Managing dairy rations when feed prices are volatile

Learn strategies to manage feed costs during times of price volatility.

ISSN 1198-712X, Published October 2009

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Introduction

Profitability in dairy farming is dictated in large measure by managing feed costs and the efficiency by which feed is translated into milk production. Feed and other commodity prices can be very volatile, leading farmers to ask where prices are going and how they can cut feed costs. Unfortunately, nobody knows what direction prices are going and asking how to cut feed costs is not always the right question.

The combined effects of supply and demand determine commodity costs and given current information it can be predicted that commodity prices are on the rise. During times of price volatility, dairy producers should review or implement strategies to manage feed costs. Every sector of every industry should be looking at costs and efficiencies.

Some of the underlying factors that have changed the recent supply and demand for feed are:

the growth of foreign countries' Gross Domestic Product (GDP) (for example, China) and their increased demand for commodities
the increased non-livestock demand for grain corn to be diverted into ethanol production in response to the U.S. Energy Policy Act (2005) which mandates the use of ethanol and other renewable fuels.

These long-term drivers of higher prices will continue despite the current economic downturn. And these are some of the reasons for producers to reconsider how to manage feed costs in the future.

Feeding Objectives

Do not give up milk to cut feed costs. There is no financial gain to cutting back on those ingredients that produce milk. There is a limit to ration cost in terms of a financial payoff, but the cheapest ration is not the most profitable ration.

The feeding objective is not to minimize feed costs per litre of milk produced but rather, it is important to determine whether or not feed ingredients are being converted into milk at expectations (St. Pierre, 1998).

Before making changes to how the herd is fed, calculate feeding costs and compare them with local values. Include a way to measure feed efficiency in this process.

There are various benchmarks (return over feed, feed cost/quantity of milk, etc.), each with its own advantages and disadvantages. Several tools are available on the internet to assist with these calculations. Last year, CanWest DHI introduced "Profit Profiler", a program that allows an individual farm's financial and production data, including forage and purchased feed costs, to be confidentially benchmarked against a peer group, which is a valuable way to evaluate your management.

A key to controlling costs is working with a competent nutritionist. Tauer and Mishra (2006) reported on cost efficiency factors on dairy farms. Their study reviewed U.S. data to identify ways producers could reduce their cost of production. Numerous factors were identified by their research, such as the cost advantage of milking parlours compared with pipelines, and larger farm size compared with smaller farms. However they identified a key factor for reducing cost was using a nutritionist. Those farms that did so had greater efficiency of production compared with those who did not.

To begin reducing cost of production review the following four areas: the cost-effective use of feed additives, the use of by-product feeds, the importance of forage quality and storage, and feeding management options.

Feed Additives

Virtually all dairy farmers incorporate a variety of additives into their cows' diets and many of these more than pay for themselves in terms of higher milk production or improved feed efficiency. However, feed additives should not be used on a recipe basis. Do not use exactly the same feed additives at exactly the same inclusion rates year-round in every batch of feed mix.

In general, it pays to use additives with a proven track record based on independent research. However, situations change. Be proactive in changing additive feeding rates and their use. A cost of 11 cents/cow/day seems small but if there are 100 cows in the herd, that amounts to $4,015 a year.

Yeast and yeast cultures are commonly fed to dairy cows. While they improve the consistency of dry matter intake they have a more noticeable effect in the summer, when heat stress is common. Higher than normal inclusion rates in the summer may be warranted but not in the winter.

The two aspects of ruminant nutrition that have to be considered are (1) additives that support ruminal fermentation and (2) ingredients that supply nutrients post-ruminally. First, feed the rumen so that microbial protein and volatile fatty acid (VFA; e.g. acetate, propionate and butyrate) production are optimized. The most cost effective part of any ration is derived from the ruminal fermentation of forages. It is the art of making milk rather than buying milk. Some additives are good at supporting this, such as:

buffers (products like mag-ox, bicarb or Min-ad, support milk fat test and reduce potential for sub-acute ruminal acidosis by increasing ruminal pH)
rumensin (alters fermentation to favour propionate production)
yeast and yeast culture (consistent feed intake, may improve digestibility)

Secondly, consider using feed ingredients that support the needs of the cow by delivering nutrients post-ruminally, These additives more directly enable the cow to either support high milk production or to support her health. Some additives in this category include:

rumen inert fat or by-pass fat (increases energy density of the diet, helps body condition score, benefits milk fat content and a better energy balance can help with breeding)
trace minerals (benefits for hoof health, immune function)

There are many other additives and ingredients available to nutritionists and producers. Individual circumstances differ and use and payback of these products varies. Feed ingredients are available for many situations including enhancing palatability, controlling effects related to mycotoxins (however, note that there are currently no label claims allowed for control of mycotoxins), and for cost-effectively adjusting ration specifications. This includes urea to improve soluble protein content (particularly in high corn silage diets) and sugar for situations of insufficient soluble carbohydrates. There is not a universal need for these types of ingredients, so discuss their use with your nutritionist.

By-Product Feeds

Using by-products as feed ingredients is an old idea. What is new in this area is the magnitude of the supply of by-products, particularly from the rapid growth of ethanol production. Ontario ethanol production has doubled with the recent plant openings and there is good availability of by-products as dry, wet and also modified-wet distiller's grains.

There remain some issues with their use including variable nutrient composition or digestibility of nutrients from batch to batch, often arising from the drying stage. There is some indication that these problems are more likely to be reduced as the plants gain experience with processing the by-product.

New fractionation technologies are also possible and are on-line in the U.S. at some plants. Fat and protein levels can be changed, making the by-products more flexible for incorporating into dairy rations.

Use of corn distiller's grains is a good way to displace more costly ingredients. Researchers have shown that feeding corn distiller's grains at 20 per cent of dry matter intake has no negative effects, but in practice they are generally not fed in excess of 10 per cent of the diet. Some nutritionists remain concerned about the negative effects of residual oil in the by-product on ruminal fermentation and its potential to depress milk fat.

Other by-product feeds can be cost effective also. Availability and quality can vary from region to region but should be considered in any feeding program where storage and handling methods are available.

Forages

Forage quality is the single most important factor in putting together a ration. It also gets the least amount of attention when discussing ways to manage feed costs. Forages determine what amount of concentrate is needed in the ration to support a desired level of milk production.

One aspect of ensuring forage quality that can be improved is bunk silo storage of corn silage and haylage. Dry matter losses are a hidden cost compared with the use of an additive that will directly increase diet cost. Dry matter losses can be more costly in terms of lost nutrients and reduced feed quality.

Density analysis on bunk silage samples of haylage and corn silage from a sample of Ontario dairy farms has shown that the packing density is frequently below optimal. Better packing and higher densities reduce the loss of dry matter. A study from Cornell University has shown that dry matter loss can range from a low of 10 per cent over 180 days of storage when the silage density is 352 g/L [or 22 lbs of dry matter/ft³] to as high as 20 per cent losses when bunk density is only 160 g/L [10 lbs of dry matter/ft³].

Feeding Management

There are a number of management options available to dairy producers to consider when implementing strategies to better manage feed and feeding costs.

Group cows. Single group TMR herds can reduce feeding costs by 50¢ to $1.00/cow/day for cows moved into a second group, because lower producing cows have lower nutrient requirements. Offsetting considerations are increased labour necessary for preparing a second feed mix and potential loss of milk (0 to 0.25 litres/day, often this is temporary) by moving cows from the high group to the lower group.
Adjust feed refusal allowance. Savings vary depending on how the feed refusals are presently used (re-fed, offered to heifers, or disposed of).
- Fresh cows should be fed for 3 per cent to 5 per cent refusal rate; high cows 1 per cent to 5 per cent, late lactation 0.5 per cent to 3 per cent
- Low refusal feeding does not imply having an empty bunk. The bunk should have less than 1per cent orts (feed offered to an animal but not consumed by the animal) at next feeding and just reach that state by the next feeding.
Monitor and understand where feed is going by using feed management software and calibrating mixer and scales.
Introduce written protocols for feeding and regularly monitoring forage dry matter changes.
Book feed in advance with the feed company. Understand how it works and the risks involved, but that it can be a cost saving tool.
Measure and track feed efficiency in the herd.
Feed minerals, but phosphorus in particular, at the required rate and not above it.