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Calculate and improve your dairy’s income over feed cost metrics

June 2, 2016
Calculate and improve your dairy’s income over feed cost metrics

Income over feed cost (IOFC) can be a critical metric when evaluating a farm’s profitability and the sustainability of a current or proposed feeding program. During times of low milk prices, understanding your costs can be crucial to a farm, effectively riding the wave to the next high or low in the milk price storm.

Understanding IOFC

IOFC is defined as the portion of income from milk sold that remains after paying for purchased and farm-raised feed used to produce the milk.  

Information you need to calculate IOFC:

  1. Milk price average per month
  2. Total milk produced per day over the period of a month
  3. Number of cows as it relates to production during that month
  4. Inputs (amount of feed used)
  5. Cost per ton of feed input (to purchase or produce)

To illustrate with an example, we will use a 142-cow milking Holstein herd in Kentucky.

  • Income
    • Milk price:  $15.50
    • Number of cows: 142
    • Average pounds produced per cow per day: 78 pounds
      • Income per cow per day: $15.50 * .78 = $12.09
  • Feed costs:

Ingredient

Cost per ton

Cost per lb

Inclusion in Diet (lbs)

Cost in Diet

Corn Silage

40

0.02

60

$1.20

Balage

60

0.03

10

$0.30

Fine Ground Corn

175

0.09

11.5

$1.01

Soybean Meal

445

0.22

6.5

$1.45

Citrus

195

0.10

3.5

$0.34

Concentrate

495

0.25

5

$1.24

Total

     

$5.53

IOFC = $12.09 (income) - $5.53 (feed costs) = $6.56 per cow per day

Feed to succeed

When evaluating your ration to maximize IOFC, there are potential changes that carry minimal to no cost but can have an impact on your bottom line.

  1. Slow release non-protein nitrogen provides a concentrated source of ruminally-degradable protein. Due to the concentrated nature of the protein, a small amount provides the same nutrients as a larger amount of vegetable protein, allowing for reformulation potential to reduce feed costs. Optigen®, a product from Alltech, was utilized by Penn State in an example of IOFC calculation. You can read more here: http://www.dairyherd.com/news/industry/production-financials-cash-flow-mechanics.
  2. Yeast: Feeding yeast has been widely researched and has shown to improve dry matter intake, stabilize rumen pH, maximize nutrient release and reduce overall feed costs.
  3. Enzymes: Looking at the use of enzyme technology can be another avenue to maximize IOFC.  When feeding high-forage or high-corn diets, adding an enzyme that helps break down the key components in these diets, such as starch or plant fiber, can increase feed efficiency and improve milk production.

Using tools such as IOFC can lead to opportunities to gain a better understanding of your ration, to improve profitability of your herd and to understand your spending power when it comes to other on-farm purchases.