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Efficiency = Profitability

 

Dr. Joe McGrath Technical Manager Ruminants,
DSM Senior Lecturer – Ruminant Nutrition, University of New England, Australia

While I am aware that I am writing this article for a Breed Society magazine, I just can’t go past the fact that feed cost is still the biggest on farm cost and therefore the most important factor for defining profitability.

If you are thinking to yourself, “well he is wrong because  I don’t purchase feed I have grass”, I am still including the grass as you have already bought it (or from an economist’s point of view it is an opportunity cost). If your land is worth $50 000/ha then the interest value of that land at 5% is $2500/ha. If you harvest (ie. eaten not offered) 10mt of grass per year then the grass is worth

$250/mt just in interest alone. You still must add fertiliser, chemicals, fencing, water, laneways etc. to this cost.

In other words, for a 500kg MS/yr cow earning $6/MS, her $3000 annual income incurs approximately $2000 feed costs. Now, how you manage the cash flow around this is another thing. Perhaps you own the land, and do not directly incur the costs or perhaps the bank manager is happy to fund it because farm land is rising quicker than the interest cost. Either way, at the end of the day the cow will have to pay her way.

Now that we are all onboard and realize that our single biggest cost to farming is feed we can start to focus on what is the best way of efficiently turning that feed into money. In our industry that method is usually with milk. Specifically, fat and protein.

One of the myths that the proponents of black and white cattle continually raise is that they are more productive and therefore more efficient. More productive, yes, more efficient? How is this measured? Per cow? Per farm? Per unit of input cost? I would like to go with per farm.

The reason being is that the fence is usually the boundary of our system. Sure, there are outside inputs that can increase the effective size of the farm (typically feed and fertiliser), but these come at a set cost and usually show a diminishing return so are not as variable as we think.

In recent times, I have had the pleasure of working with a farmer that has several systems including pasture and TMR barns. Interestingly, in one barn he has a herd of

Jerseys and one a herd of NZ Friesians. Both appear (to a nutritionist) to be a nice line of cows, with good frame and conformation. Being TMR we know exactly what they are eating. While it is TMR it is still a 70% forage based diet consisting of maize silage, grass silage and some lucerne silage. This is matched with available concentrates, typically grain and canola meal.

Both sets of cows are performing well. However, on a feed efficiency basis the golden girls are winning. The Jerseys are consuming 9.09kg of feed for every MS produced.

Whereas the Friesians are consuming 9.23kg. I will say that if it was possible to put in more concentrates (ie. they were cheaper) we may see the black and whites take over.

But is that even relevant for our grass based industry?

This raises another question, what about other costs and incomes within a Jersey vs Friesian farming system. The usual suspects put forward are income from cull cows, income from Friesian bull calves, cost of extra insemination, cost of extra milking activity and cost of extra calvings. Not to mention the dreaded increase in metabolics.

In July of this year Jamie Drury, a dairy farmer in Australia, wrote a conference paper for a meeting of the Dairy Research Foundation in Port Macquarie, NSW. The title was “Holstein to Jersey: The decision-making process behind the change”. This paper details the experience of changing from a pedigree Holstein herd to a Jersey herd.

To summarise his findings the benefits were as follows:

  • More efficient production of milk solids.
  • Increase in total farm productivity, with the increase in cow numbers more than compensating for the drop per animal.

Approximately 160k MS to 200k MS per annum.

 

  • Less use of AI, conception per insemination increased from ~30% to ~55%
  • Better tolerance of heat stress
  • Less labor cost for fetching cows (~$20 000/yr)
  • Freight cost per MS saving of $0.35
  • Less costs associated with feet (trimming, lame etc.)
  • Calving ease
  • Resistance to milk fat depression in spring.

All the benefits outweigh the cost of cull prices for male calves (not really a factor in Australia). Cull cow price is a factor. Assuming total weight turned off is the same (as the farm runs more Jersey cows, they will cull more as well), there is still less per kilogram paid for the Jersey; in Australia this is approximately 10-15%. I would suggest that this be the number used in your budgets.

So, it would appear from our NZ and Australian data they are more profitable. Importantly other findings further reinforce this, even in USA’s intensive TMR systems a data set from the largest dairy accounting firm in the USA

Demonstrating that Jersey herds show a US$389 profit per cow with the average of all herds at US$267 per cow.

Ok, this all sounds great and we are preaching to the converted. But as a scientist my job is to work out the why. In our part of the world it is very simple. We do not have to dig too deep. The primary reason is that in both countries we are paid on MS not litres.

Why is this important? It takes energy to produce litres. Most of that energy sink can be defined by the production of milk sugar or lactose. The cow must produce this lactose and this effectively drives the production of litres. The black and white cow wins this fight hands down. The feed stuffs that help drive lactose include starch and other highly digestible carbohydrates.

This energy loss results in lots of the negatives associated with the larger cows, including negative energy balance, poor fertility and even ketosis. Furthermore, the genetic potential of the Holstein Friesians means that we cannot supply this energy requirement and this often manifests itself in low BCS.

Furthermore, these simple carbohydrates are not that compatible with our pasture based diets, especially in spring. That is because the grasses lack effective fibre, have high levels of poly unsaturated fats and very fast passage rates. But perhaps the biggest issue is the cost of grain in New Zealand.

The last major reason for efficiency gains in Jersey cows is that it is more likely that they are fed closer to their genetic potential than larger animals. This means that there is less maintenance cost as a proportion of total production.

To give an example of this let’s consider a simple equation. Imagine that a 500Kg cow producing 2kg of MS requires 21kg/day of dry matter. Maintenance would take up the first 7kg, the first MS 7kg and the second MS 7kg. Therefore, if you drop 7kg of feed the cow would only produce 1kg MS. Put simply an increase of feed by 50% increases milk production by 100%. Or another way to look at it is feed efficiency improves from 14:1 to  10.5:1.

While this example equation is standard for all cows it is perhaps more likely that smaller cows are fed closer to their optimum than large cows in pasture based systems. Furthermore, Jerseys have a much greater intake of fibre (NDF) per Kg of body weight than larger Holstein cows. This enables them to eat closer to their potential in forage based systems.

Metabolic disease must be factored in for Jerseys. They do tend to have a much higher incidence of milk fever and associated diseases. However, there is at least one very good set of nutritional supplements in the New Zealand market that will largely control these.

There are many different techniques for increasing the feed efficiency of dairy cows in pasture based system, but the majority of these are not breed specific. The two main points mentioned above, components and feed intake are the primary reasons that Jerseys are more efficient than Holstein Friesians.

For decisions made specifically for individual farms the total cost benefit analysis of all the points mentioned above need to be considered. It is important to remember that there is a biochemical reason for all outputs and that only nothing comes from nothing. Jerseys are not magical, but they do produce what we are paid for and are a better fit for pasture based systems, well at least nutritionally anyway.