Is your feed cost per cwt <$10?
Is your feed cost for all animals on your farm less than $10 per 100 pounds of milk produced? This includes calves, heifers and dry cows in addition to your milking cows. In the Midwest, it probably is. In other parts of the country, it may not be; but knowing that cost is extremely important in making good decisions about the Milk Margin Protection program. As shown in Figure 1, the margin between milk price and feed cost can become very tight.
Figure 1. Historical margins between the price of milk and the cost of feed. Source: dairymarkets.org
Consider some quick calculations: For every 100 cows, you have 80 milking and 20 dry cows as well as 100 calves and heifers. Your feed costs are $.10 per pound of dry matter for the milking cows and they eat 50 pounds of dry matter per day and produce 80 pounds of milk per cow per day. That equates to $5.50 per cow per day feed cost or $5.50 / .8 cwt. = $6.88 per cwt of milk in feed cost. But that is just for the milking cows. If we add $3.00 per head of average heifer feed cost per day and $3.00 per head for the dry cows, we have an additional $360.00 per day in feed costs. That adds an additional $5.63 per cwt in feed costs. We now have an actual feed cost per cwt of milk produced of $12.51.
As was discussed in a previous article by Jim Salfer, our feed costs in the Midwest can be lower than the national average due to the fact that we grow a large percentage of our own feed. It is valuable for your business to know what your actual cost is. It may not be simple to arrive at some values of home produced forages. Knowing cost per year, actual yields, and allocated costs in addition to land cost can be challenging. One of the difficult factors in calculating feed costs is coming up with an accurate cost or value of your home grown forages. Your cost to produce your forage may have little to do with current market price of hay or corn. You may be able to grow corn for silage or alfalfa and grass for forage at a lower cost than you would have to pay in today's market. This is one advantage to upper Midwest dairies. You are choosing to make your crops a cost center, not a profit center, thereby putting the profit potential in your dairy operation or in the net farm profit if the dairy is your main enterprise. Being in the dairy business does not allow us a lot of flexibility of enterprises or rotations.
|Homegrown feeds:||Avg lb/cow||$/lb||$/cow/day|
|Goal: >60% of total||Subtotal||=|
|Purchased feeds:||Avg lb/cow||$/lb||$/cow/day|
|Goal: <40% of total||Subtotal||=|
|Feed $/cow/day||Avg milk/cow||Feed $/cwt milk|
|Goal: < $10.00/cwt|