Cost of nutrients and relative value of feedstuffs for Pa. Dairy Farms

1/23/2016 7:00 AM

Ken Griswold

Technical Service Manager

Kemin Animal Nutrition & Health

Joanne Knapp

Fox Hollow Consulting LLC

Columbus, Ohio

Normand St-Pierre

Dairy Management Specialist

Ohio State University

The close-by Class III milk price is now running below $14 per hundredweight at the beginning of January, and all indicators suggest that the price will stay in that range for the next several months. The prices of corn and soybeans have dropped recently, which should help hold feed prices lower. Therefore, it imperative that rations be scrutinized for opportunities to use more cost-effective feedstuffs in order to maximize income over feed costs. The SESAME program, developed by The Ohio State University, was designed with this purpose in mind. 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), 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, 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 (d-RUP) is currently worth approximately $0.474 in the market, regardless of whether that d-RUP comes from soybean meal, blood meal, or corn, etc. 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 value 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 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.

In the protein byproduct feedstuff markets, the plant-based proteins have generally been stable over the past several months while the animal-based protein prices jumped around in Table 2. Among protein sources, distillers dried grains with solubles (DDGS), feather meal, meat meal and expeller soybean meal were 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 DDGS, 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. Among animal-based RUP sources, fishmeal remains extremely high and blood meal continues to be over priced in the market. These protein sources need to be carefully 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. 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.

It should be noted that the value of effective fiber (e-NDF) in the market has risen over 45 percent since the first quarter of 2015. This steady increase in value while the milk price has gone in the opposite direction may reflect the quality of hay produced during the growing season or the interest in trying to improve milk components during a period of low milk prices.

Among energy feedstuffs, the byproduct feedstuffs including bakery byproduct meal, corn grain, corn gluten feed, hominy, 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 maybe different than those listed in Table 2. There are several warnings about the information presented in Table 2.

Warnings:

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.


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