2 Calculating the cost of your feeds

Transcription

1 2 Calculating the cost of your feeds 2 Calculating the costs of your feeds Objective: To understand the real farm cost of different feed types. Challenge: Calculate your current feed costs Plan feed cost savings in the coming year through a grazed grass output of 10 tonnes of utilised DM/ha. Target What s in this section? Establishing the real cost of grazed grass, silage and other feeds Using the utilised DM approach Improving grazed grass utilisation Calculating actual forage production costs. Achieve grazed grass costs of 80/tonne utilised DM. A New Approach to Costing Because cattle feeds come in a wide range of moisture contents and require very different production, handling and storage inputs, it is notoriously difficult to compare their value on a like-for-like basis. Contents Utilised Dry Matter Costs 2:3 Grazed Grass Utilisation 2:4 A new approach to assessing feeds has been developed to take account of the differences in dry matter (DM) and the wide range of establishment, variable and contractor costs associated with forage, as well as feeding and storage costs. In itemising the true costs of forage production, this approach allows genuine comparisons to be made between forages and purchased feeds and provides an excellent basis for improving profitability by driving down feeding costs. 2:1

2 Action plan To achieve grazed grass costs of 80/tonne utilised DM. 1. Calculate Your Forage Costs Establish the real cost of your grazed grass, silage and other forages as the basis for making more from them (Page 2:5). 2. Calculate Your Purchased Feed Costs Establish the cost of purchased concentrate and bulk feeds to compare their value with your home-grown forage (Page 2:9). 2:2

3 Utilised dry matter costs To compare the value of different forages and concentrates, with very different moisture content and nutrient concentrations, they have to be converted into the same currency. The well-established dry matter (DM) system in which feeds are converted to a zero moisture level achieved in practice by drying allows the effects of moisture content to be eliminated. Simple unit-for-unit DM comparisons between forages, however, require allowances to be made for different production costs as well as any feed left in the field or lost during transport, storage and feeding-out. These variables can be accounted for by basing comparisons on the amount of feed dry matter actually consumed by the cows utilised DM. Utilised DM can be calculated on a per hectare basis to compare any farm-produced feeds. Financial comparisons can be made between all feeds on the basis of utilised DM/tonne. Such comparisons do not, of course, account for the differences in individual energy and protein contents of different feeds required in rationing. However, they do provide a simple and effective way of assessing the relative value of feedstuffs on individual farms for planning purposes (Table 2.1). Table 2.1: Typical Utilised DM Costs of Different Feeds Feed Utilised DM Total Cost ( /tonne) Cash Cost* ( /tonne) 18% Dairy cake Processed barley Grazed grass Zero grazing Conventional 3 cut silage cut high feed value silage Big bale silage Fermented whole crop cereals Urea-treated whole crop cereals Forage maize with mulch Forage maize without mulch Crimped wheat (grain only) Fodder beet * Cash cost refers to establishment costs, variable costs and contractor costs associated with producing the feed, taking no account of the rental cost for land, the cost of depreciation of silo and feeding area and the machinery and labour cost of feeding. These costs are likely to be more relevant for those with grazing infrastructure and silage storage and feeding facilities already in place. Source: Kilpatrick C, Keady T, Cushnahan A and Murphy J (2002), Cost of Forage on the Northern Ireland Dairy Farm (updated with 2008 input costs). 2:3

4 Grazed grass utilisation Improving grazed grass utilisation will have a major impact on reducing the cost of production. The cost of grazed grass in 2008 has been calculated by Northern Ireland researchers and advisers as 100/tonne utilised DM/ha and, by using a slightly different set of assumptions by Kingshay Farming Trust, as 73/tonne (Table 2.3). The Northern Ireland researchers assume an average yield of 10.6 tonnes DM and 25% losses post-harvest (75% utilisation) resulting in 8.0 tonnes/ha actually consumed (Table 2.2). Kingshay assumes an average yield of 11.7 tonnes DM and 25% losses post harvest (75% utilisation) resulting in 8.8 tonnes/ha consumed. Grazing DM yields significantly higher than 10.6 tonnes are frequently reported. Indeed, average yields for five farms in Northern Ireland were 12.3, 11.0 and 13.6 tonnes DM/ha for 1999, 2000 and 2001 respectively. With good management it should be possible to achieve these higher yields for longer periods of the growing season, increasing average farm output and decreasing DM cost/tonne. A realistic grazing utilisation target is 70-80%. Small improvements in utilisation can significantly reduce grazed grass costs. Equally, failing to utilise sufficient DM/ha can substantially increase costs (Figure 2.1). Figure 2.1: Grazed Grass Costs and Outputs/ha Cost per tonne utilised DM ( ) Utilised DM tonnes/ha Increasing the yield of utilised DM/ha from 8 tonnes to 10 tonnes reduces the cost of grazed grass by almost 20% from 100 to 80 (Figure 2.1). 61 Although utilisation efficiencies nearer to 100% are possible, significant losses occur at these levels due to trampling and contamination of grass with urine or manure. 2:4

5 Grass Growing Costs Utilised Total cost/ha 355 DM yield Good site tonnes/ha 10 Cost per tonne DM /t 35.5 Utilised /t 80% % % The example above shows the cost of not utilising grazed grass; 70%-80% utilisation is the desired level and is readily achievable, however, poor management reduces utilisation and then the cost of grazed grass mounts. This is avoidable and Grass+ aims to show you how to achieve 70%-80% utilisation. Calculating Forage Costs Forage production involves three main sets of cash costs establishment costs, variable costs and contractor costs (Table 2.4). A number of other costs need to be accounted for: The opportunity cost for each hectare of land used the value that could otherwise be obtained from it through an alternative use The depreciation cost of providing a forage structure field drinkers and roadways plus the cost of silos and storage buildings The cost of any losses incurred during fermentation or storage and during feeding-out The cost of presenting the feed to the cow a forage wagon for silage feeding or charges for droving cows to grass twice a day. Forage yields and post-harvest DM losses vary widely from farm to farm, making individual farm measurements essential for accurate costings (Table 2.2). Table 2.2: Typical Estimated Forage DM Yields Crop Yield (tonne DM/ha) Post-harvest DM loss (%) Post-harvest Utilised DM/ha (tonnes) Grazed grass Zero-grazing Conventional 3 cut silage cut high value silage Big bale silage Fermented whole crop Urea-treated whole crop Forage maize with mulch Forage maize without mulch Crimped wheat (grain only) Fodder beet Source: Kilpatrick C, Keady T, Cushnahan A and Murphy J (2002), Cost of Forage on the Northern Ireland Dairy Farm. Researchers and advisers in the UK have developed a standard system for comparing utilised DM costs/tonne between different forages (Example 2.1). 2:5

6 This system can be used to calculate individual farm costs which can then be compared with the benchmark costs derived from both Northern Ireland and Kingshay (Table 2.3). Example 2.1: Forage Cost Calculation (Table 2.3) Row 1. Estimate utilised DM yield (from actual farm data or Table 2.2). Row 8. Convert land charge to utilised DM/tonne (row 7 row 1). Row 2. Quantify establishment costs (from actual farm data or Table 2.4). Row 9. Account for depreciation costs (from actual farm data or values provided). Row 3. Quantify variable costs of production (from actual farm data or Table 2.4). Row 10. Subtotal cost per tonne utilised DM (row 6 + row 9). Row 4. Quantify contractor costs (from actual farm data or Table 2.4). Row 11. Calculate on-farm cost per tonne utilised DM (row 8 + row 10). Row 5. Calculate total cash costs (row 2 + row 3 + row 4). Row 12. Account for post-harvest and feedingout losses (from Factsheet 1). Row 6. Convert cash cost to utilised DM/tonne (row 5 row 1). Row 13. Calculate total cost per tonne utilised DM (row 11 + row 12). Row 7. Make a charge for the land (from actual farm data or values provided). 2:6

7 Table 2.3: Typical Forage Costings (Example 2.1) Row Element Northern Ireland Data Kingshay Data Grazed Grass 3 cut Silage 4 cut High Value Silage Big Bale Silage Grazed Grass 3 cut Silage 1 Utilised DM yield (tonnes/ha) Establishment costs ( /ha) Variable costs ( /ha) Contractor costs ( /ha) Total cash cost ( /ha) Cash Cost Land charge ( /ha) Land charge Depreciation Sub-total On-farm cost Feed-out costs Total Cost Note: Figures may not add up precisely due to rounding. Source: Kilpatrick C, Keady T, Cushnahan A and Murphy J (2002), Cost of Forage on the Northern Ireland Dairy Farm, and Kingshay Farming Trust (updated with 2008 input costs). Worksheet 1 provides a template for individual farm cost calculations. 2:7

8 Table 2.4: Forage Establishment, Variable and Contractor Costs 2008 Establishment Grazed Grass 3 Cut Silage 4 Cut High Value Silage Big Bale Silage Ploughing Power harrowing Sowing (rolling, harrowing, etc) Seed Lime Fertiliser Sprays Total Total/year 24* 52** 36*** 52** Variable Costs Fertiliser Sprays Additives Polythene cover Total Contractor Costs Fertiliser applications Spray applications Grass topping Mowing, silage harvesting, buckraking, baling, wrapping ( 7.00/bale), bale transport Slurry spreading Total *Assumes 15 year life; **Assumes 7 year life; ***Assumes 10 year life Source: Kilpatrick C, Keady T, Cushnahan A and Murphy J (2002), Cost of Forage on the Northern Ireland Dairy Farm (updated with 2008 input costs). 2:8

9 Calculating Purchased Feed Costs Being delivered to farm ready-to-feed, purchased compounds incur minimal additional costs, apart from depreciation on storage bins and feeding-out. Factsheet 1 details bulk feed storage and feeding costs Utilised DM costs can be calculated much more simply than for forages using the same costing sheet (Example 2.2; Table 2.5). Example 2.2: Purchased Feed Cost Calculation (Table 2.5) 18% dairy 233/tonne and 86% DM Row 6. Calculate cost/tonne of DM ( 233 x 100/86 = 270.9) Row 12. Establish feeding out-costs ( 3.1/tonne DM) Row 9. Establish depreciation cost of storage bin ( 0.4/tonne DM) Row 13. Calculate total cost of compound feed/tonne utilised DM ( = 274.4) Row 10. Subtotal costs ( = 271.3) 2:9

10 Table 2.5: Typical Purchased Feed Costings (Example 2.2) Row Element Processed Barley 18% Dairy Cake 1 Utilised DM yield (tonnes/ha) 2 Establishment costs ( /ha) 3 Variable costs ( /ha) 4 Contractor costs ( /ha) 5 Total cash cost ( /ha) 6 Cash cost Land charge ( /ha) 8 Land charge 9 Depreciation Sub-total On-farm cost 12 Feed-out costs Total Cost Source: Kilpatrick C, Keady T, Cushnahan A and Murphy J (2002), Cost of Forage on the Northern Ireland Dairy Farm, and Kingshay Farming Trust (updated with 2008 input costs). Worksheet 1 provides a template for individual farm cost calculations. 2:10

11 When comparing the cost of purchased feeds with farm-produced feeds in rationing, it is important to account for differences in nutrient concentrations in the dry matter as well as the value of convenience (Table 2.6). Table 2.6: Typical Nutrient Content of Farm Feeds DM (%) ME (MJ/kg DM) Protein (% in DM) Grazed leafy ryegrass White clover cut grass silage Big bale silage % protein compound Soya bean meal Barley Source: DairyCo Research Reports, Ewing W N (1997), The Feeds Directory. Summary Utilised DM/ha is a good basis for comparing the output of forage crops The real cost of farm-produced and purchased feeds can be compared simply and effectively on a utilised DM/tonne basis A realistic target for grazed grass is a yield of 10 tonnes utilised DM/ ha at a cost of 80/tonne DM Increasing the output of grazed grass from 8 to 10 tonnes/ha reduces the utilised DM cost/tonne by around 20%. See also... Section 1: Section 15: Section 16: Making More From Your Grass Factsheet 1: Bulk Feeds Worksheet 1: Farm Feed Costing 2:11