Feed Costs

How Can Farming Businesses Optimize Feed Costs by Utilizing Smart Farming Techniques?

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What are the Challenges to the Increased Feed Costs?

The farming business is facing a setback due to the increasing costs of feed for their pastures. These higher costs are squeezing the margins for the livestock, dairy, and poultry farmers.

The farmers are bearing the brunt as the prices of meat and other bi-products are not increasing in accordance with increased costs.

Costs increased due to weather conditions which meant that the feed’s raw materials turned out to be of poor quality, this meant that the nutritional value of the feed decreased and so did the quality of the feed which resultantly increased prices.

The cost of feed also increased in 2021 due to the COVID-19 pandemic as labor shortages, supply chain disruptions and tight working conditions meant that factories had a decreased output. The price shot up by as much as 30%.

Cash Flow for Farms

The cash flows in the farms affect the decision-making policies. The farmers need to work out their feasibility costs and the profit margins that can help them make better decisions. One must be aware of the cost of the gain and the potential for their business.

For the next year, farmers are expecting a higher price for meat and better prices for dairy products which can help their cash flows. The climate experts also expect a good yield for the corn crops which can help alleviate the issues of increased feed costs.

There is a very high demand for the corn which means that producers of corn will look to increase their corn production.

The droughts in certain regions will mean that the cow numbers will decrease which will mean a higher cattle price for 2022 which will provide great returns for the livestock producers. In the latter half of 2021. Some farmers dropped as many as 125,000 cows in a short span of six months.

Why are Feed Costs Continuously Rising?

The cost of the feed for the farming industry is on the path of continuous uncontrolled increase. These were affected by several factors and are still subject to the aftermath of the COVID-19 pandemic.

The meat industry is already sensitive to the surge in feed prices. These costs are rising due to several reasons that are mentioned below.

Disruptions in the Supply Chain

The disruption in the supply chain for the feed was linked with COVID-19 as the freight costs increased side by side in 2021. The pandemic disrupted the supply chain, and the complications are still ongoing.

The ingredient suppliers for feed stated that the shortage of labor due to restrictions, increased packaging demand from customers, and increased shipping costs mean the prices need to be increased. Similarly, the increase in the power costs and grain prices meant that the prices are still scheduled to grow.

Labor Challenges for Factories

Due to restrictions of COVID-19, companies had to shut down or limit operations. This meant that labor demand fell. As the demand for labor fell, the laborers went away from cities and the world witnessed an event called “The great resignation.”

People quit their jobs and moved away from cities to decrease their living expenses. An immediate consequence was that there was a mass shortage of laborers.

Even after the COVID restrictions were lifted, laborers chose not to return. Factories cannot run without workers thus the production levels decreased drastically. This resulted in increased feed prices.

Decreased Profit Margins for the Feed Producers

The feed producers stated that the profit margins became dangerously low for them which means that the feed production business was no longer feasible for them.

The production prices increased and the selling prices were quite close which meant that the profit margins for the feed producers became unfeasible. This meant selling prices had to be increased.

Increasing the Sustainability of Feed Productions

There has been a green revolution in the world. Feed producers have ramped up their focus on sustainability issues. This new paradigm means that the traceability and the sustainability of the feed ingredients such as soybean will be tracked.

Similarly, there are additional costs to decrease methane emissions to make the operations more environmentally friendly. Climate change is perhaps the biggest concern for the agriculture industry which affects pasture and arable farming.

Certain countries make it compulsory for producers to follow environmental regulations which makes it a must to practice sustainable farming. Thus additional costs are included in the selling price for the feed.

New Policies for Zinc Oxide and Antibiotics Usage

Starting from June 2022, the European Union has decided to ban the use of Zinc oxide as a veterinary medicinal product. New legislations will also force the prohibition of all sorts of use of antibiotics in pastures.

This means that farmers now have to look for alternates. The growing pressures that ask to limit antimicrobial use create opportunities for some feed additives but also make them more expensive.

The Threat of Animal Diseases

The threat of animal disease is a prevalent threat. There can always be an outbreak of an animal disease that can result in pastures and birds being killed.

This decreases the price and the demand even after the disease has been controlled due to public fear. To prevent such disease outbreaks, it is best to improve the on-farm biosecurity measures. The disinfection, cleaning, management, and housing need to be optimized.

How Can One Avoid High Feed Costs?

The feed costs were quite unpredictable. This will mean that the cost allocation for the producers is challenging. The market volatility means that the farmers will need to rely on reliable data to get a clear picture as to which factors are responsible for affecting their feed costs so that the farmers can devise their own strategies.

Feed costs can be avoided by making use of the latest technologies such as artificial intelligence which can assist the farmers so that they can cut the costs and improve their business operations.

Feed Conversion Ratios

When farmers plan to lower the feed costs for the business, the feed producers start by considering all of the factors that can affect the cost of the feed. It is not necessary that every time the FCR is improved, the maximum amount of money will be saved since it may become detrimental in the long term.

For instance, if the feed cost is being reduced and one reaches the value of 1.6, farmers may feel delighted, but considering other factors such as the cost of the feed may unveil that one does not recall cutting the costs.

Thanks to modern technologies, software solutions can account for the business with added storage in databases to keep a safe record of all the data.

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How Can one Get a Complete Picture for the Calculation of Feed Costs?

Farmers can get a clear picture for the calculation of their feed costs by having a software solution tailored to their business needs.

The management software will be able to combine the data for costs and operations to provide a vivid picture to understand all of the facts that need to be adjusted in order for the farmer to save the most money in all of the areas for business which also include feed reduction costs. The use of software can help farmers as it can provide benefits to them.

Data Centralization

All of the sources for information can be integrated into a single dashboard that can provide the user with transparency and visibility of the complete operational costs.

If the cost of business performance is kept elsewhere, and the cost of business is kept elsewhere, it will not allow the user to understand how one factor impacts the other. This is where data centralization helps keep all the data in one place and provides the best value for our business.

Improved Operation Planning and Business Reporting

The more accurate the sources for the data, the more reliable the report generation for the business will be. When farmers have a reliable report, it can allow them deeper insight so that the farmers can make better business decisions. This results in improved operation workflows for the business.

Testing and Optimization

When the farmers have a clear picture that takes into account all of the factors, they will easily be able to deduce which factors they need to tweak so that they are correctly able to measure the business effectiveness for those changes.

Making use of artificial intelligence to tighten the supply chain

The best way to save the costs on feed is to make use of accurate predictions for the weight of the livestock or poultry. It seems insignificant, but this can actually help forecast the exact quantity for feed cost per bird.

This micromanagement can be utilized by the business to minimize the food reclaim. The accurate projection for feed and the weight prediction for the livestock or poultry are some of the many outcomes of using artificial intelligence in the farming business.

Farmers can employ specialists to develop solutions to solve their real-world problems which can improve production, reduce costs and allow for better business planning.

Following prescriptive action from descriptive actions

When vital data is being stored and analyzed by the algorithms, it is the first step to optimizing the level of production but this method only keeps the farmers in a state where they can react to the information.

It is critical to understand what has happened and why. This starting point can be used to improve production levels and performances.

Smart software solutions that make use of machine learning or artificial intelligence allow the users to look at the data with accurate forecasts to understand what can be expected from the future.

How Can the Cost of Feed be Controlled?

The cost of feed needs to be controlled by the producers themselves. They can make use of a rumen environment or forage quality.

  1. Considerations to follow gradual progress. The farmers can think about their forage programs. They can consider it once or twice a year. They can ask themselves whether they are growing the right crops which will be the best for the soil. The process of manure management also needs to be checked. These foraging and storage needs need to be checked by oneself or with the help of experts.
  2. Management of the Heifer costs. The heifers can consume over 15% of the feed on the farm. These costs are fluctuating all the time. It is very common on farms that 70% to 75% fewer heifers are present as compared to the milking cows. When these are not raised, it saves forage costs for the farming operations for the lactating cows while simultaneously decreasing the feed costs.
  3. Checking the mixer management settings. In times of increased feed costs, it is important to pay great detail to the settings of the feed mixer. Check whether the scales are working accurately, is the feed is being mixed properly and that there is no leftover feed in the mixer.
  4. Avoid overprocessing the corn. If the corn is over-processed to the limits that the corn grain is pulverized in it, then it can become very fine-grained. Good corn silage could have a high percentage of the corn grain in the mixer. It is possible that the feed provides lesser nutrition due to waste.
  5. Analyze all of the feed additives. In general, there is no problem with the feed additives, but it is important to make sure that all of the additives are analyzed. With new seasons and new months, it is best to look at what you are feeding your cattle or poultry and have a discussion with your nutritionist. Ask them if there is a need for this, or why are they putting this in.

How Can the Cost of Feed be Optimized?

The cattle producers noted a relatively stable price for the feed of the pasture for the last half a decade, but now it is changing in some areas.

There is an increase in the demand for grain with a simultaneous decrease in the expected yield for the corn which led to a dramatic increase in the price of corn.

This means that the operations must now be scrutinized by the farmers so they can find methods to optimize the operational costs.

Consider the Options at Your Disposal

The sudden increase of grain prices in 2020 and 2021 had added up to $20 to almost $50 per ton of feed for the farms for their ration prices.

This increase of 10% to almost 25% depended upon the operations of the business. When these costs are multiplied by the days that the cattle are fed, altogether this becomes a very significant increase in the cost of the feed.

This is troublesome for the cattle producers. To maintain a profitable business with tight margins is where farmers must explore other options.

Type of Cattle and other Marketing Endpoints

Cattle producers have several options. One of them is to reduce the cost of feed by shortening the days that the cows are on a diet of feed. They can also finish their cattle are lighter body weights and have a leaner composition.

This cannot guarantee a profitable outcome, but this is an option that is based on risk but is an option at the disposal of the farmers.

The Feed Decisions

Another option that the farmers can follow is that they make feed changes for their pastures. They can evaluate different cost diets and then implement the best cost plan that can help optimize the business performances or follow a least-cost diet plan that will be needed to meet the requirements of the feed with a priority for providing an inexpensive solution.

Farmers can also make use of new feed additive technologies such as Rumensin doses. These can help improve the efficiency of the feed. This dose has been proven to maintain a gain in weight while simultaneously reducing the feed investment for the farmers without affecting a long-term endpoint.

Some Management Influences

The producers of cattle can also consider the new technologies that can help improve the daily gain rate which makes use of an implant dose and a fixed timing for adding some beta-agonists.

These can be added during the late feeding period. It can help maintain the efficiency of costs for as long as possible while the cattle slow down biologically.

Focus on Improving the Efficiency Levels for the Feed

As the prices of the feed costs are increasing, there is a need to improve the efficiency levels of feed. For example, if the cost of feed is $200 per ton, an improvement by a factor of one-tenth for the feed conversion ratio may come out at almost $7 per cow.

As the prices for rations climb to about $250 per ton, the efficiency improvement can be worth an added $1.75 per cow in terms of the incremental opportunity which is subject to the new and increased feed prices.

The length of cattle stay at the feed yard and the type of cattle will determine how many days the saving per head per day will be multiplied by.

Make use of Expert Recommendations

In times where businesses need to strive for efficiency, veterinaries or nutritionists are perhaps a very valuable resource. They can help you in developing practical solutions that can be used to optimize feed costs.

It is critical to have a completely open dialogue with the experts so that they masterfully weigh all the options that are available for them and then decide what solutions might be the most feasible for your business model to maintain a gain in profitability and business efficiency.

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FAQs

How Can Feed Costs be Reduced?

The cost of feed needs to be reduced by the producers themselves at times. They can make use of a rumen environment or forage quality.

  1. Management of the Heifer costs. The heifers can consume over 15% of the feed on the farm. These costs are fluctuating all the time. It is very common on farms that 70% to 75% fewer heifers are present as compared to the milking cows. When these are not raised, it saves forage costs for the farming operations for the lactating cows while simultaneously decreasing the feed costs.
  2. Checking the mixer management settings. In times of increased feed costs, it is important to pay great detail to the settings of the feed mixer. Check whether the scales are working accurately, is the feed is being mixed properly, and whether there is no feed leftover in the mixer.
  3. Avoid over processing the corn. If the corn is over-processed to the limits that the corn grain is pulverized in it, then it can become very fine-grained. Good corn silage could have a high percentage of corn grain in the mixer. It is possible that the feed provides lesser nutrition due to waste.
  4. Analyze all of the feed additives. In general, there is no problem with the feed additives, but it is important to make sure that all of the additives are analyzed. With new seasons and new months, it is best to look at what you are feeding your cattle or poultry and have a discussion with your nutritionist. Ask them if there is a need for this, or why are they putting this in.

How do you Increase the Cattle Feed Ratio?

The cattle to feed ratio can be improved by following two methods. One method is to increase the yield of the milk along with the dry matter intake, and the other alternative is to decrease the dry matter intake but maintain the same milk yield. The diet modifications that increase yield can also increase efficiency.

About Folio3 AgTech Practice

Folio3 is a Silicon Valley based Digital Transformation partner for entrepreneurs and Fortune 500 companies with a special focus on digitization of Agriculture, Production and Companion Animal industry. Having worked with some of the world’s leading animal health companies, cattle associations, cow-calf operators, cattle feeders, beef processors and beef marketing companies, we have the design and development expertise required to help you digitize your manual procedures and practices, whether you’re a farm or a ranch owner, veterinarian, feedlot manager, nutritionist, or processing plant owner, we have got you covered.

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