Current, as well as near future, class three milk prices continue at sub fifteen dollars per hundredweight. This is terrible news for our area dairy farmers considering what it costs to produce a hundredweight of milk. A summary of the 2017 OSU Farm Business Analysis program compared the average of all Ohio dairy herds in the program to the high 20% of herds. The report accounted for both direct and overhead expenses. The cost of production per hundredweight averaged across all farms was $18.73 including both direct and overhead costs. For the high 20% of farms, that cost of production was $17.69/cwt. Feed, labor, depreciation and supplies were the top four expenses across all farms as well as for the high 20% of farms.
By far, the top expense in milk production is feed cost. Across all farms, feed averaged 51.2% of the total cost of milk production. Interestingly, on the high 20% of farms feed averaged 52.7% of the total cost of milk production. The next highest cost of milk production is labor at 13% for the all farm average and 9% for the high 20% farms. Supplies came in at 4.4% of the total cost of milk production for both the high 20% of farms as well as the average across all farms. Depreciation at 7% was higher on the high 20% of farms as compared to 4% average for all farms. I think the take home message is that feed costs, because they make up such an overwhelmingly large percentage of the cost of milk production, might offer some opportunities for cost savings.
The caution is not to just cut feed costs for the sake of cutting cost. Keep in mind the health and production of the cow. Short-term cost cutting could result in long term and potentially expensive consequences because of inadequate nutrition. In a September 2018 Progressive Dairyman article on decluttering the ration, the author said that formulating a perfect ration is not necessary, 90 percent is good enough because the perfect ration is expensive and often there are other factors besides the ration that keep the cow from producing to her full genetic potential. Reduce costs by using only one or two protein sources, use one source for starch, and evaluate feed additives from a “must-have” versus “nice-to-have” perspective. A February 2018 Progressive Dairyman article listed some things to consider regarding feed rations during low milk prices. That list included
- Maximize the use of high quality farm grown forages and grains to reduce purchased feed costs.
- Include affordable by-product feeds, but monitor to assure consistent quality and nutrient content.
- Evaluate the use of feed additives. Do they offer an economic return at $15 dollar milk?
- Consider multiple TMR mixes for different stages of lactation
- Minimize feed shrink.
Feed shrink is an area where some no or low cost management changes could pay good dividends. Shrink is feed that was produced or purchased but never actually was consumed by the animal. Losses from feed shrink happen in a number of different ways and close observation, attention to detail, and record keeping can help to identify where those losses are occurring. Once identified, there may be opportunities to change or improve management practices to reduce feed shrink. Feed shrink occurs with harvest losses in the field, dry matter losses from poorly stored silage and/or hay, and wind-blown feed, especially around commodity storage bins. Feed spilled and driven over during feed mixing, inaccurate feed mixing, broken, punctured or torn bags of silage or baleage, excessive overfeeding and/or feed refusals, and feed losses to birds can all be sources of feed shrink.
With our current milk prices, profit margins are low to non-existent. If a farm is providing only one TMR mix for the entire dairy herd, that ration is typically balanced to meet the nutritional requirement of early lactation cows. While there may be some labor savings to only mixing and feeding one TMR ration, that ration balanced for early lactation cows is excessive in terms of feed cost and nutrient requirements for mid and late lactation cows. Grouping mid and late lactation cows separately from early lactation cows and formulating TMR rations for their nutrient requirements will result in cost savings.
Rory Lewandowski is an OSU Extension Agriculture & Natural Resources Educator and may be reached at 330-264-8722.
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