Profit in the Details Profit per pen

February 2, 2009 06:00 PM
Dan Little
How often have you removed cows from a pen or milking string, yet experienced no decrease in total milk production for the string?

Regardless of the stage of lactation, a response like this tells us that the pen density (number of cows per pen) might have been too high. However, with current milk prices, a more common way to improve profitability (or minimize loss) would be to attempt to decrease feed costs. So how can you determine the optimum feed cost and pen density for your farm?

The interaction of pen density and feed cost per pound of dry matter is illustrated by examining the milk production and feed cost of four pens of cows (see table below).

Consider Pen A as the current situation, with an average milk production of 75 lb. of milk/day and $3.75 in feed cost/head/day. The net result is a daily gross margin (income over feed costs, or IOFC) per pen of $750.

Pen B is an example of removing 10 cows from the pen but experiencing no decrease in total milk produced per pen. Therefore, milk production increases per cow with no change in daily feed cost, resulting in a net gain of $16/pen/day of gross margin.

On the other hand, Pen C is an example of an outcome that might be expected by attempting to decrease the feed cost in Pen A. Provided that the ration was properly balanced to begin with, a change in ingredients to decrease feed cost usually decreases dry matter efficiency (DME) and has a negative impact on profitability. In this case, the effect of the decreased milk production and the cheaper ration results in a daily loss of $30 per pen, or nearly $11,000 per year, as compared to Pen A.

Pen D illustrates the possible outcome of a decision to increase the feed cost by improving the quality of the diet. The 15¢ invested in feed per cow per day results in an increase in feed efficiency to provide an increase in milk production compared to
Pen A. Even at $10/cwt. milk and a higher feed cost per cow, Pen D is more profitable than Pen A by nearly $40 per day, or $17,866 per year.

It is understandable that decreased cash flow on the dairy causes everyone to critically examine input costs. However, attempts to decrease the cost of an effective ration will often further deteriorate profits.

Fortunately, many rations can be altered to improve feed efficiency and actually increase profits even though the daily feed cost has increased.

Daily monitoring of gross margin is necessary for producers to accurately evaluate the results of pen density or ration changes.

Bonus content:

Click here to download "Dairy Profit Analyzer."

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