From feeds to nutrients
In appearance, dairy cows are feed converters. They ingest feeds and produce milk. But, we know that the amount of milk produced per unit of feed ingested is not constant across all feedstuffs. This is because fundamentally, feeds are carriers of nutrients. It is these nutrients that cows really need to produce milk. Cows have requirements for nutrients and not for feeds. Cows do not need hay but need effective fiber. Cows do not need corn but need energy. Thus, in essence, when you buy a feed you actually are buying a mixture of nutrients.
From apples to oranges
Imagine that a bag of fruits sells for $6. There are 3 apples and 1 orange in it. Neither do we know the price of one apple, nor do we know the price of one orange. All we know is that 3 apples and 1 orange cost $6. Next to this bag, we find a basket of fruit with 1 apple and 3 oranges. It sells for $10. Just looking at the basket, we don't the price of one apple; neither do we know the price of one orange. However, if we combine the information from the bag of fruit with that from the basket of fruit, we can determine the price of one apple and one orange. You may have forgotten the algebra required to do this, but by trial and error, you would eventually determine that one apple costs $1 and one orange costs $3.
When feeding cows, feedstuffs are the equivalent of the bag and the basket. Nutrients are the equivalent of the apples and oranges. If we have enough feedstuffs (bags and baskets) being traded and if we know their prices, we can calculate the implicit cost of nutrients (apples and oranges). With many feedstuffs and many nutrients, finding the best solution is not trivial, which is why we wrote a software program, Sesame, to do this for us. Check with you local Extension office to inquire about a training workshop in your area for how to use this software.
The cost of nutrients: Ohio, March 2003
We used the nutrient composition table from the National Research Council (2001) for 24 feedstuffs available in Ohio. Prices used were wholesale prices for North Central Ohio for the first week of March 2003, with the addition of $20/ton to account for mixing and delivery charges. These prices approximate a farm delivered price in large, bulk quantities as commodities or blends of commodities. For nutrients, we selected Net Energy for lactation (NEL), rumen degradable protein (RDP), rumen undegradable protein (RUP), effective neutral detergent fiber (e-NDF), and non-effective neutral detergent fiber (ne-NDF). Other nutrients (e.g. minerals, such as phosphorus) may also have a value, but their contributions to the price of the selected commodities are generally small and negligible.
Estimated costs of nutrients are reported in the following table. The numbers in this table are costs expressed in dollars per unit. For example, the cost of one mega-calorie of NEL is about $0.07. Similarly, the cost of one pound of digestible RUP is about $0.22 and one pound of e-NDF is approximately $0.10.
Take note that based on current market conditions, RDP and ne-NDF both have an implicit cost of $0.00. That is, the current market does not attribute any cost to these two nutrients.
Now that we know the unit costs of nutrients, it is very easy to calculate the break-even price (i.e., the market value of the nutrients) for each commodity. This price is reported in the following table in the column labeled "Predicted".
Sesame uses statistical procedures to estimate the cost of nutrients. This enables the software to calculate a "probable" range for the break-even prices. Take bakery by-product meal (bakery waste) as an example. The current market price is $115/ton and the break-even price is estimated at $126.96/ton, with a probable range of $112.82 to $141.10. Thus, bakery by-product meal is currently priced under its break-even price but not enough to make it a real bargain. Gluten feed would be an example of a bargain feed, whereas soybean hulls are currently grossly overpriced. The same information is reported visually in the following figure.
Feeds located above the top red line (very top line) are considered overpriced; those between the two red lines (very top and very bottom lines) are priced according to their respective nutrient content; those under the bottom red line (very bottom line) are bargains.
This does not mean that a balanced diet (ration) can be made exclusively of bargain feeds. What this implies is that opportunities to reduce feed costs exist by maximizing the use of bargain feedstuffs while minimizing the use of overpriced ones. A nutritionist equipped with a valid ration balancing software is still required to determine the amounts of feedstuffs to be mixed to produce a sound ration.