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Feed costs revisited

Jim Paulson, Extension Educator-Dairy

Published in Dairy Star January 31, 2009

In my last article, published November 8, 2008, I discussed the growing trend of sustainable aspects of dairy farming and what that means. To review, the three main areas are: 1) economic, 2) environmental, and 3) social. Economics is number one because if we don’t sustain a profit, we won’t sustain our business. With the big drop in milk price since mid-2008, profitability is going to be a challenge in 2009. With feed costs representing 40-50% of the costs of producing milk, now is a good time to revisit your feed costs.

There are two basic ways to measure feed costs: cost per cow per day or cost per cwt. Both are dependent on costs to feed your herd. It is most likely different from other farms as it depends on amount and types of forage fed, amount of home raised feeds and purchased feeds, milk production level, and the base factor being your forage quality. At the bottom of the page is a simple form to help compute feed cost per cow per day. This form is also available on our dairy extension web site at: Look for “Feed Cost Calculator”. It is a downloadable spreadsheet for your use free of charge.

Once feed cost per head per day has been determined, we can calculate daily milk income and income over feed cost or IOFC. Most producers have a good idea of the bulk tank average per cow every time the milk gets picked up. For computing IOFC, include all milking cows, not just those whose milk is going in the tank, since we are feeding all of them. Milk income is simply the tank average milk in pounds times the milk price per pound. For example, a tank average of 75 pounds per cow per day with a net milk check price of $13.00 per cwt equals $9.75 per cow per day. If feed cost is $5.00 per cow per day, this leaves an IOFC of $4.75 as the gross margin to cover the rest of our costs. We expect to see the IOFC in a range of $5.00 to $7.00 per cow per day. Additionally, we still have to account for the feed costs of dry cows and heifers. This makes the margin shrink even more.

Where will IOFC be for you in 2009? What is your strategy for dealing with the lower milk price in 2009? One of the first things we usually look at is purchased feeds. Is there anything we can cut out? If so, why have we been feeding it in the first place? Most likely, it is there for a reason. Maybe some of the ingredients were used for a specific feeding problem and now that has changed. But reducing feed cost will not necessarily increase IOFC if by doing so, it reduces milk production. The lowest cost ration may not necessarily be the most profitable.

What can you do to either reduce costs, increase milk production or both? Here are some things to consider:

  1. Always strive for maximizing dry matter intake. One more mouthful may mean another pound of milk. This means fresh, palatable feeds, feed pushed up often so they can reach it, no sorting, mangers cleaned daily, cool comfortable cows, and the list goes on.
  2. Watch days in milk. Really work at getting cows pregnant. Our target for days in milk is 150. Late lactation cows just don’t milk as much. With margins squeezed, we may want to cut vet checks, breeding programs, etc. but that can come back to haunt us.
  3. Concentrate on feeding high quality forages. That may start with your cropping plans for this spring and in the future. What is your cost for corn silage and haylage? Should you look at a different forage mix? Work with your nutritionist as you consider different options and get their input on amounts, varieties, with the goal of feeding more forage.
  4. Look at all other costs and purchases in addition to feed. Are there other costs that are out of line?
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