Editor's note: This article first ran in the November 2011 edition of Dairy Herd Management.
Higher commodity prices are likely to stick around for the long run, predicts Normand St. Pierre, Ohio State University extension dairy specialist. "We got accustomed to $2 per bushel corn," he says, "but that"s probably long gone. I think these higher prices are permanent."
Case in point: Due to increases in fertilizer and seed, agronomy experts forecast 2012 corn and soybean inputs to climb as much as 20 percent over 2011 levels.
"We"re expecting to see input cost increase somewhere between 5 and 20 percent, depending on the crop and the level of inputs relative to the quality of land farmed," says Barry Ward, leader of the Production Business Management program in Ohio State University"s Department of Agricultural, Environmental and Development Economics. "We"ve seen enough significant increases in fertilizer cost that it will be a pretty big bump over last year," he adds.
For dairy farmers, that means profit margins will continue to be squeezed. But you are not powerless, says St. Pierre. He contends that you can take a variety of actions — regardless of farm size — to improve the consistency of your bottom line. For example:
1. Shop better
Your goal is to find the same feed, but at a lower price. This is not the same as "cheap feed" or substituting a cheaper feed for a more expensive commodity, but rather making sure you are paying the lowest possible price for comparable feedstuffs. Call around and find out where you can obtain the lowest price for the same quality feed. And be sure you are comparing apples to apples since some commodities can have the same name but different specifications, as may be the case with some by-product feeds.
Keep in mind that feed is often bought bundled with services like forage analysis or ration balancing, and that can have an impact on prices. "These services have value," says St. Pierre, "but be sure you are paying for services you need."
Also, make use of cash discounts, provided your cash flow permits this practice. A 1 percent discount for paying 15 days early is equal to an annual percentage rate of 25 percent, notes St. Pierre.
Avoid credit card balances. "Even your obnoxious brother-in-law can lend you money at a lower rate than most credit cards," he asserts.
Check for hidden fees in feed prices. Or, in other words, make sure you are getting what you pay for. For example, ask what"s in premixes and additives to be certain you need these ingredients.
Don"t pay more for feed than is necessary. Your goal is to find underpriced feeds; that is, feedstuffs that maintain desired production levels at a lower cost. There is nothing that says you have to feed corn and soybeans if these commodities fit the definition of "overpriced."
"Ruminants, and dairy cows, in particular, can take advantage of a wide variety of feeds," says St. Pierre. "Use evaluation software like Sesame to help you find underpriced feeds."
2. Reduce storage losses
Shrinkage is a problem for both commodities and silages. In fact, many farms average about 15 percent for dry matter shrink for silage and about 5 percent for commodities. Your aim should be to cut down on the cost that comes with that shrink on $7 per bushel corn.
St. Pierre contends that at that if corn in the field is worth about $49 per short ton, adding in the cost of harvest, transportation, packing, inoculant treatment and silage cover, chopped corn silage has a cost of about $61 per ton. At that price, a 15 percent shrink has a cost of $9.15 per ton.
When you cut that to a 10 percent shrink, the cost drops to $6.10 per ton, or a net savings of $25 per cow per year.
Therefore, use rapid and aggressive bunker packing procedures, cover silos quickly and properly, and invest in effective silage inoculants. Then, enforce good bunker storage management, like proper face management.
"Dairy producers really need to remove the opportunities for oxygen to get to the silage," says Mike Schutz, Purdue University extension dairy specialist. "Replacements for corn and silage, such as distillers grains, alfalfa and other energy supplements, will be expensive, so farmers really need to monitor feed storage."
3. Re-think cow grouping and feeding strategies
Evaluate the value of multiple rations for your herd. Single TMR programs for your lactating herd can be difficult to justify in an era of expensive feed.
"Multiple rations are a pain, I know," says St. Pierre. "But consider grouping cows for things other than breeding status. Consider nutritional status instead. Multiple rations may be worth $0.25 per cow per day if you do."
He recommends a single lactation ration for herds lower than 100 cows, two rations for herds of 100 to 300 cows, and three rations for herds with more than 300 cows. Just be sure to avoid steep changes in diet composition and that you use care when moving animals into new groups to avert significant social upsets to cows.
Finally, consider bringing in an outside consultant from time-to-time to offer an independent look at how you can increase your efficiency and effectiveness in these, and other critical areas that impact your bottom line.
For more advice from Ohio State University"s Normand St. Pierre on how to apply these ideas, as well as several other tips, check out this Webinar: https://connect.extension.iastate.edu/p5eyipuciws/?launcher=false&fcsContent=true&pbMode=normal
To access the Sesame feed evaluation software, go to: www.sesamesoft.com