Using Efficiency to Drive Profitability in Uncertain Times

Unprecedented increases in farm input prices, mainly feed, fertiliser and energy, has created a lot of concern for farmers throughout Europe. Predictions that were made early in the year have now been further revised due to the conflict in the Ukraine and its financial and supply repercussions. While farmers are worried there is a lot of evidence to suggest that they should be optimistic on some aspects as well.

Milk price and beef prices increases

Dairy farms have seen milk price reach 50 cents per litre (c/l) base price with some farms receiving over 60c/l based on their solids. The milk price in 2022 will be up to 30% higher than 2021 and with milk production costs increasing by 30% compared to 2021 levels, the average dairy farm will see their net margin retain similar levels to 2021. This is according to the updated document from Teagasc on the situation and outlook for Irish agriculture produced in April.

There is a very similar story for beef farmers with a 12% increase in price in 2021 being further supported with an additional 16% increase in 2022 for the price of finished cattle. This is being driven by strong retail demand for product as well as increased EU exports. While this is tempered somewhat by an 11% increase in overhead cost, the gross margin on beef finishing farms is predicted to be the same as 2021 levels.

Increasing costs and maintaining margins will always be a concern for any business. In a year like 2022 we need to keenly focus on these areas. While we all have an opinion of what they should be, farmers are generally price takers when it comes to input and output prices. Managing how farmers utilise these inputs, while maximising output and the quality of these outputs, is all about driving efficiency on farm and should be a key defining focus for margin.

Vital to focus on feed efficiency

At KEENAN the focus is very much on feed efficiency and while this is defined as the kilograms of milk or meat produced per kilogram of dry matter intake; feed efficiency can begin long before it reaches the animal’s mouth. How the feed that is grown and purchased is utilised to produce the most and high valued product is key. A recent survey of UK farms by Alltech showed that for every £3 spent on feed, £1 was wasted through field, storage, feeding/feed-out and feed efficiency losses. A further survey of over 800 farmers in Ireland, by IFAC farm accountancy and advisory firms, showed that 94% believed greenhouse gas reduction was important. Tackling feed efficiency and utilisation is a key starting point to help reduce emissions as well as driving productivity and margin.

First time KEENAN users can gain €24,400 in their first year

KEENAN offer a combination of technology and advisory nutrition support to drive feed efficiency and utilisation on farm. According to the IFAC survey only 32% of farms are currently using technology to increase farm efficiencies with 52% mentioning cost as a barrier. With all investment there needs to be a return of investment and first-time users of KEENAN technology increased their feed efficiency by 11% through increased productivity and reduced feed costs, resulting in an extra €244 per cow per year – €24,400 for a herd of 100 cows.

In addition to this all adoptions of technology takes on some complexity and the InTouch nutrition service is there to guide farmers along the way. The service shows farmers how to use the technology and advise on management best practices to get the most from the system. With all new technologies there also comes a fear of having to change systems. This is not the case as the majority of customers continue to maximise grazed grass intake with similar levels of supplementation. It may be the case that supplementation is utilised in a different way and there is a focus on maximising home-grown forages even more.

Accuracy is key

The system involves maximising the use and quality of home-grown feeds including grazed grass. Accuracy of mixing and the precise delivery of what the cows need, is a key feature of KEENAN through it first class engineering in addition to the KEENAN controller guiding the operator through the correct loading sequence. This is the cornerstone of any profitable system. Results from InTouch for over 1200 farms show that the top farms can load their mixer with 0.3% accuracy with each 1% further inaccuracy costing the average farm over €2,500. Some farms showed 20% inaccuracy, this can end up costing €60,000 per annum.

Using straw in the diet has huge cost benefits

Straw has also been synonymous with KEENAN diets especially for dry cows where together with other management features of the Hi fibre Low energy has been shown to reduce metabolic issues around calving by 50-80% resulting in veterinary saving of €51 per cow. This year when feed is more expensive and the cost of silage production has increased by 40-50%, the utilisation and handling of straw can reduce feed cost of dry cows by 60-70c/cow/day.

No one understands mixing like KEENAN

The unique engineering features of the KEENAN also allows the processing of by-products. Once regarded as wasted, this feed can now be incorporated into the diet. Currently there is 15,000t of by products being processed through KEENAN mixers worldwide each month, with products like brewers, potatoes, bread, biscuits, chocolate, vegetables, and breakfast cereal being used to add energy and protein to the diet in a cost-effective way. With some by products there is side effects also like the oil content of brewers which can affect the rumen health and butterfat of cows. Trial work carried out in the US showed that the mix produced by a KEENAN can allow a higher inclusion rate of this material in a rumen safe way to be fed to the animal.

With uncertainty prevailing regarding feed price and supply, now is the time to focus on planning for the future. Avoid waiting for later in the year when these decisions will be taken out of farmers hands. The focus needs to be on efficiency to drive profitability as it is in any business setting.

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