Optimizing Income over Feed Supplement Costs

Large fluctuations in milk and supplemental feed prices create anxiety and uncertainties. Profit margin may shrink rapidly when milk price goes down and supplemental feed prices go up. Thus, it is important that correct decisions are made to maximize return on supplemental feed expenses. The change in prices and milk production response to feed supplements are especially important because they impact directly the profitability of dairy farms. Supplements might represent the largest portion of expenses and milk is by far the most important revenue generator in a dairy enterprise. Usually, more than 90% of dairy farm revenue comes from the milk check and more than 40% of the expenses are used on purchased feeds. Analyses from surface responses to income over feed cost for different crude protein (CP) levels have been studied in the past (Roffler et al., 1986), but the distinction between rumen undegradable protein (RUP) protein and rumen degradable protein (RDP) creates a need to further fine-tune the formulation of supplements for maximum income over feed cost. Volatile market conditions that are greatly impacting feeds and milk prices require the ability to make strategic ration formulation adjustments promptly and efficiently to maintain dairy margins and remain economically competitive. An interactive simulation model may be beneficial in exploring those strategic decisions in responses to fluctuating milk and feed prices.