High milk production is an important factor in improving profitability. However, milk production without feed efficiency and cost control on ingredients may result in decreased profits. The data in the table below derives from two Midwestern dairy herds this past summer.
The difference in income over feed cost (IOFC) for the two herds is more than $460/cow/year, even though milk production is nearly identical at 80 lb./day. Note the increased feed efficiency for Herd 1 compared with Herd 2—despite Herd 2 paying more for ingredients.
Herd 2 has a 45¢/cwt. advantage on milk price, but this is overwhelmed by the feed savings of Herd 1. Further investigation of milk production, milk price, feed cost per pound of dry matter and feed efficiency is needed to determine the source of the differences between the herds.
If the feed costs were exactly the same, Herd 2 would still have a higher daily feed cost. This is due to the difference in feed efficiency favoring Herd 1 by 0.2 lb. of milk per pound of dry matter.
In this example, the difference in gross margin is more than $460,000 per year for a 1,000-cow dairy! It is critical that we implement real-time tracking and monitoring programs to reduce the level of variation that is currently present in our industry.
Milk Profit Index (MPI) calculator - under "Profitability Tools”