To mitigate the effects of higher feed costs on production levels and profitability, many feed manufacturers and dairy producers will shift to lower-cost alternatives. Ration formulations may change dramatically depending on both the forecasted supplies (including potential increased supplies of bio-energy-related feedstocks) and the expected relationships among the prices of major feed ingredients. Dairy producers may make other management adjustments, including the use and proportion of alternative forages that are consistent with raising a larger portion of total dairy feed. The extent to which this is possible depends on the nature of a farmer’s land resources. These management adjustments may also be in response to changes in the nutrient content of animal waste from increased use of some less-expensive feed ingredients. To identify management and adjustments we: a) estimate the effects of increased feed prices and changes in the relative prices of important dairy feed components on whole-farm profitability; b) identify optimal adjustments for on-farm feed production, feed purchases, crop sales, and dairy rations that account explicitly for expanded availability of bio-energy-related by-product feedstocks; and c) point out potential implications of these production management adjustments on whole-farm nutrient planning.
Compared to the averages over the past 15 years, the 2008 price of DDGS was low relative to the price of corn grain and soybean meal. At these current prices, it is profitable to include DDGS in rations for dry cows and young stock, as well as for lactating cows. On average, the rations contain about 10% DDGS on a dry matter basis. These changes in the composition of rations lead to modest increases in net farm returns, but they also have important implications for changes in crop production and for nutrient management practices necessary to deal with increased levels of nitrogen and phosphorus in animal waste. Were the price of DDGS relative to corn grain to return to its average level, it would still be profitable to feed it to dry cows and heifers, but not to lactating cows.
impact statement issue
Along with the recent growth in demand for farm commodities in China and India, due largely to population and income growth, the expansion of the U.S. biofuels industry has also contributed to the recent, rather abrupt changes in agricultural commodity markets. These increased demands for grains and oilseeds have led to increased price volatility in the short run and in the longer term are likely to continue to put upward pressure on the overall level of commodity prices. These changes, which have already been reflected in higher wholesale and retail prices for some food items, have substantially different implications for crop and livestock producers across the U.S. The purpose of this research is to identify effective management adjustments on dairy farms to recent structural changes in commodity markets.
impact statement response
To estimate these effects, we develop a mathematical programming model of a representative dairy farm in New York. To account for recent structural changes in commodity markets, our initial analysis reflects the most recent relative price differences among major dairy feed ingredients. Because there is a great deal of uncertainty about the future supply of bio-energy-related by-product feedstocks , such as DDGS, and their prices, we map out an effective farm-level demand curve for these feedstocks by varying their prices relative to those for other major feed ingredients. We extend this model through the inclusion of new components that link bio-energy feedstocks, feed prices, and nutrient loadings. These linkages are established through the use of the CPM-Dairy program to generate alternative dairy rations.
impact statement summary
A mathematical programming model of a representative New York dairy farm is developed to identify optimal management adjustments to increased availability of corn distillers dried grains with solubles (DDGS) or a change in its relative price as the corn-ethanol industry in the United States matures.
