Feed and Nutrient Pricing

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

Commodity feed markets have been relatively flat for the last 6 months. Besides the usual seasonal trends for commodities, such as brewers grains and wheat middlings, commodity prices have remained relatively constant over the last semester. Consequently, the implicit prices of nutrients as calculated by the software SESAME have remained relatively constant and near their long-term averages (Table 1).

Currently, there are great opportunities to reduce feeding costs through the judicious selection of ingredients to be included in the ration (Table 2). Ingredients that are currently trading well under their break-even prices are: bakery by-product, corn, corn silage, whole cottonseed, distillers dried grains, gluten feed, hominy, and wheat middlings. These are the current bargains. Feed ingredients trading significantly above their break-even prices are: alfalfa hay, beet pulp, canola meal, citrus pulp, meat and bone meal, molasses, soybean hulls, blood meal, and fishmeal. The use of these overpriced ingredients should currently be minimized.

Milk prices have been dropping abruptly since the beginning of the year. The large increase in milk supply resulting from the increase in the size of the national herd (number of cows) compounded with substantial increases in cow productivity (lb/cow/day) have led to a 5.9% annual increase in milk supply during February 2006. Although the demand for milk and dairy products has been very strong, the markets cannot keep absorbing huge increases in supply without significant price adjustments. Milk prices have been relatively strong over the last 2 years. Dairy farm profitability has ranged from good to excellent over that period of time. Unless unforeseen events occur to curb milk supply, we can expect relatively low milk prices in the foreseeable future. As shown in Table 3, income over nutrient costs dropped by $1.71/cow/ day between November 2005 and March 2006. On most farms, this reduction equates to the average daily profit made on a lactating cow. Consequently, things are once again getting tough on our dairy farms.

Table 1. Prices of nutrients, central Ohio.

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

Table 2. Commodity assessment, Central Ohio, March 2006.

Table 3. 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, August 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.