Determining the Cost of Feed Ingredients
There are many ways to compare the prices of by-product feeds. Most ration formulation program will calculate the value of each feed ingredient based on the nutrient requirements of the diet and the nutrients available from ingredients offered. By using this method, you will be able to have the specific information for that particular instance. With that being said, most farmers do not have the software to calculate the value of each feed.
What the farmers usually will do is to use programs specifically designed to compare the value of the feeds with a referenced feed. One of the commonly used program is called FEEDVAL program from University of Wisconsin, Madison. FeedVal is designed to help farmers make economical decisions when purchasing feed ingredients. The program computes the nutrient value of common feed ingredients, for example, corn or soybean meal. Then, factoring in the price of the ingredients, it indicates whether the ingredient is considered cheap or not. The program starts out with default values that reflect current market prices in the Midwest. Users are also able to put their own prices in.
An example of using the FEEDVAL program is shown in Table 1. The by-products were obtained from dealers in South Georgia market in late January and they were compared with the results from FEEDVAL using corn as well as soybean meal for the same market and time. Most of the calculated values relative to corn and soybean mean were favourable except for cottonseed hulls and urea.
Table 1. Values ($/ton) of select feed ingredients using FEEDVAL compared with current market prices.
Although FEEDVAL is very useful to the farmers, it does not take into account the effect of nutrient balance in the final ration. Farmers ought to compare similar types of ingredients when choosing those that they will use. Consult a nutritionist if you are unsure if a new ingredient fits into the feed ration.
True cost of an ingredient may be different from what is paid. There are additional costs such as delivery cost for by-product feeds, interest cost on the money tied up if the feed is being fed over an extended period of time. Shrinkage also occurs, which varies from 3% - 7% for dry ingredients and 15% - 35% for wet ingredients. If special storage or handling method is required, the cost of those should be included as well.