Breaking free from the chains of the past Where
truth moves faster than a Holstein calf No law
waiting on some printed page We're charting new
ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Hey there, farmers and dairy enthusiasts.
Welcome to the Bullvine Podcast, your go -to
source for straight talk on dairy profitability
and management. In today's episode, we're unmasking
the hidden leaks in your dairy financials caused
by common feed cost miscalculations. These aren't
small errors. They're costing you serious cash.
We'll break down what's happening, why it matters,
and how you can stop the bleeding. So grab your
coffee and let's dig in. Welcome back to the
Bullvine Podcast, the show that digs deep into
the topics that matter to dairy producers. That's
right. Today, we're tackling a really interesting
feature article from the Bullvine that's got
everyone talking. We're going to break it all
down. Yeah, really unpack its nuances and, you
know, show you why it's so critical for your
farm's future. We are indeed. Today, our deep
dive is into an article titled, The True Cost
of Dairy Feed. now for anyone running a dairy
operation you already know feed is your single
largest expense it's often uh the first line
item on your budget that makes you wince a little
right but this piece it truly pulls back the
curtain on something even more uncomfortable
How many operations are fundamentally misunderstanding,
or frankly, severely underestimating, just how
much they're truly spending on feed? Yeah, it's
not just about the price per ton you pay, is
it? No, it's about a cascade of hidden expenses,
the subtle blind spots that accumulate silently,
and frankly, to siphon away your profits without
you even realizing it. And this isn't just about...
better accounting for the sake of it. The article
really hammers home that this isn't just some
spreadsheet exercise. It's about the very survival
and strategic decision -making capacity of your
dairy. Especially in a marketplace that's becoming,
well, increasingly unforgiving. Absolutely. In
a market as volatile as dairy is right now, where
margins are razor thin and milk prices can swing
wildly by double -digit dollars, knowing your
true cost of production, especially your feed
costs, is just So our mission today is to illuminate
these often overlooked financial leaks and, more
importantly, offer you clear, actionable strategies
to plug them. Exactly. This deep dive is designed
to give you the insights to make more strategic,
more resilient, and ultimately more profitable
decisions for your farm. Okay, let's unpack this
because the article starts right off the bat
with a statement that probably gets home for
a lot of producers. It talks about that gut feeling
you get when you're walking past the feed bunk.
watching the TMR get pushed up, and it just doesn't
quite sit right. Like there's money walking out
the barn door that somehow never shows up on
your milk check. Yeah, that feeling. And then
it drops the bomb, and it states, if you're calculating
feed costs the way most juries do, you're probably
underestimating your true costs by more than
$3 .50 per hundredweight. Wow. $3 .50. Now, that's
not a rounding error, is it? Not by any stretch
of the imagination. When you start to break down
the sheer magnitude of that underestimation,
it quickly becomes alarming. Almost catastrophic,
really. Think about it. For a medium -sized dairy,
let's say a 200 -cow operation, averaging about
85 tons of milk per cow daily, that seemingly
abstract $3 .50 per 100 -weight error translates
to over $50 ,000 annually. $50 ,000. In misprofit
or hidden losses. Imagine that for a moment.
$50 ,000. What could that mean for your farm?
Is it new parlor equipment that would make life
easier? Paying down debt? Or just having a healthier
bottom line when prices dip. Right. That peace
of mind. Exactly. This isn't a small accounting
glitch. The article calls them systematic blind
spots. So deeply ingrained in traditional dairy
accounting that producers might not even realize
they're bleeding cash this way. It's like having
a slow, invisible leak in your financial pipeline.
And the article powerfully points out how market
volatility just amplifies these errors exponentially.
Absolutely. It really gets me. Fired up, as the
author puts it, thinking about that staggering
$12 .05 per hundredweight swing in income over
feed costs from the lows of 2023 to early 2024.
It's a wild ride. It is. But if your baseline
numbers are already off, if you're flying blind,
as the article describes it, those market swings
don't just rock your farm. They can absolutely
hammer it twice as hard. Right. You're losing
money on two fronts. The market downturn and
your inaccurate cost accounting. It's like trying
to navigate a ship through a storm with a faulty
compass. You're already battling the elements,
but your internal guidance system is just giving
you bad directions. Leading you further astray.
What's truly fascinating here, and the article
emphasizes this, is the concept of feed as the
ultimate financial lever. Right. It's not just
a cost, it's the cost. For most dairy operations,
feed accounts for a massive 50 -60 % of total
production costs, sometimes even over 70%. When
you look at numbers like Illinois farms reporting
nearly $3 ,000 per cow annually just on feed.
$3 ,000 per cow. It quickly becomes clear why
even a small error here is so devastating. Yeah,
if feed is 60 % of your total expenses and you're
off by just 5 % in your calculation. Just 5%.
That seemingly small error can effectively wipe
out your entire profit for the year. It's a concept
the article calls an accounting illusion. An
illusion, yeah. Operations that appeared profitable
on paper running what they thought were healthy
margins. Were actually operating at a significant
loss once their feed costing methodology was
corrected and all these blind spots were revealed.
That's the brutal math, isn't it? It forces you
to question the very foundation of your business
planning. So what does this all mean for your
operation? If you're not fully accounting for
this largest, most impactful expense. How can
you truly know if you're profitable? How can
you make sound strategic decisions about expanding,
investing, or even just confidently continuing?
This strategic blindness, as the article calls
it, can lead to monumental decisions being made
based on profoundly flawed profitability data.
It's a risk most producers simply can't afford
to take, not in today's environment. Absolutely
not. It's about your farm's long -term viability.
Okay, so the stakes are incredibly high, which
leads us to the critical question. What are these
specific calculation traps having such a devastating
impact? Right. The article zeroes in on a core
issue right away, the as -fed trap. The as -fed
trap seems so simple, almost too obvious. Exactly.
Yet it's costing dairies a fortune. The example
given is brilliant in its clarity. Imagine two
loads of corn silage arriving at your farm, both
quoted at $60 per ton as -fed. Okay, 60 bucks
a ton sounds the same. You'd think they're essentially
the same product, same value, right? But then
you look at the dry matter percentages. One load
is 30 % dry matter. The other is 40%. Ah, okay.
Big difference. Huge. And this is where the simple
math really hits you. If you break it down to
the actual cost per ton of nutrients, which is
what you're truly buying. Right, not just tonnage.
That first load at 30 % dry matter is actually
costing you... $200 per ton of nutrients. So
$100. But the second load, at 40 % dry matter,
only costs you $150 per ton of nutrients. Wow,
that's a 33 % difference in value. 33%. For what
looks like the exact same product, same price
per ton. As New Mexico State Extension bluntly
puts it, the water component contains no nutrients.
Right. Yet when you buy as -fed... without accounting
for dry matter, you're basically paying for water
as if it were valuable feed. It's astonishing
how often this happens. And the article shares
a really impactful anecdote about a central Wisconsin
farm. They were consistently overpaying for wet
distillers grains, precisely because they weren't
converting to a dry matter basis, just paying
per wet ton. So they started testing. Once they
implemented a simple dry matter testing protocol
and adjusted their purchasing, they saved over
$15 ,000. in just four months. 15 grand in four
months just by changing how they calculated the
value. Exactly. Not even changing the supplier
or the price per ton. It directly connects to
profitability. You're literally paying for water
instead of nutrients. And that $15 ,000 savings
was real cash staying in their pocket. For a
200 -cow dairy, that's already a huge chunk of
that $50 ,000 annual blind spot we mentioned.
And that's just one blind spot. The next one
is equally insidious. Treating free forage as
if it truly costs nothing. Or maybe pricing it
based on last year's production costs, right?
Yeah, maybe worse. This is where the psychology
of farming often clashes directly with economic
reality. Because you grew it, you chopped it,
stored it, you put in the work, paid for the
inputs. It feels like once it's in the bunk,
it's free to your cows. A sunk cost. Exactly.
But economically, that's just not the case. The
USDA Economic Research Service recommends pricing
homegrown feeds at current market values. And
for a very good reason. Every ton of homegrown
silage, haylage, or hay you feed is a ton. You're
not selling on the open market. That's its opportunity
cost. Right. You're choosing to use it yourself,
which is fine, but you need to account for what
you could have gained by selling it. Otherwise,
you're subsidizing your dairy enterprise with
your crop enterprise without even realizing it.
The article gives a really clear example of this.
A southern Minnesota farm. Yeah, this one was
truly devastating. The owner genuinely thought
his dairy was highly profitable. Production was
good, cows healthy, cash flow looked positive
on paper. But then when they worked with a consultant
and repriced his homegrown feeds at current market
rates... Everything changed. What they discovered
was his crop enterprise was actually subsidizing
a dairy operation that was, well, marginally
profitable at best. Maybe even operating at a
loss. Potentially. This meant he was strategically
blind to the true performance of his dairy. He
couldn't make informed decisions about expansion,
land use, or even if he should stay in dairy
versus maybe shifting to cash crops. That's not
just bad accounting. It's a fundamental lack
of clarity about your entire business model.
So I have to ask you, the listener, are you falling
into this trap thinking because you grew it,
it's truly free and potentially masking deeper
issues? That's a powerful question. It forces
you to look at your whole operation through a
clearer, more realistic lens. And then we have
the invisible herd. Yes, the invisible herd.
Another one that trips up even sharp managers.
calculating feed costs only for the milking string,
and completely ignoring dry cows and, crucially,
replacement heifers. I think it's obvious to
include them, right? They're eating. Yeah. But
the article points out how often this vital segment
is just overlooked. This omission is massive.
Its impact on your true cost per hundredweight
is startling. Industry analysis, cited in the
article, shows that by only counting the milkers,
you underestimate true feed costs by about 38%.
38%. Think about that number. That translates
to a staggering $3 .16 per hundredweight error,
just from the scope of your calculation. Let's
put numbers to it. 200 milking cows. Okay. You're
realistically feeding another 40, 50 dry cows,
plus maybe 180, 200 replacement animals, calves,
heifers. None producing milk that hits the bulk
tank today. Exactly. Their feed costs are a very
real part of your overall cost of production
for every hundred weight of milk that does get
sold. It's a jarring disconnect, as the article
puts it. Farms are investing heavily in genomics,
precision breeding, cutting -edge genetics. Spending
thousands to optimize the future potential of
their herd. Yet when it comes to a fundamental
financial metric like feed costs, they're calculating
like it's 1985, ignoring a huge chunk of their
biological inventory. It's like building a high
-tech race car with all the latest engineering,
but putting cheap, under -inflated tires on it
and wondering why it's not performing optimally.
Great analogy. You simply can't reach your full
potential if a fundamental component of your
cost structure is so wildly inaccurate it blinds
you to the full picture. If those animals aren't
contributing to current milk revenue, their feed
costs absolutely need to be factored into your
overall cost per hundredweight of milk sold.
Otherwise, you create this artificial sense of
profitability. Which isn't sustainable and leads
to misinformed decisions. Yeah. Then there's
feed shrink. The silent profit killer. Ah, shrink.
The feed you paid for, hauled, stored, but never
actually makes it to the cow's mouth. Spoilage,
spillage, pests like birds or rodents, improper
storage and handling. The article really dives
into this, and the numbers are truly eye -opening.
It's a huge problem that often flies completely
under the radar. It's not a direct invoice, right?
Exactly. Research from Hubbard Feeds indicates
an average shrinkage of 5 .42 % for purchased
feeds across the industry. Five and a half percent.
That's already significant and often unacknowledged.
But it gets worse. Losses can routinely hit 8
.06 % for commodities in open storage exposed
to the elements. 8%. And the article notes shrink
rates can even exceed 12 % on farms with inadequate
protocols. 12%. Imagine paying for 100 tons of
feed and only 88 tons actually getting consumed.
That's a massive amount of money just vanishing.
It is. The article gives a vivid example. A 1
,000 cow operation tracked its shrink losses,
found it was losing $5 ,733 over just 47 days.
Whoa. So annually, that's... Nearly $45 ,000
just vanishing into thin air, or as the author
says, into bird bellies and blowing away with
the wind. And the economics are staggering when
you consider the potential savings from fixing
it. Absolutely. Moving from an open commodity
shed to proper enclosed storage for that same
1 ,000 cow dairy could lead to potential savings
of over $135 ,000 annually. That kind of saving
can often pay for the new building itself within
a few years. It's an investment that pays for
itself. Definitely. But what's really concerning
about shrinkage, beyond just the volume loss,
is the double impact it has. Double impact. How
so? You're not just losing volume. You're often
losing the most valuable parts of the feed first.
The lightest, most nutrient -dense particles.
The expensive stuff often blow away or get picked
out first. Ah, okay, so you're paying twice.
Exactly. Once for the lost feed, and again because
the remaining feed in your bunk is now an imbalanced
ration compared to what your nutritionist formulated.
Which then hits cow health, production, feed
efficiency. A cascading problem undermines the
nutritionist's work. It's like buying premium
fuel and having half evaporate before it reaches
the engine. And even when costs are calculated
correctly, the article warns that good metrics
go bad when feed efficiency is misapplied. Yes,
this is something I see a lot. The classic mistake
of using average feed conversion rates instead
of focusing on marginal response. This is where
it gets really interesting because it's subtle
but crucial. It is. And it's where truly precise
management shines. Average feed conversion tells
you, broadly, how many pounds of milk per pound
of feed across the whole herd. Useful benchmark.
Marginal response, however, asks, What additional
milk do I get from the next additional pound
of feed I give a cow? It's about the return on
the very last unit of feed. Which is what matters
when you're considering pushing for more production.
Right. The article gives the example of a producer
who thought adding two pounds of concentrate
would yield six additional pounds of milk. based
on his average rate. 3 .1 looked great. But in
reality, from that extra two pounds, he only
got maybe two extra pounds of milk. Precisely.
His marginal feed rate for that increment was
now 1 .1, tripling his marginal feed cost per
pound of milk. So instead of a profitable margin,
he was barely breaking even, maybe even losing
money. He was making decisions based on incomplete
or misleading data, thinking he was gaining efficiency
when he was just increasing costs with minimal
return. That's where profitability is won or
lost at the bunk. And some operations, chasing
impressive average numbers, push this even further.
Yeah, without considering the broader economics
or animal welfare, the article highlights the
danger of pushing cows so hard they start milking
off their backs. Sacrificing body condition,
energy reserves, future fertility for short -term,
potentially misleading gains. It's a critical
point. True profitability isn't just maximizing
one metric in isolation. It's optimizing the
whole system for long -term health and resilient
returns. It's the difference between a sprint
and a marathon for your herd. Exactly. So when
you combine all these errors as fed pricing,
free forage, incomplete herd costing, unaccounted
shrink. All of it together. The article calculates
a staggering miscalculation of over $1 ,200 per
cow annually. $1 ,200 per cow on a 200 -cow dairy.
That's a quarter million dollar blind spot. It's
truly shocking when you see it laid out. But
here's the crucial part. The core message is
that every one of these errors is fixable. Okay,
good. It's not just doom and gloom. Not at all.
This isn't a doomsday scenario. It's a roadmap
to reclaiming significant profitability. And
the article details the dramatic returns documented
when these issues are corrected. For instance,
strategic nutritional grouping. Right. Moving
from a single TMR to distinct diets for high,
mid, low producers can save over $400 per cow
annually. $400 per cow. That's huge. It's a big
operational change, yes, but a massive tangible
return. Beyond that, feed center upgrades, reducing
shrink from, say, 8 % down to 3%. Direct savings.
And then there's precision feeding implementation
using tech like AI -driven optimization. Documented
to save $31 per cow annually through improved
efficiency. Yeah. These aren't just theoretical
savings. They're real impacts. Which brings us
to a really crucial point the article highlights,
how technology is creating these two distinct
dairy industries. Yeah, this is important. On
one side, you have progressive operations embracing
AI -driven feed optimization, real -time monitoring,
precision feeding. And they're seeing what, like
7 -12 % reductions in feed costs? Exactly. While
often improving production and health. That $31
per cow saving from AI is a powerful example
of fine -tuning that, frankly, human management
alone can't achieve at scale. But the key here,
and the article is direct about it, is that this
technology isn't cheap. It needs investment and
expertise. Expertise that many smaller operations
might lack. This creates a widening gap. Larger
farms capture these efficiencies, lower their
costs, while smaller operations struggle with
higher cost structures. Making it exponentially
harder to compete. It's presented as a question
of pure survival. So if you're not leveraging
these tools or finding alternatives, What does
this mean for your scale? Are you being left
behind? It's a critical strategic challenge for
the entire industry, regardless of size. A make
or break consideration for many. And the article
then broadens the scope to the global context.
We can't ignore what's happening internationally.
Right. China's rapidly expanding dairy industry,
for instance, is fundamentally altering global
feed demand and prices. Feed is what, 64 % of
their costs? 64%. So their buying strategies
have a direct impact on global commodity markets.
Right back to our local feed bill. Absolutely.
And it's not just China. European producers are
grappling with significant environmental regulations.
Pushing them towards highly efficient waste -reducing
feed management. Their focus on precision feeding,
nutrient management. It's not just about costs.
It's increasingly about compliance. And the article
makes the point that these pressures are coming
to North America. Early discussions about carbon
pricing, environmental compliance. It's already
happening. This connects directly to why accurate
feed costing isn't just about immediate profitability.
It's about global competitiveness and preparing
for future regulations. You can't be compliant
if you don't know your numbers. Okay, so with
all these challenges and opportunities laid out,
the article provides a really actionable 90 -day
implementation roadmap. Yes, this isn't just
theory. It's a step -by -step practical guide
for you to start fixing these errors, broken
into three phases. Phase one, the first 30 days.
Foundation building. What does that involve?
Start by auditing your current method. Compare
lactating -only costs to a recalculation, including
the entire herd dry cows, heifers, plus shrink
adjustments. You can do this with existing software
or even just a spreadsheet, right? Absolutely.
The goal is just to see the difference. Then,
implement weekly dry matter testing for forages
and wet byproducts. Get a tester or work with
your nutritionist. And crucially, price homegrown
feeds at current market rates. Check local elevator
prices, commodity reports. And finally, start
simple. Measure actual shrink. Track deliveries
versus consumption. Even visual assessment helps.
These are foundational steps for an accurate
baseline. Okay, so that's month one, then days
31, 60, system integration. Right. Move beyond
auditing and integrate the new comprehensive
costing into regular financial reporting. All
animals, all shrink in your cost per hundredweight
calcs. Then benchmark. Compare your numbers to
industry standards, like that University of Minnesota
FinBIN data, $10 .38 per hundredweight average
for 2023. See where you stand. At this stage,
evaluate technology needs too. Does your scale
justify feed management software? And critically,
train your team. Everyone involved needs to understand
the new methods, why they're vital. It's a team
effort, not just an accounting change. Makes
sense. And finally, days 61 -90. Strategic optimization.
This is where you leverage that accurate data
for strategic decisions. Implement precision
feeding where feasible, maybe nutritional grouping
if herd size warrants. Splitting the herd into
groups based on production. Exactly. Assess infrastructure
needs, calculate ROI for feed center improvements,
maybe an enclosed shed, better storage. Develop
robust risk management strategies using those
accurate cost baselines for forward contracting
or DRP decisions. When you know your true break
-if, these tools become genuinely powerful. and
establish monitoring protocols, regular reviews,
adjustment procedures, make it an ongoing practice.
Continuous improvement. So it's not just a one
-time fix. Definitely not. And the article closes
with the uncomfortable questions every producer
needs to ask themselves. Okay, what are they?
First, when was the last time your feed cost
calculations were really audited? Not just math
errors, but the methodology, scope, assumptions.
The fundamental method, not just the numbers.
Exactly. Second, are you making major business
decisions? expansion equipment, land based on
incomplete or inaccurate cost data. Because if
the foundation is shaky, those big plans are
built on sand. Precisely. And third, how do your
feed costs truly compare to industry benchmarks
like that Finbin $10 .38? If you're way higher,
these errors might be why. Not just bad luck.
Progressive operations, the ones thriving, treat
feed costs like... genetic evaluation data -driven,
regularly updated fundamental. They invest in
accurate measurement, understand income over
feed cost, not just minimizing expense. And they
benchmark religiously. Know where they stand,
always striving for improvement. This highlights
that fundamental split developing. The old approach
of close enough just doesn't cut it anymore.
Not with thin margins and volatility. Plus, climate
change adds complexity. Variable forage quality
makes accurate costing even more critical. And
regulatory pressure is only increasing. Environmental
compliance will likely demand more detailed tracking.
Sophisticated cost management becomes essential.
The bottom line reality check is stark. This
isn't just better accounting. It's about survival
and sustainability. Farms that nail feed costing
have accurate baselines for risk management,
reliable data for decisions, a solid foundation.
The ones that don't. They're getting squeezed
out when markets turn tough, often without understanding
why their seemingly profitable enterprise suddenly
can't pay the bills. They're left guessing in
the dark. So here's the articles challenge, direct
to you, the listener. Calculate your feed costs
using the comprehensive method. Whole herd shrink.
Dry matter basis, market rates for homegrown.
Then compare that number to what you've been
traditionally using. The author bets the difference
will shock you. More importantly, it gives you
the accurate baseline needed to build a truly
resilient operation. The question isn't whether
you can afford to make these changes. It's whether
you can afford not to. While you're debating,
your competitors are capturing the profits you're
leaving on the table. Will you act decisively
or let market forces decide your farm's fate?
So after all that, what's the absolute key takeaway
for a farmer listening today for immediate application?
Okay, immediate application. You could pocket
an extra $444 per cow annually just by switching
to strategic nutritional grouping. $444, separating
high producers from low producers, feeding them
more precisely. Exactly. It's a direct saving
that really adds up. And you can slash feed shrink
losses from that 8 % average down to maybe 3
% through... Better storage and handling? Right.
That one farm saved over $100 ,000 yearly just
by upgrading their feed center and management.
Real ROI there. It's significant money. Plus,
boosting cost accuracy by 40 % just by switching
to dry matter basis for all feeds and including
the entire herd, dry cows, heifers, they count.
Eliminates those profitability illusions. Gives
you an honest picture. Fundamental. And looking
ahead, leveraging AI -powered feed management
can squeeze out another 3 -5 % efficiency gain.
Constant optimization. In today's market, that
3 -5 % can be the difference between thriving
and just surviving. It's an investment with a
proven payoff. Finally, and critically, use that
accurate baseline for smart risk management.
Know your true break -even. Then tools like DRP
and forward contracting become genuinely effective
strategic instruments, not just gambling, empowering
your decisions with real data. Great points.
And that's all the time we have for today's Deep
Dive. For more articles and insights, be sure
to visit www .thebullvine .com. Don't forget
to subscribe wherever you get your podcasts.
Thanks for listening. Thanks for tuning in to
The Bullvine Podcast. If you're ready to stop
leaving money on the table, start mastering your
feed cost calculations today. Share this episode
with your fellow farmers, visit our website for
resources, and join the conversation online.
Until next time. Keep those cows happy and those
profits growing.