Cost of Nutrients in Feedstuffs

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

It is this time of the year where rumors of a possible drought in the Midwest can send corn and soybean prices through the roof. So, Mother Nature sends the requested rain and rumors emerge about a bumper crop. Prices collapse. One can quickly loose his/her sanity over these price gyrations. Fortunately, you are feeding dairy cows. They don't NEED corn or soybeans to produce milk. They need NUTRIENTS, such as energy (measured as Net Energy for Lactation - NE_L), rumen degradable protein (RDP), digestible rumen undegradable protein (d-RUP), effective neutral detergent fiber (e-NDF), and non-effective NDF (ne-NDF). Although corn and soybean meal can be important suppliers of nutrients, other combinations of feedstuffs can achieve the same results. Corn and soybean meal are also important market drivers of feed commodities, but other commodities, especially high fiber by-products, have markets and seasonal patterns of their own. Thus, if soybean meal goes up by 10%, you should NOT think that the price of protein has gone up by 10%. If you are feeding a lot of soybean meal and its price goes up by 10%, then it is time to look at your nutrition program and consider other combinations of feed ingredients. You should also consider known seasonal trends. We know that people drink more beer in summer time. Thus, more beer is brewed. Therefore, the supply of brewers grains increases. The good old law of supply and demand works, and the price of brewers grains falls. Likewise, winter wheat is harvested in early summer. And guess what, some people are milling this wheat! Thus, the supply of wheat middlings (often shortened to wheat midds) increases, while the demand by the feed industry to manufacture pelleted feeds drops. The same law of supply and demand works again; the price of wheat midds falls. I received a call last week from an old feed broker friend. He had about 200 tons of wheat midds that could be picked up for $10/ton FOB Buffalo, NY. If I tell you that wheat midds has about the energy and fiber content (although non-effective) of corn silage, but contains 18 to 20% crude protein (mostly degradable), would you think that $10/ton for wheat midds could fit nicely in many feeding programs?

Sesame^TM (available at www.sesamesoft.com) is a software developed at Ohio State to extract the cost of nutrients from all commodities traded in a given market and to estimate break-even prices of these commodities. In each issue of the Buckeye Dairy News, we use Sesame to help dairy producers and their advisors in their selection of nutrient sources (feeds) for their herds. As usual, we calculated the prices of nutrients for central Ohio in early July. Results are presented in Table 1. Not much has changed between May and July of this year. Notice, however, that many nutrients are priced substantially lower than at the same time last year. Commodities are grouped into three broad categories in Table 2. Tactically, you should try to maximize the use of commodities in the "bargains" column, while minimizing the use of those in the "overpriced" one. This is not to say that excellent nutrition programs can be developed without any of the ingredients in the "overpriced" column, but from an economic basis, their use should be reduced to a strict minimum. A more detailed analysis of break-even prices is presented in Table 3.

Using these nutrient prices and milk component prices for Federal Order 33 released by the Market Administrator on July 1, we calculated our standard benchmarks of nutrient feeding costs and income over nutrient costs (Table 4). The cost of putting the required nutrients through a cow to produce our standard 75 lb/day of milk at 3.6% fat and 3.0% protein has not changed from May 2005, essentially at $3.60/cow/day. The declining milk prices, however, resulted in a $0.58/cow/day reduction in income over nutrient costs. At $7.17/cow/day, however, income over nutrient costs is still substantially higher than the historical average of about $6.00/cow/day. Above-average profits should still be the norm for Ohio dairy producers.

Table 1. Prices of nutrients, central Ohio.

Table 2. Groupings of commodities, Central Ohio, July 2005.

Table 3. Commodity assessment, Central Ohio, May 2005.

Table 4. Nutrient costs and income over nutrient costs, Central Ohio.¹

¹Costs and income for a 1400 lb cow producing 75 lb/day of milk, with 3.6% fat, 3.1% protein, and 5.9% other solids. Component prices are for Federal Order 33, April 2005.
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.