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How Do Feed Costs Impact Heifer Cost of Production?

How Do Feed Costs Impact Heifer Cost of Production?
By Tim Beck
During 2016 to 2019 the Penn State Extension Dairy Business Management Team worked with farms to study the costs to produce dairy replacement heifers. The data from this work was summarized and uploaded to the University of Minnesota’s FINBIN database. This study took an in-depth look at the differences between high- and low-profitability farms with feed cost explaining most of the variation.
Table 1 presents the data for 91 Pennsylvania (PA) farms and Table 2 summarizes the data from 1,525 Midwest (MW) dairies from 2016 to 2019. Comparing the two regions will provide some perspective on areas for improvement. Differences between the use of concentrates and forages in their heifer diets existed.
In the PA data, the low 20% profit farms spent $400/head on concentrates and $249/head on forages, compared to the top 20% profit farms with $137/head on concentrates and $177/head on forages. The annual difference of $334/head from the high to low 20% group (PA) explains a large share of the cost difference between the PA profitability groups. The cost summary section of Table 1 shows there was $617/head difference in feed cost between the low and high-profit groups. Sixty-nine percent of the $892/head difference in total cost/head is explained by feed cost.
In contrast, the MW farms had a slightly lower annual feed cost at $415/head compared to the $430/head spent by the PA farms. The MW low 20% profit farms spent $359/head on concentrates and $217/head on forages while the high 20% profit farms spent $178/head on concentrates and $134/head on forages for a total of $311/head. In both the PA and MW farms, the low 20% of farms spent more on both forages and concentrates compared to the top 20%. This suggests the more profitable farms may have had a more favorable match of cropland base to the feed requirements of the herd. They may have used higher quality forages that required less concentrate supplementation, and the proportion of cheaper home-raised forages and grains may have been higher in their rations. These warrant taking a closer look at their cropping programs. Differences in using double-crop forages to increase the total tons of forage available for the heifer enterprise may account for this feed cost variation. Feed cost explained $387/head difference from the highest to the lowest profit groups in the MW data and represented 70% of the total cost/head.
The feed cost per head per day for the PA farms averaged $1.18, while the MW farms were at $1.14 per head per day. Total cost per head for the PA farms averaged $1,974 and the MW farms averaged $1,688 to grow their heifers. While feed cost per head accounts for 70% of the cost difference between each group within a location, it does not fully explain the additional 30% variation in total cost per head. There are other management practices, such as age at first calving, that could influence the heifer enterprise. A full copy of the financial data can be obtained at the University of Minnesota's FINBIN.
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