Cost of Nutrients and Benchmarks of Profitability for Ohio Dairy Farms

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

Feed markets have dramatically changed the dairy nutrition landscape this Fall. Corn prices buoyed by the increased demand from ethanol plants, combined with an exuberant interest from speculators, and have risen to heights historically seen in low production years (e.g., 1996). The dramatic changes that will result from the phenomenal growth in ethanol production will require substantial and significant changes to the way that we approach dairy nutrition and ration balancing. We will discuss these in a future issue of Buckeye Dairy News. For now, dairy producers and their nutritionists should at least ensure that feeds used on their farms, either as commodities or as ingredients used in commercial feeds, are justified on an economic basis. To assist in the process, we evaluated current commodity markets in central Ohio using the software SESAME (available at www.sesamesoft.com). The appraisal would be slightly different for other Ohio regions, but not markedly so.

Compared to May 2006, prices of nutrients (Table 1) show:

1. A 17% increase in the unit cost of dietary energy,
2. A 7¢/lb drop in the cost of degradable protein,
3. An increase of 5 ¢/lb of digestible rumen undegradable protein (RUP),
4. A drop of 1.4¢/lb of non-effective neutral detergent fiber (NDF), and
5. No change in the price of effective NDF.

Table 1. Prices of nutrients, central Ohio.

Nutrient name
May 2006
November 2006
Net energy for lactation - 3X (NRC, 2001; $/Mcal)
0.072
0.084
Rumen degradable protein ($/lb)
-0.013
-0.083
Digestible-rumen undegradable protein ($/lb)
0.200
0.250
Non-effective neutral detergent fiber (NDF; $/lb)
-0.027
-0.041
Effective-NDF ($/lb)
0.065
0.065

From a historical standpoint, net energy lactation is currently very highly priced (10-year average is about 7¢/Mcal), whereas rumen degradable protein (RDP) is much below its historical average of about 0¢/lb. Therefore, as a general rule, it is currently wise to reduce the safety margins of dairy rations for net energy of lactation. Meanwhile, the markets are willing to pay you for using additional rumen degradable protein and non-effective NDF. In practical terms, this means that there are some high RDP and high fiber by-products that are currently bargains.

In Tables 2 and 3, we report the results for 27 feed commodities traded or available in central Ohio. Table 2 conveniently groups commodities into three groups: bargains, at breakeven, and overpriced. If many ingredients in your rations are from the overpriced column, it is time to question your nutritional plan. Details of commodity pricing are shown in Table 3. In this table, the column labeled "actual" is the price for tractor trailer loads FOB central Ohio. The "predicted" column is the calculated breakeven price per ton; lastly, the "lower limit" and "upper limit" are the 75% confidence range for the breakeven price.

Table 2. Grouping of feed commodities, central Ohio, November 2006.

Bargains
At Breakeven
Overpriced
Corn silage Bakery byproducts Alfalfa hay - 44% NDF
Whole cottonseed Brewers grains - wet Beet pulp
Distillers dried grains Corn grain Blood meal
Feather meal Cottonseed meal Canola meal
Gluten feed Soybean hulls Citrus pulp
Gluten meal 48% soybean meal Molasses
Hominy Roasted soybeans 44% Soybean meal

Meat meal

Tallow  
Expeller soybean meal Wheat bran  
Wheat middlings    


Table 3. Commodity assessment, central Ohio, November 2006.

Name
Actual ($/ton)
Predicted ($/ton)
Lower limit ($/ton)
Upper limit ($/ton)
Alfalfa Hay, 44% NDF, 20% CP
150
120.01
99.61
140.58
Bakery Byproduct Meal
130
133.03
123.04
143.02
Beet Sugar Pulp, dried
150
124.82
108.72
140.92
Blood meal, ring dried
495
461.99
432.43
491.55
Brewers Grains, wet
30
28.42
25.05
31.79
Canola Meal, mech. extracted
173.60
137.02

124.46

149.59
Citrus Pulp, dried
172
115.34
106.69
123.99
Corn Grain, ground dry
135
141.23
131.66
150.80
Corn Silage, 32 to 38% DM
35
51.92
44.66
59.19
Cottonseed Meal, 41% CP
186
179.11
168.06
190.16
Cottonseed, whole w lint
161
190.09
163.69
216.50
Distillers Dried Grains, w solubles
115
156.64
143.53
169.75
Gluten Feed, dry
97
124.10
114.42
133.77
Gluten Meal, dry
319
342.57
324.55
360.58
Hominy
105
120.06
111.42
128.71
Meat Meal, rendered
205
239.39
220.71
258.06
Molasses, sugarcane
154
95.15
87.08
103.21
Soybean Hulls
92
75.20
52.51
97.88
Soybean Meal, expeller
247
278.24
265.61
290.88
Soybean Meal, solvent 44% CP
202.60
169.81
151.30
188.33
Soybean Meal, solvent 48% CP
211.60
205.01
188.25
221.77
Soybean Seeds, whole roasted
250
253.62
238.05
269.16
Tallow
350
346.58
314.43
378.74
Wheat Bran
76
76.04
61.04
91.04
Wheat Middlings
69
87.76
74.60
100.92

Appraisal Set
Name
Actual ($/ton)
Predicted ($/ton)
Corrected ($/ton)
Alfalfa Hay - 38% NDF, 22% CP
170
118.61
140.53
Alfalfa Hay - 48% NDF, 17% CP
130
121.68
106.94
Blood meal, ring dried
235
384.50
 
Fish Menhaden Meal, mech.
920
332.27
 


Nutrient prices and milk component prices can be used to calculate a benchmark for feed costs and income over nutrient costs. Results are presented in Table 4. The cost of feeding for a milk yield of 75 lb/day has gone up by $0.12/cow per day since May and is $0.20/cow per day greater than at the same time last year. This occurred while the price of corn went up from $32/ton (90¢/bu) in May 2006 to $45/ton ($1.26/bu) in November 2006. This indicates that although prices of traded commodities move up or down in "sympathy" with the corn/soybean markets, they do have markets of their own.

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

Nutrient
November 2005
May 2006
November 2006
 
------------------------------ $/cow/day --------------------------------
Nutrient costs2
 
 
 

NEL

2.89
2.49
2.93

RDP

(0.79)
(0.07)
(0.44)

Digestible-RUP

0.75
0.45
0.56

ne-NDF

(0.21)
(0.13)
(0.19)

e-NDF

0.72
0.71
0.71

Vitamins and minerals

0.20
0.20
0.20

TOTAL

3.57
3.65
3.77
Milk gross income
 
 
 

Fat

4.93
3.33
3.82

Protein

5.53
4.47
4.83

Other solids

0.66
0.67
0.90

TOTAL

11.12
8.47
9.55
 
 
 
 
Income over nutrient costs
7.55
4.82
5.78

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.
2NEL = 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.