When does extra feed stop paying its way? | Ep. 134

WEBVTT
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Kiora and welcome to Talking Dairy.
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I'm your host, Willie McKnight from Dairy and Z.
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It's great to have you with us.
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Bit different today from your normal host, Jack McGowan.
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She's off sick today, so I've jumped into the hot seat.
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Today we're looking into the question many farmers weigh up every season.
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When is extra feed worth it, and when does chasing that extra milk start to cost more than it returns?
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Supplementary feed has become a bigger part of many New Zealand dairy systems and it can play an important role in filling feed gaps.
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But the profitability of the feed depends on how efficiently it is used and whether the extra milk produced actually covers the full cost of producing it.
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A multi-season trial led by Northland Dairy Development Trust compared different feeding systems to determine the real cost of the extra milk solids produced for extra supplementary feed.
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Joining me today are Kim Robinson, Ag First Project Manager and co-lead of the study, and Dr.
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Paul Edwards, Dairy and Zenior Scientists.
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They share what the research found and what it means for different farm systems and how you can apply these insights when making feed decisions on your farm.
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Let's get into it.
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All right, Kyoto Paul.
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It's good to have you here today and Kim.
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Paul, can you just give us a quick rundown, sort of your background and where you are today recording this podcast?
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So I'm coming to you from a very chilly morning here in Canterbury in Lincoln.
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I'm a farm system scientist, which, yeah, like I guess that covers a breadth of many topics.
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My connection with this is that I'm the DRNZ sort of scientist involved with the work that's happening at the Northern Agricultural Research Farm.
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And Kim, give us a rundown.
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I assume you're in Rotorua today for the Ag First conference.
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Uh yes, hi Willie.
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Thanks for having us.
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I have come down to seek warmer climbs, but it has not been warmer.
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So I'm based in Northland, based in Fangare, been up there for 30 years.
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In the last 10 years, I've been involved with the Northland Dairy Development Trust, contracted, Ag First is contracted to them to run the science and sort of project manage the research and then do the extension, which is, I guess, why I'm here today talking with you.
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Right.
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So we're recording this off the back of the article in the Inside Dairy that's just come out to farmers and stakeholders.
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Kim, can you start by explaining what the research was trying to find out and what's so important about the concept of marginal milk?
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Yeah, sure.
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So our research is very much farmer-led, and we try and answer the questions that farmers are asking us.
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I guess the big question here, farmers felt that they were feeding more supplement, working harder, making more milk, but they really didn't know if they were w making more money.
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And so they asked us to see if we could find that out.
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What we were able to do in this trial was separate out the milk that came from pasture and the milk that came from supplement, and then we could put some dollar figures around it, which really answered that question.
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The trial compared the three systems, pasture only, PKE only, and PK plus.
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So you were trying to find out by doing these to put these systems side by side, basically, for a result?
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Yeah, we've got an amazing resource up there.
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We've got the Northern Agricultural Research Farm, and it's big enough that we can split it into three farmlets, identical farmlets.
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So each farm's about 27 hectares and 80 odd cows, and they're all identical.
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The paddocks are randomized around the farm, they have the same soil type.
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The cows are put into herds that have the same age and BW.
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So effectively it's three identical farms.
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So what we were able to do is we ran a pasture-only farm, which allowed us to calculate how much of the milk was just coming off pasture.
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The second farm we added some supplement, made some more milk.
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So we could calculate the extra milk come from the supplement.
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And then the third farm, we added even more supplement, unlimited supplement, made some more milk, and again were able to calculate the extra milk coming from that supplement.
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So what that gave us was effectively a milk response per kilogram of dry matter of supplement.
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And then, of course, from there we can work out costs.
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So it was quite a simple concept, but actually probably not been done before at that scale on effectively a commercial farm.
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Paul, one of the big messages is that the true cost of supplement is more than just the purchase price.
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What other costs should farmers be thinking about when they they're feeding out supplements?
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Yeah, well, that was one of the, as Kim's kind of alluded to with the setup of those farmlets, the farm staff working on it were actually recording tasks that they were doing that was specific to each farmlet.
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For example, hours spent on the tractor feeding out, which is both like a tractor cost kind of aspect to it, a vehicle RM, but also the the actual labour cost of that.
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And so updating these numbers from when the study was done through to sort of adjusting for this high period of inflation that we've had over the last couple of years, for every dollar that was spent on supplement cost, the other farm costs actually rose by um 95 cents as well.
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So kind of almost doubling the cost of that supplement.
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Whereas, you know, any other trials previously was sort of that 50 cents, wasn't it?
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Was the thought.
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Is that right?
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That's right.
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There's been some work done before, data mining kind of work looking at dairy base and it's actually been done overseas in the UK and Ireland before.
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And the kind of numbers that have been coming out, they're actually really consistent at around that dollar fifty.
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So for a dollar of supplement, an extra fifty cents of other costs.
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So you're really consistent in that$1.50 to$1.60.
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But that was prior to this, you know, post-COVID period of inflation.
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So I actually suspect that these numbers are quite complementary to each other and and I think give us a lot of confidence that what we measured here is kind of a reflection of reality and not just the particular experiment, but actually what happens at that there at a sector level.
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So, Kim, the research showed that as supplement use increased, the milk response declined.
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Can you elaborate a bit more on that?
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Sure.
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So, of course, we had our pasture-only farm and we did our base amount of milk.
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On the PK only farm, we we fed limited supplement because we only fed up until FEI limits.
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And then on our PK plus farm, our unlimited farm, we fed unlimited supplement until our decision rules were followed.
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So what we found was that the more supplement the cows get, the more milk they produce, but the less milk per kilogram of supplement.
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And that's not surprising.
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It's that law of diminishing returns.
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You know, those cows were fully fed right at the top.
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They weren't hungry at all.
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There was no desire for them to eat more.
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So even though a lot of that supplement at the top end was DDG, which is supposedly, you know, better quality, a lot of farmers will tell you they get a better response out of it.
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We didn't actually find that.
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We found that the more we fed, the less milk we got per kilogram of supplement.
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Do you think that's the palatability of that DDG?
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You know, like cows tend to want to jump in and grab a lot of DDG and eat that more over the PK?
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Oh no, they were just full.
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They were just full.
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We had pretty strict rules, which I can elaborate on more shortly, but on how we made that decision.
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And we were careful not to waste supplement, and we were careful not to waste grass.
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So it was a true drop-off in response.
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It wasn't because they were leaving some of the supplement behind and we were wasting it.
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I think it's just that diminishing return.
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You know, the hungrier a cow is, the more her response will be.
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The the fuller she is, the less response in milk.
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Paul, can you tell us about the findings between the three systems and what it does tell us?
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So just I guess put some numbers around what Kim was alluding to in terms of that drop-off and response.
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So going from the pasture-only farmlet, which was just grass or silage made within that farmlet, up to that PKE-only one, the milk size response we got there was 113 kilos of milk solids per ton of dry matter that was that was fed out.
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That dropped down to 92 when we compared the extra milk of going from that PKE only to the PKE plus.
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And then when you compare the difference in operating costs between those as well, that extra milk produced in the PKE-only farm that was$7.68, was the the actual cost of it, which rose in that PKE plus because of the lower response, rose to$9.38 was the extra milk that was produced.
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That was what it cost to do, which of course then, depending on the milk price, determines which is the most profitable system.
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And so obviously, we don't know the future in terms of actual milk prices, but if you look at sort of some ranges of milk prices we've experienced over the last couple of years, if I remember rightly, the looking at the inflation adjusted milk price, only three of the last 10 years has the milk price actually been above that$9.38 from that PKE plus farmlet.
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And so in terms of a long-run kind of average, that PKE only farm was the one that came out as being the most profitable.
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Essentially, if the milk price was higher than the$7.68, it was adding a little bit of profit, you know, not necessarily a huge amount over the pasture only one, depending on the milk price.
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But as soon as milk price was less than that$9.38 in the PKE plus farm, it was actually mining your profitability.
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So you're producing more milk, but you're not making more profit.
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And so I guess that just really highlights that being wary of kind of using average costs and kind of doing those back of the envelope calculations, you really do need to factor in all those extra costs when thinking, is this a profitable decision?
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Kim, pasture residuals were a key part of the decision making in this trial.
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How can pasture residuals help farmers decide when to feed supplement and when to pull back?
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Well, that is probably the most important factor in making money out of your supplement.
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Those milk responses that Paul talked about are relatively high for the industry, I think.
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If you sort of back calculate across dairy base pool, there's not probably too many farms getting over 100 grams of milk solids per kilogram of dry matter.
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So the way that we get those responses on that farm is we are very diligent about sticking to our decision rules about when we feed supplement.
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And that decision is driven by pasture residual.
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So we have a target pasture residual of 15 to 1600 kilos of dry matter, depending on the time of the year.
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If the residuals drop down below that, we feed more supplement.
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If the residuals go up above that, we feed less supplement.
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So we were constantly adjusting the supplement feeding to try and get this constant level of feeding on the cow.
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So we would pull supplement out, we'd increase it depending on the season.
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I think every spring we had periods of just pasture-only feeding in the cows, because of course the residuals would rise up as the spring flush comes.
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So we would have cows going from three or four kilos of supplement maybe in September right down to zero in late October, and then they might go back onto supplement as we head into summer.
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Interestingly, despite pulling the supplement out gradually, as residuals were rising, that didn't appear to have any effect on reproductive performance in our herds.
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And we've got 80 cows per herd, so we can track those differences.
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So that's probably a little bit contrary to some of the advice that you get from some of the industry saying you have to feed supplement to get cows and calf.
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We certainly didn't find that.
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We got very good repro performance, and certainly no difference between the pasture-only cows and the high supplement cows.
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So I think the key is having the discipline to use the pasture residuals to pull supplement down.
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So you're not looking at the fat, you're actually looking at your response.
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And it is that key of we're not going to monitor milk production, we're actually going to monitor residuals to make our decisions, is why we got such high milk responses.
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I know a lot of farmers have that thought track that if they alter the cow's diet too close to mating, by dropping that feed out, that it will affect mating results.
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And obviously a lot think that with the VAT too, all of a sudden the cows drop off and oh, we need to put that supplement back in.
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Yeah, I guess the key there, Willie, is we don't want cows to go hungry.
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So only pull the supplement out if the residuals are going up.
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We don't want underfed cows, we don't want overfed cows, we want consistently fed cows.
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And so we're certainly not saying pull the supplement down unless the residuals are rising.
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If the residuals are staying at the target level or dropping, the last thing we want is for supplement to come out.
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So the whole decision process is around using the residuals to guide the cow intake decisions.
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All right.
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Thank you.
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Paul, the study makes a point that not every farm is chasing the same goal.
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How should farmers think about supplement decisions in relation to their own farm goals and their their risk tolerance?
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I think that's a difficult one to make generic comments on, perhaps, but what we do know is not every farm is out there as a profit maximizer.
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And so there are some trade-offs that are occurring here.
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You know, if if you want to chase that PKE plus kind of type system with those high milk prices, okay, I'm I'm tempted to go and try and operate that system in this particular year.
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That's great.
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In that case, you're potentially exposing yourself to more risk in terms of market conditions changing because the milk price could be less than what you end up thinking it's going to be at the start of the season.
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And equally, I guess, at the other end of the spectrum, you know, that pasture-only farm at that end of the spectrum, you're potentially exposing yourself to more environmental risk.
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So I guess it's really just an acknowledgement that farm systems are complex and farm goals differ.
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I think the point of this study is really to go into these things eyes wide open of about what you might be trading off.
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Yeah, definitely.
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Kim, although this study focused mainly on PK, what principles can farmers apply when they're looking at other supplement types like maize or vegetable waste or anything like that?
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I think the principles would apply across any supplement.
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There's probably three key principles, I guess, if you're feeding supplement that will lead to your best chance of making good money out of them.
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Number one is don't waste it.
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So we were very careful not to waste our supplement.
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We were feeding in concrete bins.
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We weren't feeding in trolleys where there was a trail of PK along the race and then a big ring of it in the panic.
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So very low wasted.
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So feed pad situation with the trials.
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Yeah, not necessarily inshed meal or anything like that.
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No.
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And inshed feed systems are definitely good for low supplement wastage.
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The problem with inshed feeding is it's quite hard to turn the tap off when you don't need it.
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And so that leads to the next point, was which is don't waste grass.
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So don't waste your supplement, don't waste your pasture.
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And that's the residuals issue.
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So if you're feeding supplement in your shed and then going out and topping your paddocks, you might as well be wasting your supplement.
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You know, you're wasting something.
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And so we're very careful not to waste supplement, not to waste pasture by pulling that supplement down when our residuals were rising.
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And probably the third thing is we certainly on the high supplement farm, the PK plus farm, we purchased whatever was the cheapest form of whatever we needed at the time.
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So if we just needed energy, we bought more palm kernel up to whatever rate we needed.
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And then if in the summer we often needed extra protein because we had some quite dry summers.
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So then we found the cheapest form of protein.
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That was usually DDG, so most of what we fed.
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But there was occasions where we purchased some high-quality grass silage that was a bit cheaper.
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So we just went out and found the cheapest form of whatever we needed at the time.
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And we used the DNZ feed checker to assess what we were limiting.
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So yeah, don't waste your grass, don't waste your supplement, and buy the cheapest form of whatever you need would be the three key rules to follow there.
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Some farmers look at the fact that, you know, they can put PK in and keep feeding even though they're starting to get a surplus, and then harvesting that surplus is quality silage.
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What are your thoughts on that?
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You know, because you are substituting and then having that high-quality grass silage on hand in the summer when you are short of good quality homegrown protein.
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We spend hours debating this.
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Hours.
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We have a farmer committee that come along each fortnight and we debate things and we vote on things and it was always 50-50 on this one.
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I think it's risk management, isn't it?
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So although our decision rule said if you get surplus pasture because your residuals are rising, pull your supplement out.
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That was definitely the first lever we pulled.
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But if we were in a spring that we just thought, gosh, we're not going to get a lot of silage because they're so variable, some years you get hardly any, and we were expecting to need a bit.
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What we did is we scouted around the district and tried to secure some high-quality silage.
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So I think the principles can still apply, but there's probably some risk management over the top of that.
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If you're in an area where you re you reliably get a dry summer, you can't access other feed from anywhere, you really rely heavily on your partial silage made at home, you know, that's part of the risk scenario that you've got to weigh up.
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And it certainly is quite legitimate to feed supplement as long as you harvest all of your surplus and harvest it efficiently and then feed it efficiently.
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So, you know, we don't want topping.
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We want actually mowing and put into a bale and then a high-quality bale, which gets fed with low wastage later on.
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So I think that's a legitimate strategy.
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We don't want to see, you know, feeding that supplement and then heck, I've got to go out and get the tractor out and top the paddock.
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You want to generally be shutting up that for silage and harvesting that at the right time and that quality.
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And it's the cheapest way on farm, isn't it?
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But just having that discipline to get it right.
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Paul, when milk price is strong, it can be tempting to assume more feed equals better returns.
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What does this research tell us about testing that assumption before making a feed decision?
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I think this is probably not surprised to anyone really, but I guess it was a very clear and neat illustration that production doesn't always equal profit.
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So that that would be the first answer.
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And ultimately, as it illustrated, beware of using those average costs or just looking at the cost of the supplement, you know, really factoring in that, yeah, potentially you need to double the cost of that supplement and is it still likely to stack up at that point?
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And then, you know, even if that looks favorable, then achieving that good response with that supplement is still really critical, right?
00:19:50.880 --> 00:20:07.359
And so, you know, as Kim's alluded to around being very clear about decision rules, using residuals to kind of make decisions about putting supplement in and out so that it doesn't get wasted or itself doesn't get wasted or wasting pasture, all of those things, no matter what the milk price is, I think they're really fundamental.
00:20:07.680 --> 00:20:13.279
Talked about in shed feeding systems already, you know, great for utilization, but do you waste feed because of it?
00:20:13.359 --> 00:20:16.079
Because it's it's more difficult to kind of put it in and out.
00:20:16.319 --> 00:20:34.400
And I suppose ultimately to give yourself the best chance of getting a good response to that supplement and therefore enhancing profit rather than just making more milk, using tools like the supplement price calculator to kind of look for this, you know, my specific situation right now, am I likely to get a return from it?
00:20:34.640 --> 00:20:44.880
Because doing some of the calculations like we've been able to do from this study is actually quite difficult to do on farm because you don't know exactly what is coming from pasture and what might be coming from supplements.
00:20:44.960 --> 00:20:51.519
So using tools like that are kind of the best way of working out is this going to be a profitable decision for me or not.
00:20:52.000 --> 00:21:01.599
I mean, we hear so much it's a$10 payout, we'll just get another unit load of PK, or uh, you know, and a system one farm, they're utilizing all their grass.
00:21:01.759 --> 00:21:07.839
I mean, we don't have as many of them as like what we used to, PK has sort of changed that a bit within our systems.
00:21:08.160 --> 00:21:16.000
We see the system five guys that are mixed ration working out each bit, and the grass is definitely being utilized because of their stocking rate.
00:21:16.240 --> 00:21:25.759
Do you think like the system three and people that float into a system four, they're probably not working it out like you said, Paul, and able to get it exactly right on farm.
00:21:26.000 --> 00:21:33.759
They're just thinking that analogy, it's a$10 payout, it'd be silly not to keep the cows pumping and and put in another unit load of palm kernel, you know?
00:21:34.079 --> 00:21:37.680
Yeah, well look, for a start, you know, the marginal cost was$9.38.
00:21:37.759 --> 00:21:43.440
So that says to me, even at a$10, you're not you're actually not enhancing your profitability by very much at all.
00:21:43.759 --> 00:21:51.680
It could be as little as$30 or$40 a hectare that you're adding and doing so while at the same time you don't know definitively that it's going to stay a$10 milk price.
00:21:52.000 --> 00:21:55.359
And I guess yeah, I've the top of my head, Kim, correct me if I'm wrong.
00:21:55.440 --> 00:21:59.680
I think it was the PKE price that was used in these calculations was about$380 a ton.
00:22:00.079 --> 00:22:01.839
You know, obviously that can move around a lot.
00:22:01.920 --> 00:22:06.079
And it's not just as simple as going ten dollars, it must be a good decision.
00:22:06.319 --> 00:22:08.400
You really still have to do your homework on it.
00:22:08.720 --> 00:22:14.000
And I suppose with the research too, you know, we've had a a real jump in fuel prices as well.
00:22:14.319 --> 00:22:26.240
That does affect obviously every hour you're running your tractor or you're you're taking out feed in into the paddock or or whatever you're doing, even harvesting that feed if it's homegrown silage or or topping.
00:22:26.559 --> 00:22:29.920
It's very key to be watching these as closely as we can.
00:22:30.240 --> 00:22:34.960
To both of you, was there anything that surprised you about this research?
00:22:36.000 --> 00:22:43.359
The key costs that rose are all the ones that have gone up a lot even in the last two years.
00:22:43.759 --> 00:22:46.240
This 95 cents is two years old.
00:22:46.319 --> 00:22:49.920
I'm absolutely certain that number will be over a dollar now.
00:22:50.640 --> 00:22:58.880
And when we originally did the work six years ago, it was 60 to 80 cents, which is down closer to that 50 cents you were talking about.
00:22:59.039 --> 00:23:07.599
So the problem is most of those costs are fuel, machinery, people, and the extra milking, which is mostly electricity.
00:23:07.680 --> 00:23:11.519
And you think about where the big movers have been, it's been in those things.
00:23:11.680 --> 00:23:25.839
So what we were definitely surprised about, we did some sensitivity analysis and we played around with different prices of palm kernel and DDG, and then we played around with different response rates.
00:23:26.079 --> 00:23:37.359
And the marginal milk cost, which leads to profitability, was far, far more sensitive to milk response than the price of the palm kernel or the supplement.
00:23:37.839 --> 00:23:48.079
I would probably suggest that most farmers spend a lot more time trying to chase that last$10 discount on their ton of PK contract deal.
00:23:48.319 --> 00:23:54.400
And most farmers know if you say to them each day, what's the palm kernel price, they'll know because they get an email on their phone.
00:23:55.039 --> 00:24:03.279
But if they spent that amount of time looking at the residuals and making good decisions about pulling supplement in and out, they would triple their response.
00:24:03.599 --> 00:24:11.680
It was really surprising how much more sensitive it was to pasture management than to the price that you're paying for the supplement.
00:24:12.160 --> 00:24:19.839
And the converse of that is it's probably inversely proportional to the amount of time farmers spend on each of those.
00:24:20.400 --> 00:24:31.279
So I guess the main message from us is you know, focus your attention in the area that gives you the biggest return, which is monitoring your pasture when you're making supplements.
00:24:31.440 --> 00:24:39.359
And if you get your contract price out by$20 and your neighbor beat you by$20 a ton, it actually doesn't make that much difference.
00:24:40.640 --> 00:24:54.960
I think the other thing that this research did, which always is the case, is it proved what farmers thought was happening, that they were making a whole lot more milk, they're working harder, they're feeding all this extra supplement, and they're actually not making much more money out of it.
00:24:55.039 --> 00:24:57.599
And some and in a lot of cases, they're making less money.
00:24:57.759 --> 00:25:01.920
And it was nice to validate what farmers told us they thought was happening.
00:25:02.000 --> 00:25:03.839
And we were like, yep, actually, you're right.
00:25:04.000 --> 00:25:05.519
And now we've put some numbers around it.
00:25:05.599 --> 00:25:07.839
Hopefully they can make some good decisions.
00:25:08.240 --> 00:25:08.480
Great.
00:25:08.720 --> 00:25:12.480
And Paul, anything that surprised you about the research?
00:25:12.880 --> 00:25:19.039
It's great to be able to just quantify some of the stuff and really it just facilitates a good conversation like we're having now.
00:25:19.279 --> 00:25:27.359
Yeah, if I had to try and add something new to that, I guess it would be just the level of response that you can get out of really disciplined management.
00:25:27.519 --> 00:25:29.759
Like this was a well-run pharma study.
00:25:29.839 --> 00:25:48.400
You know, as Kim alluded to, the debates around the table about whether those decisions were what the decisions should be, you know, they were very well thought out versus uh yeah, the average, I think the last time analysis was done at across dairy-based data, the average is about 80 kilograms of milk solids per tonne dry matter versus the 113 or 92 that we we got in the study.
00:25:48.559 --> 00:25:59.920
So um, you know, I guess it's just uh again, another nice illustration about how the time and effort you put into making some of those fundamental grazing management decisions, just how much impact that they can have.
00:26:00.880 --> 00:26:07.839
And I suppose with that comment too about the 80 in dairy base, I mean, a lot of the dairy-based people are the the higher end of the industry.
00:26:08.079 --> 00:26:18.240
So, you know, how many of these farms are actually getting far less a response to that supplement and and are overestimating how much response they get from feeding a KG of feed?
00:26:18.319 --> 00:26:20.960
Aaron Ross Powell Well, thank you very much, Kim and Paul.
00:26:21.200 --> 00:26:29.599
What I'm taking from this conversation is that supplementary feed has its place, it absolutely does, but the value comes from using it with a clear purpose.
00:26:29.839 --> 00:26:45.599
The research shows the most profitable response came when supplements were used tactically, particularly to fill a genuine feed deficit or gap and um maintain pasture utilization rather than simply maximizing milk production.
00:26:45.920 --> 00:26:50.559
A key reminder is that the cost of extra milk is not just the feed price.
00:26:50.720 --> 00:27:01.759
Once you've included the extra machinery, labor, milking and feeding out costs, the full cost of using supplement can be much higher than a quick calculation suggests.
00:27:02.000 --> 00:27:08.240
So before adding in more feed into the system, it's worth asking what response am I realistically getting?
00:27:08.480 --> 00:27:12.880
What is it costing me to produce the extra kilogram of milk solids?
00:27:13.039 --> 00:27:16.400
And is that helping me to meet my farm goals?
00:27:16.640 --> 00:27:26.160
If you would like to know more, you can read more about the research and find tools and resources at dairynz.co.nz forward slash marginal dash milk.
00:27:26.319 --> 00:27:28.160
Thanks for listening and we'll catch you next time.
00:27:28.319 --> 00:27:29.119
Matewa.
00:27:35.599 --> 00:27:37.680
Thanks for tuning in to the episode.
00:27:37.839 --> 00:27:42.400
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00:27:42.559 --> 00:27:53.279
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00:27:53.519 --> 00:28:05.759
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00:28:06.079 --> 00:28:07.519
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