The Costs of Nutrients and Comparison of Feedstuffs Prices

Dr. Normand St-Pierre, Extension Dairy Management Specialist, Department of Animal Sciences, The Ohio State University

As I write this column in late March, it is snowing in central Ohio and the Midwest is once again under a blanket of snow.  That’s good for restoring soil moisture in a region that had been under a severe drought, but at some point, we would like to see some corn in the ground if we are to see a 14+ billion bushels crop next fall.  There is no need to be concerned as of yet, but it sure would be nice to see the sunshine once in a while…

Meanwhile, the feed markets are up one day, down the next.  Unless something big happens, that’s probably what we’ll see until the next crop of corn and soybean starts coming in.  On the milk side, reduced production in the U.S. combined with a drastic reduction in New Zealand due to a severe drought, an inability for the European Union to raise its output and relatively steady demand in the U.S. are pointing to increased dairy exports in months to come and substantially better domestic milk prices in late spring.  The futures markets are not reflecting this as of yet because traders are talking too much with traders and U.S. dairy economists…

For now, feeding balanced diets based on economically priced feed ingredients can help in maintaining positive margins.  The idea is to maximize the use of underpriced feeds and to minimize the use of overpriced ones.

Nutrient Prices

As usual in this column, I used the software SESAME™ that we developed at Ohio State to price the important nutrients in dairy rations to estimate break-even prices of all major commodities traded in Ohio and to identify feedstuffs that currently are significantly underpriced as of March 18, 2013.  Price estimates of net energy lactation (NEL, $/Mcal), metabolizable protein (MP, $/lb – MP is the sum of the digestible microbial protein and digestible rumen-undegradable protein of a feed), non-effective NDF (ne-NDF, $/lb), and effective NDF (e-NDF, $/lb) are reported in Table 1. Compared to its historical 6-year average of about 10¢/Mcal, NEL is still a highly priced nutrient at 17.8¢/Mcal.  In fact, dietary energy is up 2.5¢/Mcal from its January price.  This is important because a cow producing 70 lbs of milk/day requires in the neighborhood of 33 Mcal/day of NEL.  For MP, its current price (34.6¢/lb) is also greater than its 6-year average (28¢/lb) but not significantly so.  Thus, we are currently in a period of very high dietary energy and moderate protein prices.  The cost of ne-NDF is currently discounted by the markets (i.e., feeds with a significant content of ne-NDF are price discounted), but the discount of 6.0¢/lb is below its 6-year average (-9¢/lb).  Meanwhile, unit costs of e-NDF are about at their historical average, being priced at 1.3¢/lb compared to the 6-year average (3.3¢/lb).  So, dietary fiber, whether effective or not, is currently not a significant cost factor from a historical standpoint.  Of course, this may depend on how bad your crops were affected by the drought last summer. 

Table 1. Prices of dairy nutrients for Ohio dairy farms, mid-March 2013.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio in mid March are presented in Table 2. Detailed results for all 27 feed commodities are reported.  The lower and upper limits mark the 75% confidence range for the predicted (break-even) prices.  Feeds in the “Appraisal Set” were deemed outliers (completely out of price). One must remember that Sesame compares all commodities at one point in time, mid March in this case.  Thus, the results do not imply that the bargain feeds are cheap on a historical basis.

Table 2.  Actual, breakeven (predicted) and 75% confidence limits of 27 feed commodities used on
Ohio dairy farms, mid-January 2013.

For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis.

Table 3. Partitioning of feedstuffs, Ohio, mid-January 2013.

As usual, I must remind the readers that these results do not mean that you can formulate a balanced diet using only feeds in the “bargains” column.  Feeds in the “bargains” column offer savings opportunity and their usage should be maximized within the limits of a properly balanced diet.  In addition, prices within a commodity type can vary considerably because of quality differences, as well as non-nutritional value added by some suppliers in the form of nutritional services, blending, terms of credit, etc.  Also, there are reasons that a feed might be a very good fit in your feeding program while not appearing in the “bargains” column.