Dealing With an Uncommon Feed Market

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

I recall just a few months ago when the soybean meal market jumped above $250/ton. I received numerous phone calls and emails requesting help on how to deal "with these obscene soybean prices". I imagine that most dairy producers wouldn't mind still paying $250/ton for soybean meal. But the rapid changes in soybean and corn prices have opened many opportunities for judicious ingredient substitutions in dairy diets. There are bargains out there!

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. Price estimates for net energy lactation (NEL, $/Mcal), rumen degradable protein (RDP, $/lb), digestible rumen undegradable protein (D-RUP, $/lb), non-effective NDF (ne-NDF, $/lb), and effective NDF (e-NDF, $/lb) are reported in Table 1. Compared to January 2004, the cost per unit of net energy is up by 44%, RDP is up by 29%, D-RUP is up by 27%, ne-NDF is down by 6.5¢/lb, and e-NDF is also down by more than 4.0¢/lb. Thus, although the sticker shock associated with soybean meal has focused our attention on the protein prices, it is the energy that has seen the most dramatic increase. In fact, we have tracked down the NEL cost in the Midwest market all the way back to 1981, and we have never seen a cost exceeding $0.09/Mcal before. We shall expand more on this later.

Based on early May wholesale prices, central Ohio commodities can be partitioned into the three following groups:

 

Bargains
At Breakeven
Overpriced
Bakery byproducts
Corn, ground, shelled
Corn silage
Distillers dried grains
Gluten feed
Gluten meal
Hominy
Wheat midds
 
Alfalfa hay
Blood meal
Brewers grains, wet
Canola meal
Citrus pulp
Whole cottonseed
Meat meal
Molasses
Expeller soybean meal
48% soybean meal
Tallow
Wheat bran
Beet pulp
Soybean hulls
44% soybean meal
Roasted soybeans
 

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.

One must remember that SESAME compares all commodities at one point in time, early May in our case. Thus, the results do not imply that the bargain feeds are cheap on a historical basis. As a matter of fact, all commodities would be considered expensive on a historical basis. There are some feeds that are relatively more expensive than others.

In Tables 2 and 3, we report the results for all 26 feed commodities. The lower and upper limits mark the 75% confidence range for the predicted (break-even) prices.

We can use estimated nutrient costs to benchmark feeding costs. Refer to the article "Using Nutrient Cost to Benchmark Your Nutrition Costs" in the January 2004 issue of Buckeye Dairy News. Table 4 reports the nutrient costs for a 1500 lb cow producing 77 lb of milk at 3.5% fat and 3.0% protein for September 2003, January 2004, and May 2004.

From this table, one can see that the costs of nutrients have gone up by approximately $0.53/cow/day since January (or equivalently of $0.69/cwt of milk). The $0.53 increase is the result of $1.00/day increase in NEL, $0.10/day in RDP, and $0.16/day in D-RUP, but a drop of $0.46/day in the cost of e-NDF and a drop of $0.26/day in ne-NDF. Thus, the proper usage of energy sources combined with a wise selection of byproduct feeds can result in substantial savings in feed costs. Savvy buyers will keep a close watch to the commodity market during the summer month as we can expect rapid changes in prices due to seasonal changes in supply and demand of some commodities (e.g., wheat midds and wet brewers grains).

Table 1. Estimates of nutrient unit costs - OH, May 2004.

Nutrient name
Estimates
 
NEL - 3X (2001 NRC)
$0.095020
**
RDP
$0.084275
~
Digestible RUP
$0.330053
**
Non-effective NDF (ne-NDF)
$-0.064981
**
e-NDF
$0.020673
 

- A blank means that the nutrient unit cost is likely equal to zero.
- ~ means that the nutrient cost may be close to zero.
- * means that the nutrient cost is unlikely to be equal to zero.
- **means that the nutrient cost is most likely not equal to zero.


Table 2. Estimated break-even prices of commodities - OH, May 2004.

Name
Actual ($/ton)
Predicted ($/ton)
Lower limit ($/ton)
Upper limit ($/ton)
Alfalfa Hay, OH Buckeye D
140
150.55
129.82
171.27
Bakery Byproduct Meal
137
174.58
164.53
184.63
Beet Sugar Pulp, dried
160
121.30
105.01
137.59
Blood Meal, ring dried
580
566.38
538.52
594.24
Brewers Grains, wet
40
40.99
37.51
44.48
Canola Meal, mech. extracted
213
209.95
196.55
223.35
Citrus Pulp, dried
132
131.65
122.91
140.39
Corn Grain, ground dry
117
172.40
162.79
182.00
Corn Silage, 32 to 38% DM
40
50.69
43.62
58.31
Cottonseed, whole w lint
215
222.53
195.92
249.15
Distillers Dried Grains, w sol
151
204.17
190.87
217.47
Gluten Feed, dry
140
172.57
162.52
182.61
Gluten Meal, dry
415
449.18
428.97
469.39
Hominy
130
153.77
145.09
162.44
Meat Meal, rendered
350
361.83
342.50
381.16
Molasses, sugarcane
125
123.44
115.04
131.83
Soybean Hulls
130
82.88
60.06
105.70
Soybean Meal, expellers
380
363.62
349.46
377.77
Soybean Meal, solvent 44% CP
336
295.02
276.37
313.67
Soybean Meal, solvent 48% CP
345
335.07
318.18
351.95
Soybean Seeds, whole roasted
380
348.15
332.42
363.89
Tallow
420
389.71
357.09
422.33
Wheat Bran
119
112.14
96.87
127.41
Wheat Middlings
113
131.89
118.55
145.22


Table 3. Estimated break-even prices of outliers - OH, May 2004.

Name
Actual [$/ton]
Predicted [$/ton]
Feathers Hydrolyzed Meal
335
463.84
Fish Menhaden Meal, mechanized
630
463.40

 


Table 4. Benchmarks of nutrient costs - Ohio.1

Nutrient
September 2003
January 2004
May 2004
 
------------------------------ $/cow/day --------------------------------
NEL
2.94
2.31
3.31
RDP
-0.06
0.33
0.43
D-RUP
0.39
0.61
0.77
e-NDF
0.93
0.69
0.23
ne-NDF
-0.19
-0.04
-0.30
Vitamins and minerals
0.20
0.20
0.20
 
 
 
 
Total
4.21
4.10
4.63
Cost/cwt milk
5.47
5.32
6.01

1Costs are for a 1500 cow producing 77 lb of milk at 3.5% fat and 3.0% true protein.