Managing Dairy Rations When Feed Prices Are Volatile

Introduction

Profitability on the dairy is always dictated in large measure by managing feed costs and the efficiency by which feed is translated into milk production. The unprecedented feed and other commodities' price volatility witnessed in recent months has many farmers asking where prices are heading and how can they cut feed costs? Unfortunately, the first answer as to where prices are going is that nobody knows for sure where prices will be in three, six, or twelve or more months down the road and, secondly, how to cut feed costs is not necessarily the right question.

Economists are much better, and more confident, at explaining where things are now, and how we got to this point, with the value of 20-20 hindsight, than they are at predicting the future. The combined effects of supply and demand will always, though not necessarily predictably, determine commodity costs.

That being said, economists have generally predicted that the long-run commodity price trend is upwards based on the factors we know about today. Of course, it was also an economist who said that in the long-run we'll all be dead. Undoubtedly, price volatility will continue in the near term and, while the recession has generated some lower feed prices, strategies to manage feed costs should be reviewed or implemented by every dairy producer. Every sector of every industry is looking at costs and efficiencies these days.

Some of the underlying factors that have changed the recent supply and demand for feed are the growth of foreign countries' GDP (for example, China) and their increased demand for commodities. Also, the Energy Policy Act (2005) in the United States has mandated the use of ethanol and other renewable fuels and this has been responsible in part for the higher non-livestock demand for grain corn, as it is diverted to ethanol production. These long-term drivers of higher prices will continue despite the current economic downturn. These are some of the reasons for you to reconsider how you will manage in the future.

The purpose of this presentation is to briefly review the key areas for managing feed costs on dairy farms. Some of the costs are cash costs that you make a straightforward buying decision about and get an invoice for, while other costs are more hidden, but that wind up taking money out of your pocket nonetheless.

Feeding Objectives

Well-known in the world of dairy nutrition, Mike Hutjens, at the University of Illinois, recently said "never give up milk" in response to a question about cutting feed costs. If that philosophy applies correctly in the US, then it should also be the philosophy of every dairy producer in Canada, where the revenue generated from milk is higher and more stable.

Hutjens' concept is straight to the point: there is nothing to be gained financially by cutting back on those ingredients that give you milk. Obviously, there is a limit to ration cost in terms of a financial payoff, but the cheapest ration is not the most profitable ration. Your feeding objective should not be to minimize feed costs per litre of milk produced (St. Pierre, 1998). The real question to ask is not exclusively a function of the ration's cost but whether or not feed ingredients are being converted into milk at expectations (St. Pierre, 1998)?

The first thing to do before making changes to the way you feed your herd to meet your objectives is to calculate your feeding costs and compare them with local values. This process should include a measure of feed efficiency for your herd also. Various benchmarks can be used (return over feed, feed cost/quantity of milk, etc.), each with its own advantages and disadvantages. Several tools are available on the internet to assist with these calculations. Last year, CanWest DHI introduced "Profit Profiler", a program that allows an individual farm's financial and production data, including forage and purchased feed costs, to be confidentially benchmarked against a peer group, which is a valuable way to evaluate your management.

Open communication with your nutritionist is a key factor in controlling costs. Tauer and Mishra (2006) reported on cost efficiency factors on dairy farms. Their study reviewed US data to identify ways producers could reduce their cost of production. Numerous factors were identified, such as the cost advantage of milking parlours compared with pipelines, and larger farm size compared with smaller farms, but a key factor for reducing cost that they identified was the use of a nutritionist: those who used a nutritionist had greater efficiency of production compared with those who did not.

The four areas I have chosen to focus on here include the cost-effective use of feed additives, the use of by-product feeds, the importance of forage quality and storage, and feeding management options.

Feed Additives

Virtually all dairy farmers incorporate a variety of additives into their cows' diets and many of these more than pay for themselves in terms of higher milk production or improved feed efficiency. However, feed additives should not be used on a recipe basis, meaning that you shouldn't be using exactly the same feed additives at exactly the same inclusion rates year-round in every batch of feed you mix.

In general, it pays to use additives with a proven track record. However, situations change and farmers and nutritionists should be proactive in changing additive feeding rates and their use as necessary. A cost of 11 cents/cow/day adds up when you have 100 cows and you use that additive year round ($4015/year). Yeast and yeast cultures are commonly used today, but their role in the rumen for improving the consistency of dry matter intake has a more noticeable effect in the summer, when heat stress is common. Higher inclusion rates in the summer may be warranted but not in the winter.

The two aspects of ruminant nutrition have to be considered. First, feeding the rumen, so that microbial protein and volatile fatty acid (VFA; acetate, propionate and butyrate) production is optimized. The most cost-effective part of any ration is derived from ruminal fermentation. It is the art of making milk rather than buying milk. Some additives are good at supporting this, such as:

• Buffers (products like mag-ox, bicarb or Min-ad, support milk fat test and reduce potential for sub-acute ruminal acidosis by increasing ruminal pH)
• Rumensin (alters fermentation to favour propionate production)
• Yeast and yeast culture (consistent feed intake, may improve digestibility)

The second category of feed additives isn't designed for rumen function. They generally support efficient milk production by supporting the needs of the cow past the rumen. These additives more directly enable the cow to either support high milk production or to support her health. Some additives in this category include:

• Rumen inert fat or by-pass fat (increases energy density of the diet, helps body condition score, benefit to milk fat content, better energy balance can help with breeding)
• Trace minerals (benefits for hoof health, immune function)

Obviously there are a host of other additives that are available to nutritionists and producers. Individual circumstances differ and use and payback of these products varies. Feed ingredients are available for many situations including enhancing palatability, controlling effects related to mycotoxins, and for cost-effectively adjusting ration specifications, including urea to improve soluble protein content (particularly in high corn silage diets), and sugar for situations of insufficient soluble carbohydrates. There is not a universal need for these types of additives and their use should be discussed with your nutritionist. In 2006, for example, the challenges resulting from mycotoxins were widespread in Ontario and additives were used widely that year, with excellent results. However, the use of additives for mycotoxins is needed only when problems are suspected, and tests of ingredients confirm the type of mycotoxin and their concentration. Preventative use of these additives without test results adds to cost with potentially little or no benefit to milk production.

By-Product Feeds

Using by-products as feed ingredients is an old idea. What is new in this area is the magnitude of the supply of by-products, particularly from the rapid growth of ethanol production. Ontario ethanol production has doubled with the recent plant openings and there is good availability of by-products as dry, wet, and also modified-wet distiller's grains.

There remain some issues with their use, including variable nutrient composition or digestibility of nutrients from batch to batch, often arising from the drying stage, but there is also some indication that these problems are more likely to be reduced as the plants gain experience with processing the by-product.

New fractionation technologies are also possible and are on-line in the US at some plants, whereby fat and protein levels can be changed, making the by-products more flexible for incorporating into dairy rations.

Use of corn distiller's grains is a good way to displace more costly ingredients. Researchers have shown that feeding corn distiller's grains at 20% of dry matter intake has no negative effects, but in practice they are generally not fed in excess of 10% of the diet. Concerns remain about the effects of residual oil on rumen fermentation and the potential to depress milk fat.

Other by-product feeds can be cost effective also. Availability and quality can vary from region to region but should be considered in any feeding program where storage and handling methods are available.

Forages

Forage quality is the single most important factor in putting together a ration. It also gets the least amount of attention when discussing ways to manage feed costs. Forages determine what amount of concentrate is needed in the ration to support a desired level of milk production.

One aspect of ensuring forage quality that has shown there may be room for improvement on some dairy farms in Ontario is bunk silo storage of corn silage and haylage. Dry matter losses are a hidden cost compared with using an additive, but it can be more costly in terms of lost nutrients and reduced feed quality, and that does not include the cost associated with harvest and storage of feed that is lost as shrink. Density analysis on bunk silage samples of haylage and corn silage from a sample of Ontario dairy farms has shown that the packing density is frequently below optimal. Better packing and higher densities reduce the loss of dry matter. A study from Cornell University has shown that dry matter loss can range from a low of 10% over 180 days of storage when the silage density is 22 lbs of dry matter/cubic foot to as high as 20% losses when bunk density is only 10 lbs of dry matter/cubic foot.

Feeding Management

There is a multitude of management options available to dairy producers to consider when implementing strategies to better manage feed and feeding costs:

• Grouping cows. Single group TMR herds can reduce feeding costs by 50¢ to $1.00/cow/day for cows moved into a second group, based on the reduced dry matter intake of lower producers and their reduced requirements compared with high producers also lowers the purchased feed cost. Offsetting considerations are increased labour necessary for preparing a second feed mix and potential loss of milk (0 to 0.25 litres/d, often this is temporary) by moving cows from the high group to the lower group.
• Adjusting feed refusal allowance. Savings vary depend on how the feed refusals are presently used (re-fed, offered to heifers, disposed). Recommendations: Fresh cows should be fed for 3-5% refusal rate; high cows 1-5%, late lactation 0.5-3%. Low refusal feeding does not imply having an empty bunk. The bunk should have less than 1% orts at next feeding and just reach that state by the next feeding.
• Monitoring and understanding where feed is going by using feed management software and calibrating your mixer and scales.
• Introducing written protocols for feeding and regularly monitoring forage dry matter changes.
• Booking feed with your feed company. Understand how it works and the risks involved, but that it can be a cost saving tool.
• Measuring and track feed efficiency in your herd.
• Feeding minerals, but phosphorus in particular, at required rate and not above it.

Suggested Reading and References

St-Pierre, N. 1998. Formulating rations based on changes in markets. Proc. Tri-State Dairy Nutr. Conf.

Stone, B. 2008. Considerations in feed bunk management. Proc. Tri-State Dairy Nutrition Conference.

Tauer, L. W. and A. K. Mishra. 2006. Dairy Farm Cost Efficiency. J. Dairy Sci. 89: 4937-4943

VandeHaar, M. J. and N. St-Pierre. 2006. Major advances in nutrition: relevance to the sustainability of the dairy industry. J. Dairy Sci. 89: 1280-1291.

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