Cost of Nutrients and Benchmarks of Profitability for Ohio Dairy Farms

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

At the time of this writing, fears of a drought in the Eastern corn belt are accentuating, bringing the usual wild market speculations in the process. Weather will be the prime determinant of the corn and soybean markets in the next few months. Other feeds should follow more or less in sympathy. Thus, the results presented in this column could change very quickly in weeks ahead.

Using SesameTM (available at www.sesamesoft.com), implicit market prices of nutrients were calculated using market prices of 29 commodities in central Ohio (Table 1). Net energy lactation is currently at a record price, approaching $0.15/Mcal compared to a 10 year average of about $0.07/Mcal. Presently, feed energy is the predominant factor driving the price of commodities. On the other hand, both degradable and undegradable protein are currently priced at much discounted prices. Non-effective NDF (a major feature of byproducts) is also heavily discounted, whereas effective NDF (a major feature of forages) is about at its historical average. Thus, dietary energy is currently very expansive whereas protein and fiber are not. This should impact the nutritional strategy used by nutritionists when balancing dairy rations.

Table 1. Prices of nutrients, central Ohio.

Nutrient name
May 2006
March 2007
July 2007
Net energy for lactation - 3X (NRC, 2001; $/Mcal)
0.072
0.117
0.148
Rumen degradable protein ($/lb)
-0.013
-0.069
-0.163
Digestible-rumen undegradable protein ($/lb)
0.200
0.206
0.169
Non-effective neutral detergent fiber (NDF; $/lb)
-0.027
-0.046
-0.095
Effective-NDF ($/lb)
0.065
0.033
0.044

In Tables 2 and 3, we report the results for 27 feed commodities traded or available in central Ohio. Most people think that corn grain at $3.95/bu is highly priced. Certainly, this is a high price by historical standards, but corn is currently a bargain when compared to all other feed sources. Most other commodities are being traded at prices well above their historical averages. I remember when tallow at $0.15/lb ($300/ton) was considered expensive. Now you can't find tallow under $0.30/lb. We live in a new era, a new "feed world".

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

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

Expeller soybean meal

Tallow  
Wheat middlings Wheat bran  

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

Name
Actual ($/ton)
Predicted ($/ton)
Lower limit ($/ton)
Upper limit ($/ton)
Alfalfa Hay, 44% NDF, 20% CP
140
132.26
105.90
158.61
Bakery Byproduct Meal
185
210.53
197.36
223.71
Beet Sugar Pulp, dried
200
146.06
125.45
166.67
Brewers Grains, wet
39
29.07
24.71
33.42
Canola Meal, mech. extracted
191.60
138.59
121.94
155.24
Citrus Pulp, dried
214
173.30
162.35
184.26
Corn Grain, ground dry
151
219.72
207.46
231.98
Corn Silage, 32 to 38% DM
50
65.44
56.27
74.61
Cottonseed Meal, 41% CP
185
174.52
160.22
188.81
Cottonseed, whole w lint
220
234.37
200.51
268.23
Distillers Dried Grains, w solubles
116
170.27
153.46
187.09
Feather Hydrolyzed Meal
260
295.90
269.43
322.37
Gluten Feed, dry
104
149.39
136.67
162.10
Gluten Meal, dry
383
351.54
317.20
385.88
Hominy
140
178.92
167.73
190.11
Meat Meal, rendered
285
255.33
232.91
277.75
Molasses, sugarcane
154
161.13
150.65
171.61
Soybean Hulls
115
68.17
38.40
95.95
Soybean Meal, expellers
275.10
309.56
286.61
332.51
Soybean Meal, solvent 44% CP
235.10
192.29
169.91
214.68
Soybean Meal, solvent 48% CP
244.10
228.78
209.31
248.25
Soybean Seeds, whole roasted
299
317.32
297.73
336.92
Tallow
645
607.14
565.89
648.39
Wheat Bran
77
91.06
71.18
110.94
Wheat Middlings
70
111.29
111.29
93.96

Appraisal Set
Name
Actual ($/ton)
Predicted ($/ton)
Corrected ($/ton)
Alfalfa Hay - 38% NDF, 22% CP
160
133.88
163.62
Alfalfa Hay - 48% NDF, 17% CP
130
133.77
113.76
Blood meal, ring dried
745
399.55
 
Fish Menhaden Meal, mech.
970
340.38
 

Nutrient prices and milk components prices can be used to calculate a benchmark for feed costs (nutrient costs, really) 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 $0.40/cow/day since last March and is $1.24/cow/day greater than it was in May 2006. Improvements in milk prices, however, more than compensate for the increase in feed costs. The income over nutrient cost is currently $5.93 and $3.65/cow/day greater than it was in May 2006 and last March, respectively. At $10.75/cow/day, income over nutrient costs far exceeds its historical average of $6.25 to 6.50. These are good times for dairy producers. These good times should make up for the bad ones, such as those we went through for most of 2006.

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

Nutrient
May 2006
March 2007
July 2007
 
------------------------------ $/cow/day --------------------------------
Nutrient costs2
 
 
 

NEL

2.49
4.05
5.13

RDP

(0.07)
(0.37)
(0.86)

Digestible-RUP

0.45
0.47
0.38

ne-NDF

(0.13)
(0.21)
(0.44)

e-NDF

0.71
0.36
0.48

Vitamins and minerals

0.20
0.20
0.20

TOTAL

3.65
4.49
4.89
Milk gross income
 
 
 

Fat

3.33
3.69
4.44

Protein

4.47
5.62
8.62

Other solids

0.67
2.28
2.58

TOTAL

8.47
11.59
15.64
 
 
 
 
Income over nutrient costs
4.82
7.10
10.75

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, October 2006.
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.