By Jakob Vogel agr.
Rising input costs are the topic of conversation over the past few months, and as uncertainties throughout the global market continue to add strife to Canadian Agriculture, the topic will not soon pass.
Although the fear and uncertainty for dairy producers is expected, it is still quite early in the season, with time allowing appropriate reactions and decisions to be made before the planting season begins.
Now… what is the best option for you and your business in order to mitigate these increased costs wherever possible? At a quick glance, there are many consultants and suppliers recommending things that are quite contrary to mainstream targets. Some of the recommendations that have been mentioned over the past few weeks include:
- Milk more animals than before to reduce purchased feed costs (reduce milk per cow);
- Use whole milk to reduce milk replacer costs;
- Grow more hay crops to reduce the need for purchased fertilizers.
Now, understanding that every farm business has a different situation financially and environmentally, some of these recommendations make sense and can be a valid opportunity for producers to reduce their purchases during these price explosions. However, before making a decision, it is always crucial to consider all aspects of the farm business and the impacts these decisions will have on the efficiency and financial health of the business in the short-, medium- and long-term.
Validate and consider your production cost
In most reports, feed costs are published as 49-51 per cent of total expenses on the modern dairy farm. With that, other consulting groups have recorded feed costs representing 72 per cent of the variable costs on a dairy farm. With this, the easiest place to cut is the feed bill – and part of that is correct!
The variation of feed costs are associated primarily with the changing forage yield. Over the past several growing seasons, haylage yields have been decreasing, although the exact cause is unknown, culprits to the problem is most likely related to poor winter survival, drought, cultivar selection and inadequate fertilization for perennial forage crops.
With this, the decision to grow more hay crop forage; although an adequate solution in some situations, the reality for some producers may be hard depending on their topography, and fertility in order to support adequate overwintering and the quality typically expected for perennial forages.
The second tier related to fluctuations in feed costs is forage quality. A well-timed forage, does not cost more to ensile than a poor timed forage, however, the subsequent feed costs to support intended milk will increase in consequence.
Be humble with expectations and past experiences.
The concern with making decisions based off of benchmarks can be dangerous. For example, if we decide to grow more hay crops in the coming season, based on the average yield of 5 dry matter tonnes per hectare (for the year), but for some reason, your farm only yields 3 dry matter tonnes of silage per hectare, this difference would require 40 per cent more land to fulfill the same requirements as the higher yielding farm, or could lead to feed shortages which will additionally increase the costs associated with feeding and maintaining the dairy herd!
Similarly, if deciding to reduce production per animal (thus, milking more cows for the same quota), feed costs on a per cow basis may be dropped, however, the total feed costs for the herd may remain the same, or actually increase depending on the intensity of the shift. Also, one must consider the impact this decision will have on the number of dry cows and replacements that will be needed to maintain the herd overtime. For most producers, it can be agreed that the cost of producing 1 acre of corn silage, is the same as growing 1 acre of grain corn. However, the subtle difference between these two options would be the loss of potential revenue coming from the grain. Based on average prices for grain sales, the prospect of taking advantage of these increased prices may be attractive to those who are able to take advantage.
Isolate opportunities for fat trimming within your current operation
The main objective of the farm should be to fill quota, and fill as many underproduction credits as possible (before the change in policy takes effect August 2022). The secondary objective would be to take advantage of supplemental production days whenever possible. Finally, the tertiary goal would be to isolate areas of the farm where overspending can occur. The most common examples that are seen on dairies throughout the region are; too many heifers for the herd size, inadequate feed efficiency, unnecessary treatments/morbidity rates, and turnover rates that are caused by rearing too many replacements (voluntary culling of animals that are high performance, to make room for less productive first calvers).
If we consider the most recent numbers coming from Lactanet, that the cost of rearing a heifer from birth to parturition is roughly $3,000, holding onto 10 heifers too many (which even for an average sized herd is quite common) can lead to $30,000 of savings (50-65% of this can be directly seen as feed costs).
Feed the right products to the right group at the right time
With rising costs, the importance of reducing compromises for forage quality will become more important than it has in the past couple of years. As producers, consider working with your management team, and your suppliers to ensure the right feed is being fed to the correct group of animals based on their needs. For example, high digestible haylage at 22 per cent crude protein, may not be the correct feedstuff for a group of dry cows. The same goes for the high quality BMR corn silage, where possible, may not be the most ideal forage to be fed to growing heifers. Although simplicity must be considered in the decision-making process to ensure repeatability, it is also important to consider several options that may be different than what has been done in the past for sheer sake of convenience.