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

10/15/2015 7:00 AM

  • Dr. Ken Griswold
    Technical Service Manager,
    Kemin Animal Nutrition & Health
  • Dr. Joanne Knapp
    Fox Hollow Consulting LLC,
    Columbus, Ohio
  • Dr. Normand St-Pierre
    Dairy Management Specialist,
    The Ohio State University

The Class III milk price finally slid beneath $16, and looks to stay there through the spring of 2016. The corn and soybean harvest in Pennsylvania was spotty with some areas having bountiful yields, while others suffered from a lack of rain over the last three months. However, regardless of your corn and soybean crops, the national prices for corn and soybeans look to stay at current levels for next several months.

So, let’s compare 2015 prices for milk, corn and soybeans with 2014 prices. Milk price dropped roughly 34 percent from 2014 to 2015, but corn and soybean prices only dropped approximately 15 and 20 percent, respectively from 2014 to 2015. This means that feed prices have declined much less than milk price, and dairy producers need to continue to look for opportunities to lower feed costs in order to stretch their margin per hundredweight.

Deciding where a byproduct feedstuff may be a cost-effective alternative to corn and soybean meal is a challenge. The SESAME program, developed by the Ohio State University, may be able to help in the decision-making process.

The software program 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), noneffective 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, 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 pound of digestible rumen undegradable protein is currently worth approximately 58 cents in the market, regardless of whether that d-RUP comes from soybean meal, blood meal, corn, etc. Therefore, based on 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, and economically, where the price of a byproduct feed has to fall to be considered as an alternative in ration formulation.

The SESAME program was upgraded in 2014 to weight the value of different feedstuffs during the analysis so high-priced feedstuffs such as blood meal, fish Menhaden meal, tallow and low-priced forages with regional market influences 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.

The protein markets are still the driver in terms of feed costs and the plant proteins have generally decreased over the last month with the harvest while the animal proteins have stayed higher. Among protein sources, canola meal, distillers dried grains with solubles, cottonseed meal, and soybean meal 48 percent were at or below the lower limit price based on its nutrient profile. 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. Therefore, these “bargain” feedstuffs need to be evaluated very carefully before incorporating them into the diet.

Additionally, animal-based RUP sources such as blood meal and fishmeal need to be scrutinized in the diet due to their continued high prices in the market.

Alternatively, rumen-protected amino acid supplements may be more cost-effective for balancing for amino acids within a lactating cow diet. Based on the historic data within the SESAME analysis, the prices of blood meal and fishmeal are running at 130 and 264 percent of their predicted value, respectively.

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.

Among energy feedstuffs, the byproduct feedstuffs including bakery byproduct meal, corn grain, corn gluten feed and wheat midds are at or below the lower limit price. If possible, avoid sugar beet pulp, citrus pulp and tallow as they continue to be overpriced in the market.

Supplemental fat sources are another over-priced feedstuff 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 may be 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 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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