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 turned wild, the results of speculation, substantial increase in corn demand from ethanol plants, and a USDA report that reduced the size of the 2006-2007 corn crop. Results that are presented in this column were obtained using feed prices in effect in early January when corn was trading on our local market at $3.70/bu.

Using Sesame (available at www.sesamesoft.com), implicit market prices of nutrients were calculated using market prices of commodities in central Ohio (Table 1). Net energy lactation is currently very highly priced, exceeding 11¢/Mcal compared to a 10-year average of about 7¢/Mcal. Importantly, both degradable and undegradable protein are currently priced at much discounted prices. Fiber fractions are priced near their historical averages. Thus, we are in a time where dietary energy is very expensive, whereas, protein is relatively inexpensive. This should effect the nutritional strategy used by nutritionists when balancing dairy rations.

In Tables 2 and 3, we report the results for 27 feed commodities traded or available in central Ohio. In spite of its relative high price ($3.70/bu), corn grain was actually underpriced compared to other commodities. There are still feeds available at a relative bargain price compared to other feeds, although most commodities are being traded at prices well above their historical averages. But relatively speaking, there are still some bargains that can significantly reduce feed costs if used properly.

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 $0.62/cow/day since May and is $0.50/cow/day greater than this last November. Improvements in milk prices, however, more than compensate for the increases in feed costs. The income over nutrient cost is currently $1.35 and $0.39/cow/day greater than it was last May and November, respectively. At $6.17/cow/day, income over nutrient cost is approaching its historical average of $6.25 to 6.50. Thus, although current milk prices are greater than their historical averages, the difference is completely cancelled by higher feed costs.

Table 1. Prices of nutrients, central Ohio.

Table 2. Grouping of feed commodities, central Ohio, January 2007.

Table 3. Commodity assessment, central Ohio, January 2007.

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, 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.