Nutrient Prices, Nutrient Costs, and Income Over Nutrient Costs

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

In this column, I periodically use a software program that we developed here at Ohio State (SESAME) to estimate the cost of major nutrients required for milk production and break-even prices of feed commodities in Ohio. Results can be used to identify potential feed bargains or feeds that appear overpriced. Based on wholesale prices, central Ohio, commodities can be partitioned into the three following groups in mid-September 2004.

Details on the estimates of nutrient unit costs, break-even prices of commodities, and break-even prices of forages are given in Tables 1, 2, and 3. For forages, the column labeled "corrected" uses correction factors that Dr. Bill Weiss and I have developed. These corrected break-even prices are more accurate and should be used when making purchasing decisions.

Table 1. Estimates of nutrient unit costs.

¹NE_L = Net energy for lactation, RDP = rumen degradable protein, RUP = rumen undegradable protein, ne-NDF = noneffective neutral detergent fiber, and e-NDF = effective neutral effective fiber.
²Estimates are for $/LB except for energy which is at $/Mcal.
- 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.

Table 3. Break-even prices of forages - OH (mg = mostly grass).

We know relatively well the nutrients required to produce a certain amount of milk. Now that we have a method for calculating the implicit costs of nutrients, it is relatively straightforward to calculate a benchmark of nutrient costs and income over nutrient costs. The benchmarks published in this column will be for a 1350 LB cow producing 75 LB/day of milk at 3.6% fat, 3.0% protein, and 5.9% other solids. Component prices are those paid in the previous month (we don't know yet what component prices will be in September), whereas the nutrient prices are those for the reported month (i.e., based on September 2004 commodity prices for the September 2004 nutrient prices). Results for this month are compared with those of July 2004 and September 2003 in Table 4.

Table 4. Nutrient costs, milk gross income, and income over nutrient costs.¹

¹Costs and income for 75 LB/cow/day, 3.6% fat, 3.0% protein, and 5.9% other solids.
²NE_L = Net energy for lactation, RDP = rumen degradable protein, RUP = rumen undegradable protein, ne-NDF = noneffective neutral detergent fiber, and e-NDF = effective neutral effective fiber.

To put these numbers in perspective, the long-term nutrient costs would average about $4.00/cow/day, milk gross income, $9.75/cow/day, and income over nutrient costs about $5.75/cow/day. Thus, although milk prices have dropped from their early summer highs, reduction in commodity prices result in a benchmark income over nutrient costs that currently exceeds the expected long-term average by 6.83 - 5.75 = $1.08/cow/day. In a well managed herd of 100 milking cows, this equates to an additional $3,240/month over the long-term average. This should help compensate for the terrible months this industry went through recently.