Dr. Ken Griswold
Technical Service Manager
Kemin Animal Nutrition & Health
Dr. Joanne Knapp
Fox Hollow Consulting, LLC
Dr. Normand St-Pierre
Dairy Management Specialist
Ohio State University
The federal government shutdown and impending debt ceiling issues are making all markets uncertain. It will not be clear how this political wrangling will impact the dairy industry so farmers need to be very focused on the matter at hand of improving their margins for the coming year. As such, dairy producers will need to continue to focus on the use of cost-effective feedstuffs.
Using the SESAME program, developed by Ohio State University, our program evaluates commonly used feedstuffs based on their content of five basic nutrients: net energy for lactation (NEL), rumen degradable protein (RDP), d-RUP, non-effective neutral detergent fiber (ne-NDF), and effective neutral detergent fiber (e-NDF). These individual nutrients are valued on a megacalorie (Mcal) 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 Mcal of energy is currently worth approximately $0.13 (or 13 cents per Mcal) 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 Mcal to produce 100 pounds of milk, then the value of the energy in her daily diet would be approximately $5.46 based on the current market value for NEL. This value is unchanged from last month and will likely stay fairly stable through the conclusion of the corn harvest when real crop yield will be determined.
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 (fat) do not skew the results of the analysis. Based on the historic data within the SESAME analysis, fishmeal is running at 223 percent of its predicted value and bloodmeal is 140 percent over its predicted value. The value of NEL remained the same as last month and will likely stay relatively stable until the market ascertains the outcome of the 2013 corn harvest. 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 feedstuffs to be had in Table 2 has been jumping up and down from month to month. Among protein sources, only corn gluten meal and distillers dried grains with solubles are currently underpriced based on their nutrient profiles. However, one should understand the limitations of these protein sources and formulate diets accordingly. Among energy feedstuffs, bakery by-product meal, corn gluten feed, and wheat midds are at or below the lower limit on expected price. With the price spread between canola meal and soybean meal 48 percent well over $100 per ton, canola may be a viable alternative to soybean meal for RDP in formulated diets.
Avoid citrus pulp, tallow, blood meal, and fishmeal as they continue to be overpriced in the market. Given the extremely high price of animal-based RUP sources such as bloodmeal and fishmeal, rumen-protected amino acid supplements may be more cost effective for balancing for amino acids within a lactating cow diet. 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 loads (TTL) 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.