Economic Evaluation of Dairy Feeds

Feed costs typically represent more than 50% of total costs of producing milk on a dairy farm. Feed cost savings, even a few dollars per ton, add up to significant savings over a year on a large dairy. For many dairies, a ration-balancing software program that uses linear programming techniques can be used to determine the opportunity cost or price of including a new feed in a ration. However, this requires expertise in using the rationbalancing software, and may not be appropriate when quick decisions need to be made. The purpose of this guide is to describe alternative methods of pricing various feeds. In particular, four techniques, including the cost/nutrient, index, simultaneous equation, and by-product equation methods are discussed. The manual calculation of these techniques is described herein, but a spreadsheet that uses these methods to determine feed value is available through NMSU’s Cooperative Extension Service by contacting Greg Bethard, Extension dairy specialist, at (505) 646-6404.