For years, dairy producers have been chasing that elusive figure encompassing all that relates to profitability—the margin. With feed usually being the largest expense on a dairy farm, one of the greatest factors in determining a dairy’s profitability is the ability to manage feed costs effectively.
Dairy producers have a number of choices when it comes to feeding cattle. The variety of production systems make it difficult for any one farm to truly know the cost to feed its herd when basing prices solely on the prevailing market. Though analysts do a reasonable job approximating the market costs for feedstuffs like corn silage and alfalfa haylage, actual producer costs can vary greatly within the same state. For this reason, it pays to know the true costs to produce the crops fed on the dairy farm.
Penn State Extension has developed programs to help producers in the northeast determine the costs to grow their home-raised feeds and use those costs to define the true breakeven milk margin on a dairy. Breaking down crop costs on a per unit or per acre basis can help producers determine which crops to grow in a particular year, the benefits of producing one crop over another, and how to best match a cropping plan to the herd’s rations. By determining what the cows eat in a given year, a producer can then determine how many acres and how much tonnage he or she needs to grow sufficient feed for the dairy.
Though most farms adhere to nutritionists’ guidelines for the nutrient requirements for their herds, each farm has a different set of resources to meet the cows’ needs. Land availability and soil fertility are major factors, as well as capital resources, feed storage and labor, that define how much feed can be produced on the farm and the quality of that feed. Ideally, each farm must create its own plan for a cropping strategy that will maximize high quality feedstuffs and minimize purchased feed.
To calculate the cost of home-raised feeds, first determine harvest numbers to estimate future yield. Tremendous technology exists today to help farmers track yields as crops are harvested and inventories as they leave silos and head to the feed alleys or bunks. However, for producers working on a smaller scale, keeping track of these numbers can be tricky. Basic strategies like writing down the number of bales harvested on a calendar or using a spreadsheet to calculate the volume in a particular silo can be a great first start. Once the yield per acre is calculated the direct input costs are allocated for each crop. When bills for seed, fertilizer, chemicals and custom work come in, write a note either by hand or in the accounting software to keep track of where that seed or chemical went: onto which crop and on how many acres. That helps narrow down the input costs for each crop.