration is going to account for another 10 to 15% of the total ration costs. Overall, forages and grains account for about half of the total feed costs for most lactating dairy cows.
Even though all feed sources contribute to the overall feed expense, the focus on feed cost is often targeted at feed additives. Think about a ration where an additive costing $0.10 per cow per day is going to be fed. Although $0.10 per cow may sound like a significant amount, that additive is only going to account for less than 2% of the total daily feed costs, a very small percentage in comparison to forages and grains that make up about 50% of the ration cost. This is not to say that spending an extra 2% isn’t something that needs to be considered, but additive costs often receive too much focus while neglecting other feed areas, such as forage quality and shrink, that may in turn have just as much, or an even greater, impact on daily feed cost.
Let’s use an example of a farm with 20% shrink on their corn silage. This farm is feeding 60 lbs of corn silage per cow. If the value of the corn silage into the bunker before shrink was $40/ton, after shrink the cost of the fed corn silage is actually $50/ton, so the daily cost of feeding corn silage (assuming no refusals) would be $1.50/cow per day. The producer improves their forage management (through strategies such as better packing and improved face management) to reduce the total shrink down to 14%. This improvement in reduced shrink would save over $0.10/cow per day in feed costs alone, not considering potential improvement in animal performance that would likely result from increased forage quality with better forage management.
Another logical reason that the cost of feed additives is often a focus is because feed additive expense often comes with a very small feeding rate. A $0.10/cow per day additive may have a feeding rate of one or two ounces down to a few grams. Additives with very small feeding rates may be removed from the ration without an intake replacement being needed. If larger amounts of ingredients are removed from the ration, a replacement ingredient needs to be included to make up for the dry matter that was removed from the ration. Although this concept of removal and replacement may seem intuitive to nutritionists formulating rations on a daily basis, it is something that is sometimes forgotten in the field. Removing a pound of protein supplement from a ration that costs $0.20/lb doesn’t mean that the ration is going to automatically be $0.20/cow less expensive as another pound of some other ingredient is going to need to be fed. Replacing that pound of protein with corn silage, one of the least expensive feed ingredients on a per pound basis, will still cost about $0.05/cow per day, so removing a pound of protein from the ration and replacing it will corn silage will result in a reduction of only $0.15/cow per day. However, this example just looks strictly at the immediate financial aspect and is not considering the change in nutrient values or the impact on cow health or performance that would likely occur with a change from a protein source to corn silage.
The Value of Feed Additives
Cow production and health should be the number one factor to consider when making changes to the feeding program. The challenge is that a change in feed cost is much easier to calculate and account for than unknown changes in milk production, milk components and/or health. Feed changes are often made to reduce cost and improve short-term cash flow. If the change made to the feeding program results in even a small loss of milk production, components, or cow health, the perceived advantage in reduced feed cost is quickly lost.
Let’s again look at removing a nutritional additive that costs $0.10/cow per day when a farm is receiving a mailbox price of $15/cwt. If removing that additive results in a 1-pound loss of milk production, the farm will have a net loss of $0.05/cow per day. Although the farm would have had a lower feed bill that month, the overall profitability of the farm was reduced, putting the farm in an even less ideal situation than they were before they made the decision to try and reduce feed cost.
One of the challenges of low milk prices and the cash flow issues that may result is that farms may not be accounting for the total financial picture. To cover short-term expenses, decisions are made that negatively impact the overall financial status of the farm. Feeding cows costs money but reducing feed cost is only beneficial if the savings gained are greater than the losses incurred by making the change.
Knowing the impacts of various feeds and feed additives on cow health and performance is, of course, the great unknown. If it were simple to know the actual performance change that would come as a result of adjusting the ration, feeding decisions would be easy to make.
Evaluating the potential efficacy of an additive for a given operation is challenging and there are no guarantees. However, there are some basic things to keep in mind when determining whether to keep a feed ingredient or feed additive in the ration or to give a new one a try. Some things to remember include:
Animals require nutrients and not feed ingredients. The key is that those nutrients need to be in a form easily fed to and readily consumed by an animal, and the nutrients must be available to the cow after they are consumed.
Research is not a guarantee that a certain level of performance will be met, but it gives some assurance that a positive result has been obtained in a controlled setting. Look for products that have some research behind them.
Be honest about the current status of the herd and whether the mode of action of a feed additive would really be expected to make a difference. Remember that not all feed ingredients or feed additives work in all herds.
Measurements and data are the only way to know whether a change is positive or negative. Having a way to measure the expected result when making a feed change is necessary to determine the impact of the change.
Knowing the mode of action of a feed additive and how they are supposed to work needs to be the basis for determining whether an additive should be used. Consider an amino acid supplement like lysine. Lysine supplements do just that, supplying lysine to the cow. If a cow is needing additional lysine to meet her nutritional needs, then the lysine supplement is likely to be helpful and result in a positive response. On the other hand, if a cow has an adequate supply of lysine in her current diet and is not short of lysine, there is not any amount of the lysine supplement that will likely cause a positive response. Having an understanding of the lysine needs of the cows being fed and the levels the current diet is supplying goes a long way in determining whether or not a lysine supplement is worth adding, or possibly removing, from the ration.
It is not always possible to know the exact status of an animal and whether or not a specific feed additive will meet a need, but it is best to take a structured approach to determine whether or not a feed additive is a good choice to feed at the current time. The other reality is that there are a lot of variables on any given dairy operation. Some feed ingredients fit a need and fulfill a purpose at certain times but may not serve the same purpose a few months later. Just because an additive was profitable and successful in the past doesn’t mean that it should always remain in the diet. In the lysine example above, the lysine supplement may be needed in one ration, but a ration change that incorporates ingredients high in lysine may mean that the lysine supplement is no longer needed. Another simple example of feed additives only being added when they meet their intended purpose would be an additive designed to reduce the impacts of heat stress. Adding this additive to the ration in the summer months may be a profitable and good decision, but of course keeping that additive in the ration during colder months is likely a poor decision. Other feed additives, though not as obvious as a heat stress product, may be beneficial under a certain scenario, but may not be a few months down the road as conditions and other feed ingredients change. Make sure the additives in a ration at any given time are being included for a reason that is still applicable to the current situation.
Finally, don’t be afraid to try things, whether it be adding, changing, or removing certain feeds or feed ingredients. Situations change and new feed technologies are continually entering the marketplace so just keeping things the same is not necessarily the right thing to do. Just be sure to have a plan to measure the impacts and give the changes enough time to work before determining whether a positive response is being seen.
Take Home Messages
Feeding cows is an essential part of a farm that may be confusing, complicated, and expensive. Focusing on the basics of providing cows with a well-balanced ration comprised of high-quality ingredients is the first step in ensuring that a farm stays profitable. Forages and grains make up a large percentage of the daily feed cost and quality ingredients are important to keep costs in check. When determining what feed additives should be fed to lactating dairy cows, keep in mind the mode of action of the additive and whether they will fulfill a need for the farm at that time. Finally, remember that saving on feed cost is only profitable if those savings do not result in an even greater loss of profits.