Using Nutrient Cost to Benchmark Your Nutrition Costs

Dr. Normand St-Pierre, Dairy Management Specialist, The Ohio State University

In my regular column, I have explained how we can extract the implicit cost of nutrients from market prices of feedstuffs. In our software, SESAME, we apply this method to compare feedstuffs and determine which ones are bargains and which ones are rip-offs. The method of valuing nutrients yields an additional approach for feed evaluation: one can establish reasonable benchmarks for nutrition costs. Traditionally, this has been measured using feed costs. Although it is reasonably easy to calculate an estimate of feed cost for a group of animals, it is not so easy to establish a benchmark - to estimate a reasonable figure for what feed costs should be. Using the output from SESAME and the publication on Nutrient Requirements of Dairy Cattle from the National Research Council (2001), this can be easily done with reasonable accuracy.

In Table 1, I prepared a set of estimates for three sets of cows. Cow A represents a Holstein cow typical of a herd with very good production (roughly 25,000 lb of milk/cow/year); cow B is for a Holstein cow in a sub-average herd (18,000 lb of milk/cow/year); and cow C is representative of a Jersey cow in a very good herd (18,000 lb of milk/cow/year). Daily requirements for net energy lactation (NE_L), rumen degradable protein (RDP), digestible rumen-undegradable protein (d-RUP), effective neutral detergent fiber (e-NDF), and non-effective neutral detergent fiber (ne-NDF) are basically from NRC (2001), assuming a diet with 21% e-NDF, 9% ne-NDF, and 68% total digestible nutrients (TDN). Unit costs of nutrients and milk component prices are provided in Table 2. The rest is just simple arithmetic. For example, a 1500 lb cow producing 77 lb/day of milk with 3.5% fat and 3.0% true protein requires 34.8 Mcal/day of NE_L. A unit of NE_L (Mcal) cost on an average 6.63 cents. Thus, the cost of supplying the required energy is 34.8 x $0.0663 = $2.31. The calculations are done in a similar fashion for all nutrients of economic importance. We must also account for the cost of mineral and vitamin supplementation, which is typically around $0.20/cow/day. Hence, the cost of supplying the animal with all required nutrients equals $4.10/day in January 2004. The same calculations done on an animal of lower productivity results in a benchmark estimate of $3.35/day. At a same level of milk production (55 lb/day), the Jersey cow has a higher estimate ($3.81/day) due to additional nutrients needed to support the higher fat and protein concentration in the milk. Thus, the nutritional costs of the lower producing Holstein cow are substantially less than those of the high-producing Holstein cow or the high-producing Jersey cow. So, if one's objective was to minimize nutrient costs (feed costs), lower milk production would be desirable. This illustrates the fallacy of the absolute cost minimizer, i.e., those who try to reduce costs at the expense of production. This becomes clear when we calculate the value of the milk produced (milk gross income) and, finally, the income over nutrient costs (a figure analogous to income over feed costs). The high-productivity Holstein cow yields an income over nutrient costs that is $1.90/cow/day higher than that of the low-productivity Holstein cow. It is not my intent to do a profitability comparison across breeds. Additional factors would have to be considered to make a fair comparison of Holstein versus Jersey cows. Nevertheless, it should be apparent that the high-producing Jersey cow can be very profitable. Relative productivity within breed is probably a much more important factor to overall competitiveness than breed.

In the next issue of Buckeye Dairy News, we will show you how you can calculate a nutrition cost benchmark for your own herd and diagnose the source of the problem if your costs exceed the benchmark.

Table 1. Estimating nutrition costs (feed costs) using nutritional requirements and estimates of nutrient costs.¹

¹DMI = dry matter intake, NEL = net energy for lactation, RDP = rumen degradable protein,
D-RUP = digestible rumen undegradable protein, e-NDF = effective neutral detergent fiber,
and ne-NDF = noneffective NDF.

Table 2. Unit costs of nutrients and milk component prices, Ohio, January 2003.