Possible Reasons For High Grain Costs
Monday, May 10th, 2010
By Cathy Wickswat
Cargill Dairy Finance Specialist
- Look at the net milk over feed costs so that components are taken into account. It really is the total pounds of components (butterfat and protein) that are important not just the pounds of milk. Encourage use of the Dairy Profit Monitor.
- Are all of the expenses in the purchased grain account really purchased grain? Purchased forages are sometimes included and they should be in a separate account. Supplies sometimes are included. To check the list of expenses in that review a transaction report.
- Growing too many calves/ heifers. If the herd is not expanding there is no logical reason to raise extra heifers. For several yrs. dairymen raised the extra heifers to expand their herd or market them. With growing costs at $1600-$1800/animal marketing extra heifers when they sell for $1200-$1300 is not good business. If there is no way to get loans for expansion, extra heifers should not be raised. There are a lot of extra heifers due to the sexed semen. Dairymen need to have a strategic plan on the number of heifers that they raise. Too many calves/heifers increase higher purchased grain costs/cwt.
- Poor forage quality or not enough forage. Not enough forage means purchases that can be inconsistent. Some farms have to use more purchased concentrates to make up for marginal forage supplies.
- Overcrowding. The Cornell group quoted some research showing high levels of overcrowding can cost 2.5 to 6.5 lbs. of milk production /cow/day. Overcrowding can equate to less feeding efficiency.
- Fermentation of the silage is important. Wet years like 2009 can affect the quality- ie:mycotoxins. This can mean higher purchased grain costs.
- With herds that carry high accounts payable may have not separated the interest/finance charges from the grain costs. This artificially increases the purchase grain costs when the cash numbers are converted to accrual numbers.
- Purchased grain costs do not separate out the dairy farms using high moisture corn. In 2009 farms were feeding more high moisture corn then in many years due to the high grain prices (ethanol demand) and the large corn crop in NY State due to the great 2008 growing season.
- Cow comfort needs attention. Could be stall comfort, too long a wait in the holding area, stalls that need renovation, etc.
- Water can be a problem, both quantity and quality can affect the herd
Stray voltage can mean less water intake and less dry matter intake. This equates to less milk.
- Raised heifers that are small and maybe inconsistent. Small heifers produce less milk and the purchased grains goes into growing the heifers during their first lactation. Properly feeding calves/ heifers will offset some of these grain costs, but paying for cow rations to grow heifers is an expensive prospect.
- With low milk prices keeping poor cows from “banker” numbers the result is grain being fed to milking herd groups with too many cows that are just eating the profits. Low milk equals high grain costs per hundredweight.
- Mixer wagon or truck that has improper weights.
- Feeding employees not following directions. This can go either way, too much or too little. Feed Tracker type tools or just a pencil and paper can help track the feed.
- Other feed companies may lower costs using ingredients with lower standards, or they are undercutting prices and in the end may be out of business due to their poor business management practices. This is similar to custom harvesting and/or custom heifer raisers that charge less than their competition but do not harvest crops using recommended practices (ie timeliness, proper kernel processing).
