Dr. Ken Griswold
Technical Service Manager, Kemin Animal Nutrition and 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 was $15.57 per hundredweight at the end of February. Do you remember the last time that we saw $15 Class III milk for any significant amount of time in the U.S.? The answer is 2012.
So, what was different in 2012 compared to 2015 that affected our view of the milk price? Well, 2012 was a drought year in many areas of the U.S., and that affected feed prices.
Going back to the columns that were written that year, the average prices of corn and soybean meal for 2012 were $269 and $475 per ton, respectively. As of this current column, the prices of corn and soybean meal are $147 and $410 per ton, respectively.
However, that comparison to the past should not make a dairy producer comfortable with today’s situation. Because feed costs are the largest portion of the cost of production, finding cost-effective alternative feedstuffs for dairy rations are worth the effort and time. However, deciding where a byproduct feed 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 evaluating 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 pound of digestible rumen undegradable protein is currently worth approximately 62 cents in the market, regardless of whether that d-RUP comes from soybean meal, blood meal or 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 and 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.
Due to the volatility in the markets, the number of bargain purchased feedstuffs in Table 2 has been jumping up and down from month to month. This month, there are two protein sources, cottonseed meal 41 percent and distillers dried grains with solubles, 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. Therefore, these “bargain” feedstuffs need to be evaluated very carefully before incorporating them into the diet. Among energy feedstuffs, the byproduct feedstuffs including bakery byproduct meal, corn grain, corn gluten feed and hominy 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, 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 blood meal and fishmeal, 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 114 and 300 percent of their predicted value, respectively. 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 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.