Karen Bonhert
February 15, 2022
While the New Year offers a big sigh of relief with higher milk prices, input costs are still considerably higher than the last time producers saw $20 plus prices. Experts emphasize understanding your costs, so you can benefit from a margin that has not been seen in years.
Gary Sipiorski, an independent financial consultant for agriculture businesses reminds producers that feed costs should range between 20-45% of the gross income.
“The variation of the range depends on how much feed you produce yourself. If your purchase all your feed, your feed cost will be around 45 of the milk check,” he notes. “Feed is the biggest cost to a dairy and each farm needs to individually evaluate, depending on variables such as needs and forage quality.”
GPS consultant, Paul Dyk shares four key points to help producers manage feed costs.
1. Focus your agronomy on high-quality forage. While fiber digestibility is always a prime goal for corn silage, don’t forget about the starch content. Corn silage with 28% starch has lots of digestible fiber, but you are going to be buying corn to match your diet targets. For BMR corn silage, consider lower plant populations to increase starch levels without compromising your fiber digestibility. For non-BMR varieties, look for hybrids that can achieve 61-62% NDFd30 with starch above 33%. Do the math; if you have corn silage with higher starch, you will likely feed more pounds of dry matter and you will need more acres.
2. Reevaluate your protein and amino acid strategy in your diet. New players in the field have opened up new options for methionine supplementation. Evaluate commodities coming to the farm, like canola, soybean meal and “bypass” meals. Usually, these are sold with “guaranteed” levels; check the real values and make sure you are not overfeeding nutrients.
3. Think shrink! Do you weigh all ingredients coming onto the farm and all ingredients being fed to the cows? What’s the difference? Where is there an opportunity? Don’t have a truck scale? Get one. Where do your weigh backs go from the lactating cows? Heifers or steers? It is expensive feed for these groups. Think about refeeding weigh backs.
4. Capitalism. It works. Have your independent consultant bid out your feed needs among suppliers. A 10 cent/hd. savings on a 1,000-cow dairy is $37,000. A 40 cent/hd. difference can approach $150,000. I’ve seen these numbers on many dairies, it’s your money to be saved.
A variety of factors can influence profitability in any business. With the milk check generating most of the gross dollars for a dairy farm, producers must maximize production, components and quality to boost their milk check, while also keeping a sharp eye on feed costs to ensure it doesn’t eat up all the margin gained from higher milk price in 2022.
Sipiorski highlights the importance of drilling down expenses and encourages farmers to look at where they can save money. “Sometimes we get lax about costs when milk prices are strong,” he says.
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