Cost of nutrients and relative value of feedstuffs for Pa. dairy farms

6/21/2014 7:00 AM

Dr. Ken Griswold

Technical Service Manager, Kemin <\n>Animal Nutrition & Health

Dr. Joanne Knapp

Fox Hollow Consulting LLC, Columbus, Ohio

Dr. Normand St-Pierre

Dairy Management Specialist, <\n>The Ohio State University

Over the last month there has been a slow erosion of the Class III milk price futures through the end of 2014 while the futures prices for protein sources have been steady to moving upward. This situation would suggest that the margin between milk prices and feed prices will tighten in the second half of 2014. Lower margins mean that dairy producers must look for cost-effective alternatives in their dairy rations. The SESAME program, developed by The Ohio State University, determines the economic values of dairy feedstuffs by evaluating commonly used feedstuffs based on their content of five basic nutrients: net energy for lactation (NEL), rumen degradable protein (RDP), digestible rumen undegradable protein (d-RUP), non-effective neutral detergent fiber (ne-NDF), and effective neutral detergent fiber (e-NDF). These individual nutrients are valued on a megacalorie basis for NEL and a per pound basis for RDP, d-RUP, ne-NDF and e-NDF. If you are evaluating your ration ingredients based on other nutrients, please be aware that there are differences and consult with your nutritionist on any potential ration changes.

The SESAME analysis of the Pennsylvania feed market uses 29 commonly fed commodities to determine the intrinsic value for each of the five basic nutrients in a feeding program. The intrinsic value is the price that the market is willing to pay for that particular nutrient. As an example, a megacalorie of energy is currently worth approximately $0.125, or 12.5 cents per megacalorie, in the market, regardless of whether that energy comes from corn, cottonseed, bakery meal, fat, etc. So, if a high-producing Holstein cow needs roughly 42 megacalories to produce 100 pounds of milk, then the value of the energy in her daily diet would be approximately $5.25 based on the current market value for NEL. This value is essentially unchanged from last month so the value of energy in the diet only increased by $0.08 per day. Given the intrinsic value for each of the five nutrients within a specific feedstuff, we can determine the potential break-even price based on the book values for each nutrient in that feedstuff. The SESAME program has been upgraded to weight the value of different feedstuffs during the analysis so high-priced feedstuffs such as blood meal, fish Menhaden meal and tallow do not skew the results of the analysis. The calculated costs for the five basic nutrients are shown in Table 1.

Table 2 provides the actual prices for the feedstuffs that were evaluated in the current SESAME analysis along with their predicted prices based on nutrient content. In addition, the table includes the 75 percent confidence limits of prices for each commodity. A 75 percent confidence limit indicates that we are about 75 percent sure that the true cost of the feedstuff based on nutrient content is between the lower and upper limit prices. In reading the table, one should consider feedstuffs with an actual price below the lower limit as bargains in the present market. The feedstuffs with an actual price above the upper limit would be considered overpriced, and feedstuffs with actual prices falling between the limits would be priced at their approximate nutrient value.

Due to the volatility in the markets, the number of bargain purchased feedstuffs to be had in Table 2 has been jumping up and down from month to month. This month, only three protein sources, cottonseed meal 41 percent, distillers dried grains with solubles and feather meal are currently at or below the lower limit price based on their nutrient profiles. However, farmers should understand the limitations of different protein sources. Corn-based sources, such as distillers dried grains with solubles, are very low in lysine content and can have high fat content, which limits their use in dairy rations. Feather meal is low in lysine and methionine, which are the two most limiting amino acids for milk production in dairy cow. Among energy feedstuffs, corn grain and the byproduct feedstuffs including bakery byproduct meal, corn gluten feed, hominy and wheat midds are at or below the lower limit price. The market dynamics suggest that dairy producers should avoid soybean meal 44 percent as it is over its highest market value, and therefore, has virtually no value when compared to soybean meal 48 percent. If possible, avoid sugar beet pulp, citrus pulp, tallow and fishmeal as they continue to be overpriced in the market. Given the extremely high price of animal-based RUP sources such as fishmeal, rumen-protected amino acid supplements may be more cost effective for balancing for amino acids within a lactating cow diet. Supplemental fat sources are another over-priced feed that need to be used judiciously if possible given the abundance of more cost-effective energy sources. However, because the prices used in the SESAME analysis are aggregated, approximate feed prices, the local prices for all feeds maybe different than those listed in Table 2. There are several warnings about the information presented in Table 2.


1. Actual prices listed in Table 2 are approximate and represent aggregated prices for the State of Pennsylvania. Check with your local suppliers for actual delivered prices.

2. Prices are on a commodity basis, and represent farm-delivered, full tractor-trailer load prices. No services are included; commodity feeds have little or no nutritional guarantees.

3. Results do not imply that a balanced ration can be made solely with bargain feeds, or that over-priced feeds should be eliminated from the ration. Certainly, there is an economic incentive to maximize the use of bargain feeds and minimize the use of over-priced feeds.

4. The analysis is based on the five most economically important nutrients in dairy rations. For very high production herds, other nutrients such as amino acid content of the undegradable protein should also be considered. This would change the predicted price of some commodities such as blood meal.

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