Controlling Feed Costs Over the Long Haul

Dairy June 25, 2010 Print Friendly and PDF

Contents

Introduction

After several years of relatively cheap grain prices, corn and soybean prices have increased significantly. The increase is primarily due to greater demand for corn and soybeans to produce ethanol and biodiesel. Most economists suggest that these higher prices will be with us for the foreseeable future. Because other feedstuffs are typically priced to reflect the corn and soybean market, the cost of almost all feed ingredients has increased.

Feed is the largest single cost in producing milk, therefore, most producers review their feeding program to see if there are ways to reduce these cost. Changes made to rations should only occur after a thorough review of the feeding program and must take into account the impact a change could have on other aspects of the overall operation. This paper will review factors that affect feed cost, methods for determining the value of by-product feeds, review issues related to using by-product feeds, and provide some suggestions for dealing with feed cost over the long haul.

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Factors that Affect Feed Cost

Rations are formulated based on animal requirements and the quality of feeds available. In regards to animal requirements, higher producing cows have lower feed cost per cwt. This is because maintenance requirements (the amount of feed required to maintain basic body functions) are diluted by higher levels of milk production. Therefore, it is still more profitable to feed for high levels of milk production even when feed costs are high. The key is to use a realistic level of production for formulating rations.

Forage quality is one of the biggest factors affecting total feed cost. As forage quality increases, less concentrate is required to provide the additional nutrients needed to support maintenance, milk production, reproduction, and health. Considerable advances have been made by seed companies as they work to identify hybrids that not only yield well, but are more digestible so that the cow can obtain more metabolizable energy in support of milk production. We also have a better understanding of the importance of timely harvest and forage processing to get the most out of our forage. Research has also demonstrated the importance of managing the forage during storage and feed-out to prevent secondary fermentation of silage or deterioration of hay once it has been baled.

The factor most producers watch and often talk about is the cost of supplements, especially corn, which along with soybean meal are used to establish the price for most ingredients. Fortunately, there are a variety of feedstuffs available that can supply energy and protein in rations for dairy cows in addition to corn grain and soybean meal. The list of possibilities includes traditional grains and protein supplements as well as numerous by-products from the production of food, fiber or fuel. There are also other unusual by-products available in some areas that can be fed if the producer is set up to handle those ingredients. The initial attraction of by-product feeds is their lower cost, but there are other factors to consider in addition to cost.

Most producers feed one or more additives, which increases feed cost. Several additives have research data to validate their usefulness and document their potential to improve production or health. These additives when used according to directions provide a good return on investment and should be continued. However there are additives on the market that do not have unbiased information to support their potential usefulness. Often these products are included in the ration because they may help solve a problem. The use of these additives should be critically reviewed as to their need and usefulness as they add to the cost of production and may not provide any return. No product, with or without research documentation, should not be used as a band-aid for poor management. The same is true for certain ingredients as well. Remember:

  • There are no magic bullets.
  • If it sounds too good to be true, it probably is.
  • No product can change the laws of science.

Determining the Cost of Feed Ingredients

There are several methods for comparing the prices of by-product feeds. Many ration formulation programs calculate the value of each feed ingredient based on the nutrient requirements of the diet and the nutrients available from ingredients offered. This method provides specific information for that particular situation, but most producers do not have the software to perform these calculations.

More commonly, producers use programs specifically designed to compare the value of several feeds compared to a reference feed, such as corn and soybean meal. One program that is commonly used is the FEEDVAL program available from the University of Wisconsin. This program calculates the value ($/ton) based on the dry matter (DM), crude protein (CP), total digestible nutrients (TDN), calcium (Ca), and phosphorus (P) contents of each feed compared with the test feeds (shelled corn, 48% CP soybean meal, limestone, and dicalcium phosphate). The nutrient composition of the feeds can be changed to match the products available in your area, as well as the percentage feed loss. The values for forages are expressed on a dry matter basis, whereas, all other ingredient values are expressed on an as-fed basis.

A second version of this program (FEEDVAL4) is available that calculates the value of feeds based on undegradable and degradable protein, TDN, fat, Ca, and P content using blood meal, urea, tallow, shelled corn, limestone, and dicalcium phosphate as reference feeds. Both programs allow the user to compare a wide variety of feedstuffs based on their primary nutrient content. The program can also be used to determine the feeding value of homegrown feedstuffs. There are other similar programs available as well as similar functions in many of the ration formulation programs available today.

As an example, market prices for select by-product feeds obtained from dealers in the South Georgia market during late January were compared with the results from FEEDVAL using corn and soybean meal prices for the same market and time (Table 1). The calculated values of most feeds relative to corn and soybean meal were favorable except for cottonseed hulls and urea. Some of these by-products offer greater saving potential (whole cottonseed and cottonseed meal) than others. The choice of which by-product(s) you choose to examine in more detail depends on nutrients needed to compliment homegrown feeds.

Table 1. Values ($/ton) of select feed ingredients using FEEDVAL compared with current market prices1.
Ingredient Market Price Calculated Value2 Difference, Calculate - Market
Corn, High-Moisture Ear 1003 121 21
Corn Gluten Feed, Dry 135 192 57
Cottonseed, Whole 135 221 86
Cottonseed Hulls 165 89 -76
Cottonseed Meal 160 221 61
Distillers Grains, Dried 180 201 21
Hominy Feed 155 171 16
Soy Hulls 120 164 44
Wheat Middlings 155 190 35
Urea 450 422 -28
1Reference feed cost used for this example were: $4.65/bu for corn; $240/ton for soybean meal, 48% CP; $7.00/cwt for limestone; and $27.00/cwt for dicalcium phosphate.

2The calculated price is based on the default nutrient content of the ingredients with 0% feed lost.
3Price estimated on input cost.


These programs do not take into account the effect of nutrient balance in the final ration. Producers should compare similar types of ingredients when selecting those that they will ultimately use. If you are not sure how a particular ingredient would fit into your ration, be sure and consult your nutritionist before you purchase any new ingredient. Most nutritionists keep up with ingredient cost and can provide a considerable amount of help when looking at any new ingredient.

There are several listings of ingredient prices that can be accessed by the Internet, including the University of Missouri site. These sites are good for information, but you will need to contact a broker to get a delivered price to your farm.

The true cost of a feed ingredient may be different from what we initially paid. Table 2 outlines some of the items that should be taken into account to determine the true cost of individual feeds. There are additional delivery costs for by-product feeds that may not be included in the initial quote. If you must receive a semitruck-load of feed that will be fed over an extended time, you should include an interest cost on the money tied up in inventory. Shrinkage varies from 3% to7% for dry ingredients to 15% to 35% for wet ingredients. Sometimes special storage or handling is required when compared to using a complete feed, and these costs should be taken into account. The major cost in this analysis is typically shrinkage and delivery cost when the feed is used in a normal time frame.

Nutrient Form and Balance

Most feedstuffs provide a combination of nutrients but are classified according to the primary nutrient provided. In most situations it is desirable to include a mix of feedstuffs in the ration to help provide a more desirable balance of nutrients to optimize ruminal fermentation and health. For example, high-fiber energy supplements are useful for reducing the starch concentration of rations based on corn silage and supplemented ground corn. For diets containing high-quality legume silage or high-protein grass silage, protein supplements that contain rapidly degraded protein would not be desirable. However, there are other situations in which the use of urea or another source of degradable protein should be fed even though it may not be the least expensive protein source compared with soybean meal.

When by-products are included in rations, we must be aware of the amount of phosphorus these ingredients add to the ration. With greater attention on nutrient runoff and its negative effect on the environment, we must consider the impact of overfeeding phosphorus and other nutrients on the long term aspects of whole farm nutrient balance. Several by-products have relative high levels of phosphorus which is one of the primary concerns. If multiple feeds with higher than average concentrations of phosphorus are fed, the phosphorus content of the ration will be well above that NRC (2001) recommendations. The long-term impact may be a limitation in the amount of manure that can be applied to your land which could reduce any future expansion plans with the purchase of additional land.

Table 2. Calculating the true cost of feed ingredients.
Price delivered to the farm ____ tons @ $_______/ton $____________
Interest ____ % for _______ months ____________
Shrinkage and storage losses ____ % ____________
Extra handling cost ____ Hr @ $________/Hr ____________
Total cost ____________
Divide total cost by ____ tons
Total cost per ton $____________
Note:Shrinkage for dry ingredients varies from 3% to 5%, whereas, shrinkage for wet ingredients varies from 15% to 30%.


Nutrient Variation:

When producers make the decision to use a by-product, they also assume responsibility for quality control of that ingredient. Variation in the nutrient content of by-product feeds occurs because of differences in the variety of grain used for processing, fertility of soil the crop was grown on, processing method used by the plant to extract the primary products, blending of multiple by-products together by the manufacturing plant, and storage conditions.

The results of a study examining the variation in nutrient content of by-product feeds available to California dairy producers are summarized in Table 3 (DePeters et al., 2000). The variation in the nutrient concentration in a feed is reported as the coefficient of variation (CV) and is expressed as a percent. The lower the CV, the less variation there is for that nutrient. The amount of variation is normally higher for minerals than other nutrients. The expected variation for some by-products is greater because of the different types of processing in the industry. For example, greater variation is observed in fiber and fat concentrations of hominy feed than any of the other ingredients listed, reflecting the differences in processing methods used by processors in the industry.

The variation in nutrient content of a by-product is typically much higher for the industry, compared with that from a single source. This is illustrated for wet brewers grains in Table 4. The data represent 192 samples of wet brewers grains from around the United States submitted to a commercial laboratory, as well as samples we collected during a research trial from one plant analyzed by the same laboratory. Each brewery produces different types of beer, which requires different ingredients to provide the unique properties for each beverage, resulting in high CV for all nutrients. In contrast, the variation in the nutrient content of wet brewers grain from a single brewery is typically much lower.

Table 3. Variation in the nutrient content of select by-product feeds.
    CP1 UCP ADF NDF EE Ca P Mg K
WBG2 Avg3 27.0 2.7 18.0 37.3 6.3 0.24 0.65 0.27 0.26
Min 24.2 1.6 15.8 33.0 5.7 0.19 0.59 0.25 0.19
Max 30.6 3.6 20.5 43.6 6.9 0.28 0.76 0.32 0.34
CV 8.3 24.4 10.6 9.2 6.5 11.03 8.69 8.11 20.02
CGF Avg 22.9 0.8 12.5 38.8 3.4 0.03 0.84 0.36 1.24
Min 19.4 0.4 10.7 31.5 2.9 0.02 0.63 0.28 0.95
Max 33.4 1.9 13.9 44.4 4.4 0.03 1.04 0.46 1.66
CV 18.7 57.4 8.0 9.9 13.0 19.86 13.93 14.95 16.17
DDG Avg 31.2 9.4 20.3 35.6 13.0 0.07 0.80 0.02 1.01
Min 30.4 5.7 11.3 26.5 11.7 0.06 0.77 0.33 0.93
Max 32.3 12.8 25.1 45.1 15.7 0.07 0.85 0.39 1.10
CV 2.0 32.4 29.1 23.0 10.2 7.21 3.57 5.36 5.31
H Avg 11.0 0.9 6.9 19.8 6.5 0.02 0.61 0.24 0.72
Min 10.1 0.5 4.8 15.8 5.6 0.01 0.46 0.19 0.55
Max 11.7 1.3 9.9 24.8 8.1 0.06 0.71 0.27 0.84
CV 5.8 28.2 22.1 15.3 12.3 63.56 13.02 11.58 13.99
SH Avg 11.8 1.3 46.6 64.4 2.5 0.60 0.13 0.25 1.32
Min 10.8 1.0 40.4 57.3 1.2 0.18 0.04 0.07 0.35
Max 14.2 1.6 49.9 71.6 3.7 0.73 0.19 0.29 1.60
CV 9.8 12.7 6.2 5.9 35.7 25.60 29.99 26.06 26.62
1CP = crude protein; UCP = unavailable crude protein; ADF = acid detergent fiber; NDF = neutral detergent fiber; EE = ether extract; Ca = calcium; P = phosphorus; Mg = magnesium; and K = potassium.
2WBG = wet brewers grain; CGF = corn gluten feed; DDG = distillers dried grains; H = hominy; and SH = soybean hulls.
3Avg = average; Min = minimum; Max = maximum; and CV = coefficient of variation.
Source: DePeters et al. 2000. Prof. Anim Sci. 16:69-99.


Processing methods used by manufacturers have changed greatly during the last decade. These changes allow the processor to more effectively remove the primary product (starch, oil, etc.), producing by-products that have a different nutrient profile than that listed in many references. For example, the processing methods used to produce ethanol have changed greatly, which produce distillers dried grains with solubles (DDGS) with a different nutrient content than previously available. The degree of change and the variation associated with DDGS is outlined in Table 5.

The nutrient profile listed by the Distillers Grains Technology Council is similar to that published by NRC (1989) but differs from the information published by NRC (2001) in the latest edition. The University of Minnesota recently analyzed samples from 31 plants in the Midwest (Anonymous, 2005). The results of this survey differ from the traditional book values reported by NRC (1989 and 2001) illustrating the variation in the nutrient content of DDGS that is present in the industry. Part of this variation is due to “new generation” plants that have come online in the past few years that produce DDGS that are reported to have higher nutrient value than DDGS produced by older, more traditional ethanol plants.

Processing technology is constantly being refined to improve the extraction of primary ingredients. Researchers are also looking at ways to decrease the amount of nutrients, such as phosphorus in by-products, so that their use in animal feeds will improve whole-farm nutrient balance and maintain water quality. Some processing technology being developed will allow the production of custom by-products for feeding in the near future, which will be advantageous for dairy producers. For these reasons, producers should sample each feedstuff on a regular schedule to keep track of the variation and any change in nutrient content that may impact the nutrient content of the diet.

Quality Issues

Another aspect of quality control is safeguarding against potential contaminants in the by-product feeds. Normally, the raw materials used for manufacturing food are screened for mycotoxins and other potentially harmful contaminants before use, and the by-products are safe for animal consumption as long as they are handled properly after they leave the plant. There have been a limited number of cases in the past where by-products from nonfood industry sources were contaminated resulting in either the death of numerous animals or condemnation of the animals. Producers should ask about the quality control measures used by the manufacturer to safeguard against contamination of the by-product with mycotoxins or other harmful compounds. As the production of biofuels increases, there may be situations where treated seed or fermentation products from other industries are used to make ethanol or biodiesel. The by-products from these products could potentially be fatal to the animals consuming them.

Table 4. Variation in the nutrient content of wet brewers grain (DM basis).
Ingredient   DM1 % CP % ADF % NDF % EE % Ca % P % K %
Multiple Sources, n = 192 Avg2 25.45 32.38 23.27 46.25 9.17 0.32 0.60 0.14
Min 11.91 19.94 15.92 9.21 4.17 0.12 0.17 0.01
Max 44.87 44.87 33.63 60.34 11.43 0.79 0.81 0.41
CV 13.74 13.74 11.30 11.37 13.49 32.56 13.30 41.69
Single Source, n = 6 Avg 23.10 30.67 25.29 47.35   0.16 0.52 0.99
Min 22.10 29.90 24.67 43.34   0.15 0.47 0.94
Max 23.76 32.28 25.78 49.65   0.17 0.58 1.05
CV 2.66 2.89 1.47 4.72   8.18 4.21 5.22
1DM = dry matter; CP = crude protein; ADF = acid detergent fiber; NDF = neutral detergent fiber; EE = ether extract; Ca = calcium; P = phosphorus; and K = potassium.
2Avg = average; Min = minimum; Max = maximum; and CV = coefficient of variation.


Occasionally, there are “unusual” by-products that may become available for use. Some examples include candy, cocoa by-product, fruit pomace, fresh vegetables or fruits, vegetable residues or other products that are not typically fed. In some cases, there isn’t any information available on the nutrient content of these feeds and the producer must run analysis before they can be included in a ration. Many of these products have handling issues (e.g., individually wrapped pieces of candy), but other products may have some compounds, either natural or added during processing, that would limit their use. In these cases, the producer should seek the assistance of a nutritionist with experience in this area.

Energy Supplements Other than Corn Grain

Either you have already looked at replacing some or all of the corn in the diet or you will in the near future. Corn is fed primarily as a source of fermentable energy. The energy is primarily in the form of starch, which is digested at varying rates depending on how finely it has been ground or how it has been processed. There are several by-products that can be used to partially replace corn grain in the diets. Some of the primary by-products to consider include: hominy feed, soybean hulls, bakery by-product, citrus pulp, molasses, wheat middlings, brewers grain, corn gluten feed, or distillers grain. The energy in many of these by-products is primarily in the form of digestible fiber, but some by-products contain processed carbohydrates or sugar, in the case of bakery by-product, and molasses, which should be handled differently in the ration. Hominy can have more starch than most of the other products, but there is considerable variation among sources.

Table 5. Variation in the nutrient content of distillers grains with solubles (DM basis).
Ingredient   DM1 % CP % ADF % NDF % Fat % Ca % P % K %
NRC, 1989 Avg2 92.0 15.0 18.0 44.0 10.3 0.15 0.71 0.44
NRC, 2001 Avg 90.2 29.7 19.7 38.8 10.0 0.22 0.83 1.10
Distillers Grains Technology Council Avg 91.0 27.0 18.0 44.0 9.0 0.16 0.75 0.70
Midwest Plants, n = 31 Avg 89.22 30.90 13.81   10.72 0.07 0.76 1.00
Min 86.22 28.33 8.03   3.52 0.02 0.42 0.45
Max 92.40 33.74 20.95   12.83 0.51 0.99 1.33
CV 1.69 4.67 23.08   16.38 116.54 18.16 21.55
1DM = dry matter; CP = crude protein; ADF = acid detergent fiber; NDF = neutral detergent fiber; EE = ether extract; Ca = calcium; P = phosphorus; and K = potassium.
2Avg = average; Min = minimum; Max = maximum; and CV = coefficient of variation.
Source Anonymous. 2005. http://www.ddgs.umn.edu.


Another source of energy is to feed more fat from sources such as whole cottonseed, whole soybeans, tallow, animal-vegetable blends, or inert fat supplements. When multiple products that contain higher concentrations of fat are fed, the total amount of fat in the diet must be limited to avoid any negative effects on fiber digestion, animal health, and milk-fat depression. Considerable research has been conducted on each of these, and each has advantages and disadvantages. The amount of corn that can be replaced by one or more of these by-products depends on the quality and type of forage fed, production level, and feeding system constraints.

Distiller’s grains have received a lot press recently because this is the primary by-product from the production of ethanol. As pointed out previously, there is a good deal of variation in the nutrient content of distillers grains. Some plants have taken extra steps to produce a more consistent product and typically collect a premium for their distiller’s grains.

Research has demonstrated that distiller’s grains can provide up to 40% of the total ration DM, but this is not practical for most dairies. Besides containing relatively high concentrations of fat, distiller’s grains also contain high levels of phosphorus. Like other by-product feeds that contain higher concentrations of phosphorus, high feed rates increase the amount of phosphorus in the manure which builds up in the soil. The long-term implications include lower applications rates of manure to land and limitations on herd expansion without purchasing additional land.

Suggestions for Dealing with Higher Feed Cost

It is important to review all aspects of your feeding program from time to time, independent of feed prices. This review should address several questions including: What are the primary weaknesses of the current feeding program?

Often the primary weakness is related to forage quality, feed bunk management, or some other aspect that is preventing your cows from being as productive as possible rather than the ration formulation. If cow comfort is not as good as it should be, the cows will not respond completely to any change in the feeding program. The same is true for all of the little things that should be done to make sure that each cow has feed when she is ready to eat and that cows have plenty of bunk space, there is unrestricted access to water, waters are cleaned each week, and there is a good preventative health program in place.

The DM content of any wet feeds (silage or wet by-products) should be measured routinely and rations adjusted as needed. This will reduce some of the variation in the nutrient content of the final ration and keep cows on a more consistent diet.

Sample forages and other homegrown feed and have them analyzed. Use the analysis to fine-tune your rations. Homegrown forages commonly have greater variation than purchased feeds, so it is very important to sample and analyze frequently. Fine-tuning the ration can make a difference not only in milk production, but the amount of purchased feed needed and total feed cost.

Review mixing procedures and information used for mixing rations with the feeder to make sure that the rations mixed are the same as those formulated. A misplaced decimal or transposed number can be very costly in both feed cost and lost production. Too often the feeder doesn’t understand (or forgets) the importance of adding the correct amount of each ingredient and the impact of a mistake on cow health and production on the bottom line.

Manage feed bunks to optimize intake. Old feed should be removed each day to prevent spoilage of new feed and encourage consumption. Feed should be pushed up several times a day so cows have access at all times. Provide adequate bunk space for each cow. Normal recommendations are for a minimum of 2linear feet per cow and more for fresh cows. Adjust feeding amounts to minimize refusals. Normal recommendations are for 3% to 5% depending on how well you can time feed delivery. If feed refusals are primarily the fractions that are sorted out by the cow, the amount of feed offered probably should be increased. There are opportunities for improving feed mixing and processing.

Monitoring dairy efficiency, the pounds of milk produced for each pound of DM consumed, is a good tool to help evaluate the effectiveness of a ration and economics. High-producing cows should have a dairy efficiency greater than 1.6, whereas, the majority of the herd should average 1.5. Dairy efficiency is lower for late lactation cows and during heat stress. Supplemental cooling should be optimized to maintain production and dairy efficiency.

Establishing production groups, when possible, allows different rations to be formulated according to need reducing total feed cost. It may be enlightening to determine the value of the milk produced by each cow, either current daily milk or lactation average, and compare that with the current feed cost to see which cows are profitable. The production data can be retrieved easily using PCDART and exported to a spreadsheet program.

Summary

As we look for ways of controlling feed cost in light of increasing corn and feed prices, it is important to remember the basic factors that contribute to total feed cost. A careful analysis of the total feeding program that includes forage quality, availability and cost of by-product feeds, feeding management, and cow comfort should be conducted routinely to determine where cost can be trimmed and feed utilization can be improved. Given the current push for developing alternative fuels from corn and soybeans, producers must fine tune their feeding management to maintain profitability.

References:

Anonymous. 2005. Nutrient profiles. DDGS: The value and use of distillers dried grains with solubles in livestock and poultry feeds. http://www.ddgs.umn.edu. Accessed 10/3/2005.

DePeters, E. L., J. G. Fadel, M. J. Arana, N. Ohanesian, M. A. Etchebarne, C. A. Hamilton, R. G. Hinders, M. D. Maloney, C. A. Old, T. J. Riordan, H. Perex-Monti, and J. W. Pareas. 2000. Variability in the chemical composition of seventeen selected by-product feedstuffs used by the California dairy industry. Prof. Anim. Sci. 16:69-99.

Distillers Grains Technology Council. 2005. Compositional analysis. Accessed 10/3/2005.

National Research Council. 1989. Nutrient requirements of dairy cattle. 6th ed. National Academy Press. Washington, DC.

National Research Council. 2001. Nutrient requirements of dairy cattle. 7th ed. National Academy Press. Washington, DC.

Author Information

John K. Bernard
University of Georgia

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.