Profit in the Details Fine-tune feed costs

May 3, 2010 11:39 AM

*Extended comments are highlighted in blue.

In turbulent financial times, it is critical to monitor changes in feed efficiency and feed cost as they impact income over feed cost (IOFC). The table shows the different levels of feed cost and efficiency at relatively low milk production levels, as well as a more common scenario.

At first glance, the ration cost is $101/ton for both months. Due to changes in moisture, the ration cost increased 4¢/lb. of dry matter.

However, the new formulation led to an increase in milk production and a decrease in dry matter, improving feed efficiency. The net effect is an increase in IOFC (at the same milk price per cwt.) of 67¢/cow/day or a $122,275 increase in IOFC per year for the 500-cow herd!

While the increase in milk production is a major factor in increasing IOFC, the decrease in dry matter intake (DMI) with the new ration caused feed efficiency to rise 13%. These small increases in profitability resulted in an annual increase in IOFC of more than $255/cow/year.

The "Projected” column illustrates the effect on IOFC when more common inputs are used. At 75 lb. of milk and 53.6 lb. of dry matter per day, feed efficiency jumps to 1.4 lb. of milk per pound of dry matter. At a feed cost of 8.5¢ per pound of dry matter, IOFC increases to $6.52/cow/day—a 38% increase in gross profit!

Knowing these variables is critical to profitability on your dairy. My columns on income over feed cost may sound like a broken record, but IOFC not only represents the summation of many numbers and factors that drive changes in profit, it can also be measured on a daily basis. As compared to other livestock systems, the dairy industry has a unique opportunity to track the variation of profitability factors on a daily basis, thus opening the door to continuous quality improvement. Are you using your farm's data to your greatest advantage?


Bonus content:

More on analyzing profits


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