The Dilution of Maintenance (More milk = More profit)

Jim Salfer, Regional Extension Educator-Dairy

October 5, 2007

“Can I afford to push my cows for high production?”  I am often asked this question by dairy producers, especially when feed costs are rising and milk prices are falling.  The short answer is yes.  The goals of your feeding programs, whether milk and/or feed prices are high or low, should be to maximize milk and component yields, and promote optimal dry matter intake while maintaining cow health and longevity.  Certain ration ingredients are needed to attain these goals.  Cows need fiber to promote rumen health, stimulate cud chewing and promote saliva production.  This is achieved by feeding high quality forages of the proper particle size.  Rations should also contain optimal levels of starches and sugar to optimize rumen function and maximize microbial protein production.  Grains are the main source of starch.  Co-product feeds and protein supplements are added to diets to complement the forages and grains.  Lastly, vitamins, minerals and feed additives that are proven to improve performance should be fed.

Profit is driven by income minus cost.  The reason that high production is so important in increasing profitability is a phenomenon called dilution of maintenance.  The nutrient requirements of cows come from two components – maintenance and production.  Maintenance requirements are the nutrients needed for cows to live every day.  They are used to maintain metabolic functions such as walking around, breathing, digesting food and regulating body heat.  Once all maintenance requirements are met then leftover nutrients can be used for milk production and other functions such as reproduction and growth.

Table 1 shows the total feed cost and the breakdown of the cost for maintenance and production at different production levels.

Note that Maintenance values are the same across all milk production levels.  Primary factors affecting maintenance requirements of cows are body weight and activity.  At 50 lbs of milk, 34% of your total feed cost is used for maintenance, and at 80 lbs of milk, that drops to 27%.

Increasing production also dilutes all other direct and overhead costs on your dairy.  Table 2 shows the cow per day profit margin at different production levels using $15.00 cwt milk price, 8.75 cents/lb of dry matter feed cost and other costs [Direct (excluding feed) + overhead costs] of $3.77 cow/day.  These other costs are based on the average costs of Minnesota farms using Minnesota Farm Business Management records for 2006.

Profit margins increase by 280% (from $0.42 to $1.92 cow/day) when production increases from 50 to 60 lbs/cow/day.  Increasing production to 70 lbs/cow/day increases profitability another $1.50 cow/day to $3.42. Sometimes increased expenses are required to get increases in milk production, but often small changes such as better management of the bunker silo, pushing up feed more often or harvesting higher quality forages is all that’s required.

Cost structures are very different on dairies; however these same principles apply whether it is a 1000 cow dairy housed in freestalls or organic producers that are grazing.  Within your dairy’s cost structure, invariably more milk means more profit.

Dairy producers should not make any ration changes that may decrease milk production in the upcoming year – even as feed prices increase and milk prices decrease.  While it is important to always purchase your feed ingredients for the best possible price, substituting ingredients that lower milk production is certain to decrease whole farm profitability.

Below are steps dairy producers can take to minimize the impact of high feed prices:

1. Maximize nutrients harvested from your land.  This includes maximizing the yield of high quality forages.  Proper fertilization, controlling insects and weeds and harvesting in a timely manner are all important factors.  This will minimize the out of pocket expenses from purchased feeds.
2. Test feeds often and test ensiled forages for moisture on a regular basis and adjust rations accordingly.  This will ensure that your rations are meeting your cow’s nutrient requirements, without overfeeding expensive ingredients.
3. Avoid feed waste.  Maintain a smooth face on your bunkers and piles.  Read bunks every day and adjust feed delivered accordingly to minimize the amount of feed cleaned out of the bunks.
4. Examine all feed additives and ask if there is research supporting their use in your herd or situation.
5. Do not overfeed or underfeed nutrients.  Feeding in excess costs money and nutrients are wasted, whereas underfeeding limits milk production.

Along with feed, other costs such as fuel and supplies have increased.  The only way to cover these other increased costs is with higher income over feed cost.  This is best achieved by fine tuning all areas of management to maximize milk production.

Now is not the time to make ration changes that will decrease production or affect cow health and productivity.