Despite recently low milk prices, producers continue to expand their dairy operations. While feed prices have remained moderate, producers are still looking for new methods to improve efficiency of production to enhance profitability. Since the use of by-products may help increase profitability, the trend to partially replace whole grains with byproducts (co-products or alternative feeds) will continue to increase. Also, with the increasing human population and the concurrent increase in human food production, by-products will become more readily available. This creates a more urgent need for processors to move by-products into other markets. This scenario can make the use of by-products financially advantageous for dairies. Closer evaluation of the costs and nutritive value of by-products is needed to ensure these feeds are more profitable than traditional feedstuffs in specific rations.

Evaluation of Feed Costs
Regardless of operation size, feed costs will always be one of the highest input costs. However, ration costs per head daily or per hundredweight of milk do not always relate to profitability. Income over feed cost (IOFC) is a better indicator of profitability because it not only encompasses feed costs but also milk price and milk production. A high ration cost per day does not necessarily equate to low profitability. In fact, higher producing cows often have higher ration costs due to greater supplement and bypass protein costs. The higher ration costs should maintain higher production and lead to higher IOFC. Profitability is usually higher as milk production increases due to improved efficiency at converting nutrients into milk.

In many cases, ration costs can be decreased with the use of by-products or alternative feeds. It is important however to evaluate the economic benefit using IOFC and not just ration cost per head daily. If production increases with the change, IOFC will increase. However, if production drops, IOFC may decrease, reducing or eliminating the benefit. Therefore, these ingredients must be evaluated in specific rations to determine their value for the bottom-line not just ration cost per day.

By-products can be purchased as part of a commercial feed product or as a separate commodity. Either way, by-product availability and feasibility varies across the country. Many byproducts are used only locally, but others provide enough nutritional value for cows that they are shipped long distances to be fed on dairy farms. Cotton, for example, is grown in the Southeast and Southwest. Cottonseed, a by-product, is shipped into the northern states because of its advantages for lactating cows. Conversely, cottonseed hulls, another cotton byproduct, is usually only used in local areas because of its limited nutritional value for lactating cows.

Factors Affecting the Economic Value
Nutritive Value
Although standard nutrient value tables for by-products do exist, nutrient values vary too much for them to be applicable when balancing rations. For example, the nutritive value of bakery waste is extremely variable depending on the bakery product, such as cookie or cereal. Even on two different days of cereal production, the by-product can vary considerably. Most by-products can be classified into three broad categories—energy sources, protein sources, or fiber sources.

Compared to corn and soybean meal, there is potential for much greater variability in the nutritive value of most by-products. The standard deviation for nutrients in corn and soybean meal is very small. There is little variation between and within loads. However, the standard deviation for most by-products is much higher and can vary considerably between loads. In most cases, the selling of a by-product to a dairy farm by the processor is secondary to the main product production. Protocols to ensure consistency of most byproducts are nonexistent due to the cost required to implement these procedures for a “waste” product.

Because of the amount of variation, ration accuracy for nutrients and costs can be difficult to obtain when using certain by-products. Studies have been conducted to evaluate the variation in by-products and as nutritionists make use of this information, ration formulation can become more accurate with by-products.

Because most by-products are low in starch, rations that are high in corn silage and corn will benefit the most from substituting corn with a byproduct. In many instances within the Corn Belt area, cows may be on the verge of acidosis due to rations containing high levels of starch. The use of by-products can increase IOFC by improving health and therefore milk production.

Non-forage fiber sources can also increase IOFC when forage supplies are short and/or expensive. Effective fiber would be the limiting factor for the high-fiber by-product when substituting for forage. However, energy from non-forage fiber sources is usually higher than forages. Therefore, rations should be balanced for these nutrients to allow maximum IOFC.

Substituting by-products for soybean meal can provide more sources of protein for the rumen microbial population. These sources of protein can ensure optimal rumen fermentation leading to a more efficient production of amino acids. Depending on the source, unique by-products that provide undegradable protein (UIP) may also provide a more optimum post-ruminal amino acid profile for milk and milk protein production. Any by-product used in a ration should be analyzed often and its unique characteristics taken into account when fed to cows.

Costs
As mentioned previously, IOFC is a good indicator of profitability for a ration. However, an accurate cost per ton must be determined for the by-product if purchased separate from the commercial feed. Table 1lists costs that should be used to determine the actual cost of a commodity in the bulk form for use on a dairy operation.

These costs are then added to the ‘initial’ cost per ton of the by-product. In most situations, it is easier for a large herd to justify feeding byproducts because the costs noted in Table 1 will be spread over a larger number of cows.

After determination of the actual cost per ton of the by-products that are feasible in an area, the cost per unit of nutrient can be calculated. The by-product with the lowest cost per unit of the nutrient is the better value for that particular nutrient. Table 2 gives an example of evaluation of various by-products for a given area of the country using the actual cost per ton, which takes into account costs from Table 1.

Although Table 2 provides a guide for identifying the best priced byproduct for a given nutrient (e.g., ground corn for energy), sound nutrition management should determine which by-products to ultimately include in a ration. For example, corn has a low cost per unit of energy, but using only corn as an energy source can cause acidosis. Corn gluten feed also has a low cost per unit of energy, but gluten feed is high in soluble protein, which could cause problems in certain rations. Also, since corn gluten feed is low in starch, it should not be used in rations that are already low in starch. Other nutrient values could be added to Table 2, such as fat and fiber. Also, by-products and commodities could be ranked on their relative abilities to provide certain nutrients at the lowest cost. However, this type of comparison cannot substitute for ration balancing.

Summary
From citrus pulp and potato products to bakery waste, distillers’ waste, and beet pulp, the production of by-products and alternative feeds produced across the country is increasing. New unique by-products are also being produced and should be carefully evaluated for their economic use in dairy rations. The increase in by-product production and the need for dairy producers to enhance profitability make the use of by-products more important than in the past. Dairy animals provide a possible channel for by-product utilization. More consistent production and smaller nutrient variation are necessary for dairy producers to utilize more by-products in rations.

References:

Bailey et al., Economics of Using Alternative Feeds. Alternative Feed Conference.

Arana et al., 2000. Feed Values of some by-products. Western Dairy Business. August.

VandeHaar, M.J., 1997.

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