Evaluating the economics of concentrate feeding decisions in grazing dairy cows
C. K. M. Ho A E , J. W. Heard B , W. J. Wales C , J. L. Jacobs C , P. T. Doyle D and B. Malcolm AA Department of Economic Development, Jobs, Transport and Resources, 32 Lincoln Square North, Carlton, Vic. 3053, Australia.
B Department of Economic Development, Jobs, Transport and Resources, Mt Napier Road, Hamilton, Vic. 3300, Australia.
C Department of Economic Development, Jobs, Transport and Resources, 1301 Hazeldean Road, Ellinbank, Vic. 3820, Australia.
D Peter Doyle Consulting, 4 Red Bean Close, Suffolk Park, NSW 2481, Australia.
E Corresponding author. Email: Christie.Ho@ecodev.vic.gov.au
Animal Production Science 58(7) 1329-1340 https://doi.org/10.1071/AN16122
Submitted: 26 February 2016 Accepted: 3 December 2016 Published: 23 February 2017
Abstract
Purchased concentrates are a significant variable cost of a dairy business. Farm economic theory states that feeding supplements will enable a dairy farmer to improve profit as long as the marginal revenue received from the milk produced exceeds the marginal cost of the supplement. To do this, the quantities of milk, milk protein and milk fat produced from a unit of concentrate added to the diet are needed. Recent research has compiled results from short-term concentrate feeding experiments conducted in Victoria over a 30-year period. Using these data, relationships for the response of milk production to cereal grain supplements in dairy cows grazing temperate pastures have been developed and shown to be a better predictor than previous relationships. These response functions were used in the present study to investigate the economics of tactical (short-term; weekly, monthly or seasonally) and strategic (medium- to longer-term) supplementary feeding decisions in a pasture-based system, including, specifically, how much concentrate should be fed in a particular farm situation, given a certain feed cost and milk price. In the present paper, the relevant production economics method is explained and applied to determine the amount of supplement to feed that will maximise the margin of total extra milk income minus the total cost of supplement, thereby adding the most to farm profit. Currently, when dairy farmers make decisions about how much more supplement to feed their herd, they are making implicit judgements about the extra milk, and other potential benefits, that they expect to result as well as what the milk will be worth. More finely tuned decisions about feeding supplements based on comparing marginal cost and marginal revenue would add more to farm profit than decisions based on other common criteria, such as feeding supplement for maximum milk production. While some farmers may already be feeding supplements close to the point where marginal cost equals marginal revenue, the formal method of marginal analysis reported here makes explicit what is done implicitly at present and tests farmers’ intuitive decision-making. More detailed information about the responses to supplements and the costs and benefits of feeding supplements under particular circumstances at different times through the lactation has the potential to enable better, more profitable decisions to be made about feeding cows and managing the whole farm.
Additional keywords: marginal cost, marginal revenue, production economics, strategic, tactical.
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