Cut costs wisely or risk gains being wiped out by additional losses

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Length: 1257 words; 5-6 minutes

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According to the latest DEFRA figures, average farmgate milk prices in the UK fell 18% (6ppl) last year, and the latest round of cuts has knocked income further. Despite national milk production being up 6.5% during the first ten months of the quota year, unless action is taken, incomes for most will have fallen 15-20% since the start of 2014.

“The impact on margin over purchased feed (MOPF) is likely to be similar, and there’s no doubt feed will be one of the main costs targeted as producers look to rebuild margins,” highlights KW nutritionist Dr Anna Sutcliffe. “But get it wrong, and any gains can be quickly overtaken by losses in cow performance, health and fertility.”

Financial impact

Missing peak yield by 4 litres due to compromised nutrition can cut 800 litres off total lactation yield, for example, and lose a 200 cow herd with a 415 day calving index £35,000/year, even at 25ppl. And on a typical liquid milk supply contract, failing to retain the balance of the ration at turnout can lose another 0.2ppl for every 0.1% fall in butterfats.

“The long-term impact on fertility from cows losing body condition is also well known.”

“That’s worth £333/month for the average 2 million litre producer, and even more on a manufacturing contract,” Dr Sutcliffe states. “The long-term impact on fertility from cows losing body condition is also well known.

“But there are feed cost savings that can be made without undermining income, and many of the improvements will also lift performance. It’s also important to look beyond feeding and examine any area where milk value or herd efficiency can be improved.”

As Dr Sutcliffe points out, moving from band B to band A for bactoscan and somatic cell count (SCC) can add 0.6-3.0ppl on many contracts, and up to 5.8ppl in the most extreme cases. Focusing on milking routines, hygiene and bedding quality can not only improve bactoscan and SCC results, but also lower the incidence of mastitis and significantly reduce the associated milk loss and treatment costs.

Feed value not cost

And when it comes to fine tuning feeding and feed buying strategies, the key is to focus on feed value, not cost per tonne, Dr Sutcliffe advises.

“Switch to feeds that lower the cost per litre by either delivering nutrients more cost-effectively, lifting performance, or a combination of the two. The net result will be an increase MOPF even if total expenditure rises as a result of buying better quality – but also better value – feeds.

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Moist feeds like Traffordgold offer better value for money than their dry equivalents.

“Formulating rations to improve feed efficiency will then maximise the milk produced from every kg fed, whilst fine tuning the ration to match milk quality with contract requirements will help optimise milk value.”

In addition, rations that are mixed with greater precision will deliver a more consistent supply of nutrients to the cow, improving rumen function and feed efficiency, and production by up to 7%, according to a 2014 study at the University of Guelph, Canada. More accurate matching of nutrient supply to requirements throughout the lactation will avoid expensive nutrients being converted to fat rather than milk by lower yielding cows, and help manage body condition.

“It’s this holistic approach that’s most effective long term,” Dr Sutcliffe highlights. “It not only helps rebuild margin lost to the latest milk price cuts, but also sets the herd up to be more efficient overall, ready to maximise profits as milk prices increase and be more viable in years to come.”

Future sustainability

Developing herd management strategies to better withstand the increased volatility affecting global milk prices is critical to future sustainability. Since 2008, globally traded milk products have been through three broadly similar periods of price fall (figure 1), with the current UK price cuts the result of a 50% drop in global prices between February and December 2014.

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Figure 1 – Volatility in average globally traded dairy product prices since 2008 (Source: www.globaldairytrade.info) – Click to enlarge.

“In the past, the UK market was relatively insulated from these swings, but that’s no longer the case, as we discovered in 2012. The potentially good news is that in each of the previous two cycles, the recovery has exceeded previous highs, and since the start of December global milk prices have already recovered by 33%.

“If the previous trend repeats – and with continuing global population growth there’s good reason to think it will – then better milk prices should eventually filter through to UK producers,” continues Dr Sutcliffe. “DairyCo figures show that during the recovery following the 2012 ‘low’, for example, the average margin over concentrates for UK herds rose to 26ppl, well in excess of the preceding 2011 high of 22ppl.”

Optimising the rumen

The starting point for any ration re-evaluation should be the forage, and regardless of whether using grazed grass, silages or a combination of the two when buffer feeding, formulating reliable rations to optimise rumen function relies heavily on regular forage analysis. As Dr Sutcliffe explains, the cost and effort required is minimal compared to the potential returns.

“If the aim is to create a perfect balance of the nutrients needed to support rumen microbial activity, knowing the analysis of forage is critical. Calculate what additional nutrients are needed – rather than specific feeds – and challenge your feed supplier to recommend the best value options in terms of reducing the overall feed costs per litre,” she adds.

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ProtoTec heat-treated rapemeal is a highly cost-effective source of rumen-bypass protein.

High sugar liquid feeds like Rouxminate or Economol, for example, will increase palatability and drive intakes as well as supply energy. Using rumen-protected protein feeds, such as ProtoTec heat-treated rapemeal and SoyPass rumen-protected soyabean meal, to supply digestible undegraded protein (DUP) can also cut costs – the DUP in SoyPass is currently 34% less expensive than in hi-pro soyabean meal.

Highly concentrated sources of DUP can further reduce ration costs by lowering total ration crude protein requirements and enabling the use of more cost-effective sources of rumen degradable protein (RDP), such as Spey Syrup. Similarly, the average delivered cost for moist blends or a moist feed like Traffordgold is equivalent to paying just £155-165/tonne for a dry compound feed, representing a saving of around £45-55/t, plus the benefit of improved palatability.

“Question every aspect of the ration to make sure it’s providing best value.”

“Question every aspect of the ration to make sure it’s providing best value,” Dr Sutcliffe states. “For example, a 2010 study by the University of Illinois following the 40% drop in US milk prices in 2009 found that supplements like yeasts and rumen conditioners typically produce a 3-6 times return on investment by improving rumen efficiency.

“That’s value which needs to be protected if feed costs per litre are to be minimised, and removal for a quick cashflow saving will likely cost much more in the long run.”

Fine tuning management

Critically, the study highlighted both ill-considered feed cutbacks and the removal of vitamins, minerals and supplements as the top two poor management decisions made following the milk price fall. The value of lost milk outweighed even short term gains, and longer term negative effects on fertility and performance were even more costly.

“Dairy cows are the equivalent of high performance athletes, and if you look at any of the top performers in sport they’re constantly striving to optimise any detail that improves efficiency or output. Those small gains add up to create a winning margin, and the approach should be no different for UK dairy herds, and go far beyond just nutrition.

“Critically examine every parameter you can control, fine tune and then review the end result. For example, can average cow performance and cell counts be improved by taking a fresh look at potential culls, particularly if facing significant seasonality adjustments this spring?

“Ask those questions often enough, and take the hard decisions needed in response, and both herd performance and margins are sure to rise.”

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