This article was #7 of the Top 25 most well-read articles on www.progressivedairy.com in 2014. It was published in the Jan. 17, 2014 Extra e-newsletter. So that’s where the money went! Feed costs are the Achilles’ heel of a dairy. Many dairymen prepare cost budgets based on the nutritionist’s ration but do not account for losses in the mixing process by cows sorting at the bunk or by what was lost to birds and raccoons.
While feed costs are 47 to 57 percent of the operational budget, dairymen are so accustomed to writing high-dollar checks for those products that it’s easy to lose track of the details. This webinar summary, originally presented by Dr. Mike Brouk of Kansas State University Extension, identifies those feed-cost leaks and provides relatively simple ways to reduce losses.
Based upon Brouk’s calculations, it was the “insignificant things” that separated the profitable operations from the unprofitable ones.
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Whether milking large herds or small, there are farms that even during challenging times show a profit. Dr. Mike Brouk, Kansas State University extension specialist, discussed some of the hidden costs during a recent DAIReXNET webinar presentation.
Brouk says economists studied the data from 43 farms, ranging from 40 to 700 cows per farm, and analyzed it to determine key factors leading to profitability. Not surprisingly, the most significant factor leading profitability was milk production per cow.
To remove production barriers, dairy managers are generally efficient at addressing cow comfort, nutrition, reproduction, lameness and milk management. These are high priorities for managers even in good times and garner their fair share of managerial attention.
The second most important economic factor was feed as a percent of total cost – in other words, controlling feed costs. This is an area that gets less attention. When profit margins are slim, as we’ve seen in the industry in the past several months, this is one of the defining areas that deserves considerable attention in order to increase profitability, and it’s one of the largest factors in separating profitable farms from unprofitable farms in lean times.
Know your cost
In nutrition, dairymen talk about three different rations – the one formulated by the nutritionist, the one mixed in the wagon, and the one finally consumed by the cow. Ideally, all would be identical. Practically speaking, they’re never identical. The nutritionist’s ration exists only “on paper.” If there are issues with the mixer or those who load the mixer, then the ration in front of one group of cows might be different than the mix in front of another group of cows.
And finally, the cows are going to do their best to sort the ration once it gets in the bunk. So the question becomes, how can you measure true feed cost? In order to increase a slim profit margin, you have to measure what comes in and what goes out, and then work to decrease the difference.
Shrink is one element not often considered in calculating feed cost. If you take the amount delivered and subtract the amount fed, the difference equals shrink. And you, as a dairyman, paid for that, no matter what happened to it. When you calculated your feed loan, did you account for shrink? According to Brouk’s study, most producers determine cost based on the nutritionist’s calculations. But, as we’ve discussed, that ration doesn’t reflect what actually gets to the cow’s gut.
Stop the shrink
Shrink and feed loss are the result of a variety of problems, some of which can be controlled better than others. Take wind, for example. Brouk says one producer in the study lost 50,000 pounds of molasses in one month. When asked how that had happened, the producer investigated and found there had been a lot of wind and the fill hose that dropped molasses into the wagon ended about 5 feet above the wagon.
The molasses tank was allowed to run until the correct weight of molasses filled the mixer, but it didn’t account for what ended up on the ground and on the tractor. There was a simple solution – drop the feed tube another 5 feet – but the producer hadn’t realized the problem until he saw the data.
Animals can also cause shrink. Birds, for instance. It is estimated that 100,000 starlings eat 24 tons of feed per month. That’s equal to one semi-load of feed per month. In addition, birds are great at sorting the diet and will sort out about 57 percent of the starch and leave the hay. If you have rolled corn and alfalfa hay you’ll lose about 38 percent of the starch.
So how can a producer increase profitability by reducing this shrink loss? Some dairymen are feeding more heavily at night than in the morning, or feeding smaller quantities and more frequently during the day to reduce exposure to the birds. Rodents and raccoons can also punch holes in feedbags; any effort to decrease their presence will also improve profitability.
Then ask yourself what’s happening in your storage facilities. Farms in the study, according to Brouk, experienced 5 to 40 percent shrink depending on storage length and weather extremes. Many producers have gone to a three-sided bunker, but significant shrink remains and unless producers are weighing in the feed and weighing it out, then shrink is not being correctly calculated. Closed bins will reduce loss, but not eliminate it.
And what’s happening in your commodity bay? Do you find additives stuck to the truck tires and being tracked through the yard? Are additives adequately separated (and not by using straw bales as dividers) or are they piled next to each other?
Based on the data from Figure 1, this producer in the study lost 13 cents per day, on 4,500 cows, resulting in a loss of $213,525 per year, which is pretty sobering.
One way to reduce this loss is to buy a mixed ration from a supplier. This can be added to the on-farm forages, reducing loss. Another producer modified his commodity barn by lowering the truck-loading bay, reducing wind and traffic in the bay itself. He calculated a return on investment within 5 years of making the improvements.
Then take a look at what’s happening with silage face management. In addition to the physical loss of feed, there is also loss of dry matter intake when the spoiled feed is fed to the cow. This reduces the NDF digestibility of the total diet and ultimately reduces milk production.
“Infrared cameras are a good way to look at corn silage faces,” Brouk says. “When we see heat, we see loss of nutrients, the most digestible nutrients. Once energy is converted to heat, it’s gone.”
Brouk clarifies that while energy is never lost, it is transformed and when energy produces heat, the heat is lost to the environment instead of being fed to the cow. Uncovered bunkers and mismanagement of silo faces create great potential for increased heat and thus profit loss.
Other relatively simple ways to reduce losses include:
- Inspect scales for accuracy.
- Match an appropriately-sized loader bucket to handle concentrates.
- Control flies. Studies have calculated that 3 pounds of feed per day, equaling 20 cents per cow daily, is flung over the backs of cows for fly control – and surely there ought to be a more effective way to handle fly control.
- Consider selling refusals to a neighbor’s beef cow herd or another off-farm enterprise.
- Watch feed delivery errors. Small deviations x cost per pound x pounds fed x number of cows can quickly equal large sums.
Management attitudes
Some folks think it’s not worth their time to watch seemingly insignificant things, says Brouk. But even a small reductions in shrink loss can result in big savings, as demonstrated in Figure 2. Even a savings of 35 cents in costs per day per cow over a year’s time may determine a successful and profitable year, or a year in the red. Based upon Brouk’s calculations, it was the “insignificant things” that separated the profitable operations from the unprofitable ones.
One final word about shrink loss – if producers had less shrink, then precious farm land currently being used for extra feed could be used towards a cash crop or other commodity.
“If producers can address these losses it will create a profit opportunity, separating them from other farmers, resulting in an economic advantage,” Brouk says.
Click on this link to view the full presentation. PD
PHOTOS
Photos by PD staff.
Lynn Jaynes
Editor
Progressive Dairyman
