Reducing feed costs

by Deborah Jeanne Sergeant

Feed center operations represent a costly part of a farm’s budget that could be reduced if managed better.

Jason Karszes, senior Extension associate, Animal Science PRO-DAIRY, Cornell University, presented “Feed Center Operating Costs: Loading, Mixing & Delivering Feed” as a recent webinar.

“When you think about feed center operations, it’s an important daily activity,” Karszes said. “About 10% of labor hours for Northeast dairy farms are associated with feeding animals. It’s an important daily activity. We can think about this as an activity center. If we can see it that way, we can assign all costs to the feed center.”

That strategy can help track quantity and quality measure. “How many tons are going through the feed center?” Karszes asked. “How much feed is thrown out as refusals? How much is lost to shrink?”

Analyzing costs by measures of quality over time can help farmers know if they’re maintaining or improving quality. Karszes said it’s important to provide data to the management responsible for the activity.

“Do we need to do anything to improve the process?” Karszes asked. “Is it generating the quality I’d like to get to? Not many farms have adopted activity-based accounting systems yet. That’s where we come in with activity analysis projects.”

It’s important to take a snapshot view of the farm’s costs. That way, if any changes are made to farm operations, “they may take another snapshot after the change to compare,” Karszes said.

Farmers can figure out how much their feed costs are by accounting for the cost of labor, fuel, repairs, depreciation, opportunity interest and insurance. They can do so by activity: feed out and storage and filling. Sub-activities include labor by activity and machinery loading, mixing and delivery. Costs can also be tracked by feed storages, such as bunks, commodity bay and commodity bin.

In 2014 and 2015, Karszes researched the feed centers on 26 farms, and 42 farms in 2017. By comparing the cost for feeding activities, farms can spot inefficiencies. Among the first 26 farms, the cost of loading, mixing and delivering TMR by ton to milking cows averaged $2.34 for labor, $0.99 for fuel and utilities and $0.57 for repairs. Ownership expenses included $0.81 for depreciation, $0.44 for interest and $0.04 for insurance. The total cost was $5.20 per as-fed ton of TMR fed.

“Labor is a big driver,” Karszes said. “The cost of fuel now has become a bigger driver.”

At the 42 farms in 2017, the cost of loading, mixing and delivering TMR averaged $2.47 for labor, $0.99 for fuel and utilities and $0.64 for repairs. Ownership expenses included $1.12 for depreciation, $0.55 for interest and $0.03 for insurance. The total cost was $5.70 per as-fed ton.

Equipment investment was based upon the useful life of the tractor and mixer and loader, averaging $7.43 (over 9.4 years) and $5.31 (over 11.3 years), respectively.

Labor amounted to the largest percent of total costs. The average time spent was loading (45.8%), followed by feeding (24.4%), cleaning (10.9%), prep time (6.8%), shoveling bunkers (6.5%) and other (6.5%).

“We really need to start thinking about how many labor hours are we using,” Karszes said. “What’s our labor efficiency?”

Farmers need to look at how much time it takes to feed a load, how many cows are fed per hour and how many tons are fed per hour to gauge labor efficiency. Many factors go into labor efficiency beyond how hard employees work.

“How far was the equipment driving from the bunks to where they had to go to deliver the feed?” he inquired. “Where was all the feed stored? How far did the mixer have to go to get loaded? How well was the driveway maintained? Was it bumping around, losing feed? Was the loader spending a lot of time driving buckets of feed to the mixer versus loading the mixer? Do you need a second loader?”

The research showed that as the farmers increased mixer capacity, it reduced the cost. “That’s a combination of labor costs and investment ownership costs,” Karszes said.

Using equipment more efficiently also lowers the investment per ton. Planning the farm layout can make a big difference in the cost of feeding over time.

“Shrink is what is purchased but not utilized properly,” Karszes said. Areas where feed shrink happens include bunkers, commodity bays, commodity bins and areas near feed out activities. “Feed out activity is becoming more of a management focus,” he noted. “There is a lot more work that needs to be done on this.”

The 42 farmers participating in the 2017 study offered estimates as to where they experienced shrink, along with a cost per ton of feed. They estimated that of all shrink, 63% is lost at the bunker ($4.42), 24.5% at the commodity bay ($1.71) and 11.6% at the commodity bin ($0.80) – the other 0.9% was “other.”

“There wasn’t a rigorous scientific type of study,” Karszes said. “It was more based on conversations with the farmers and feeders to come up with what they thought shrink might be.”

He encouraged farmers to think about what the farm’s feeders can do daily to lessen shrink. “Managing the feed center as a cost center can improve performance,” he concluded.

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