Custom feeding: Comparing ‘apples with apples’ in ration costs

Jon Condon, 17/10/2013


With the drought forcing many cattle producers into custom-feeding for the first time this year, many have been on a steep learning curve in terms of gauging feed costs applied by commercial yard operators providing custom-feeding services.

One large Darling Downs feedlot estimates that 25pc of their custom feedlot clients this year are ‘first-timers’ due to the drought, making it all the more important to clearly understand what they are paying for – and getting, in terms of performance – in feed charges.    

Currently in the Queensland custom feeding market, it’s possible to find ration price quotes in a range of about $70/tonne, from a low-side around $290/tonne to an upper price around $360-$370/t. Add those smaller feedlots supplied with a proprietary ration into self-feeders from a stockfeed company, and this week’s price quote on feed can go close to $400/t.

Does that mean that some lots are applying much bigger margins than others on what is basically the same ration? Unlikely, say industry stakeholders with specific knowledge in this area.

While a little variance in margin/markup inevitably exists, much of the price variance is to do with feed composition, grain processing method and likely performance.

James Maclean, from grainfed supply chain managers, Allied Beef, says the key to scrutinising finished ration price is in comparing cost on a dry matter basis, not as as-fed ration.

Every accredited feedlot must use a finished ration based on at least 10 megajoules of energy, and part of their quality assurance procedure involves getting that tested on a regular basis.

Different grain processing systems, impacting on digestibility of grain, and different ration ingredients can also impact on the feed conversion and consumption performance of different rations.  

“What appear to be cheaper rations are typically those that have higher moisture levels, or higher silage inclusions,” Mr Maclean said. “If silage costs $90 a tonne and barley $280 a tonne, an additional 10pc inclusion of silage means the proportional cost is close to a $20/tonne variance in the cost of the ration. But there is a performance penalty attached,” he said.

Nor do all feedlots charge their feed costs the same way. Some apply a simple $/tonne process, while others charge a yardage fee, plus a smaller $/tonne of feed consumed charge. Yardage fees across Darling Downs feedlots this week appear to vary from 60c to 80c/day.

For example, one feedlot might be charging $280/t for finished ration, plus yardage, while another might charge $350/t, under a ‘bundled’ program. The end result would be much the same.

Some smaller feedlots might charge a much lower yardage fee – say 20c/day – but that often involves self-feeders filled with bought ration from a proprietary stockfeed company, where the feedlot itself is not incurring cost in preparing and distributing feed. Feed cost/tonne in such cases can be considerably higher, however.

One large Downs custom feedlot spoken to this morning quoted this week’s feed cost at $350-$360/t, but crucially, due to steamflaking of grain and ingredients like energy-rich cotton seed ‘meat’, the feedlot was producing a higher energy ration – up around 13-13.5Mj, compared with feedlot ‘X’ which might be charging $320/t this week, but offering an energy level of only 12.5Mj.

While cattle on that program might still put on the weight, they would not convert near as well.

“It’s like trying to get fat on biscuits,” the reputable custom-feeder told Beef Central this morning.

“You eat shortbread and I eat the same weight in Timtams, and after a month, I’ll have gained a lot more weight than you, even if the Shortbread is cheaper.”

A point worth noting in lotfeeding at present is the big gains being had in compensatory gain, due to the drought impact on cattle.

“We’ve seen cattle quite comfortably getting 2.7 to 3kg average daily gain this year, due to compensatory gains,” the Downs lotfeeder said. “Obviously beautiful feeding conditions is contributing to that, but half of it, at least, is compensatory weightgain. It’s where feedlots that are buying cattle now are getting their real advantage,” he said.

“We hav a client from Cloncurry who questioned whether his extraordinary gain figures were right,  but we reminded him that his steers looked like greyhounds when they arrived. Of course there’s going to be big ADGs, under those circumstances. ”


Tools for evaluating ration value


We asked leading feedlot nutritionist Rob Lawrence, from Integrated Animal Production, to provide a simple ‘ready reckoner’ to help guide producers considering custom-feeding through the ration price evaluation process – effectively, to ensure they are comparing ‘applies with apples’ in feed cost quotes from custom-feeders.

“When investigating custom feeding options, it is easy to base decisions on ration cost alone,” Dr Lawrence said.

“However, the cheapest ration does not necessarily equate to increased profitability,” he said.

Potential custom feeders can review the following factors to identify the most cost effective opportunity.

Ration dry matter and energy density

Cattle eat to a dry matter and energy basis. In other words, the higher the energy density the less the cattle will eat for greater gain. High energy rations promote feed efficiency.

When comparing different feedlot rations request the following:

  • Finisher ration cost delivered bunk/bin $/t. Compare costs on the finisher/final ration (most consumed ration).
  • Finisher ration dry matter (%)

The following table describes the effect of dry matter on finisher ration cost.





When comparing rations on a cost basis only, Finisher B appears the best option ($25/t less than Finisher A), but when accounting for the dry matter difference, Finisher A is actually $18/t cheaper.

Cattle eat to a dry matter basis. In other words, feed intake will be higher for rations low in dry matter (higher moisture). Calculating ration cost on a dry matter basis removes the feed intake variation associated differences in moisture content.

  • Finisher ration energy density on a dry matter basis. Compare rations on a net energy (NE) basis. NE is a more accurate method of describing energy of grain based diets. The higher the Net Energy for gain (NEg) the better. Preference rations with NEg ≥ 1.35Mcal/kg.

Average Feeding Weight

Average feeding weight  = (live weight IN + live weight OUT) / 2

Average feeding weight effects maintenance energy requirement. This is the energy required on a daily basis to maintain liveweight (no weight gain or loss). Cattle must meet maintenance energy requirement before they gain weight.

Average feeding weight is important to review, particularly when considering placing heavier cattle on feed as described by the following table:







In the example provided, both cattle groups gained 200kg, but the additional 100kg average feeding weight of the Heavy Group increased maintenance energy requirement by 13pc. For the heavy group to achieve the same weight gain, they needed to consume an additional 2.2kg/day of feed.

Often the heavy group will not sustain the additional feed intake level. If the heavy group consumed the same as the light group, daily gain would drop from 1.82kg/day to 1.45kg/day.

Cost of Gain

Cost of gain (COG) is a production calculation that identifies cost per kilogram of weight gain. COG is a key profit driver – the lower the COG the better.

The components of COG are described as follows:






COG accounts for differences in ration dry matter and energy density, which in turn determines feed intake and daily feeding cost for performance (daily gain).

The following table compares the COG of two rations which differ in ration cost, dry matter and energy density:












In this example, ration A is $35/t greater than Ration B. However the higher dry matter and energy density of Ration B results in a lower feed intake (0.9kg/head/day) for greater weight gain (0.21kg/head/day). These differences result in a $0.15/kg COG difference or improved profitability of $30/head.

To identify the most cost effective feeding options, it’s important to evaluate finisher rations on a dry matter and energy (NEg) basis (influence feed intake and performance), consider cattle average live weights (influence feed intake/feed cost required to meet maintenance energy requirement) and use COG to identify differences in efficiency and profitability.

  • IAP’s Dr Rob Lawrence can be contacted on 0409 482 385 email: rlawrence@iapnutrition.com web: www.iapnutrition.com
  • Rob Lawrence will deliver a presentation at next week’s BeefWorks feedlot forum at Kerwee feedlot near Jondaryan, where he will discuss issues surrounding the use of beta agonists.   






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