Rocketing feed costs prompting feedlot ration adjustments

Jon Condon, 11/04/2014

Skyrocketing price rises in some commonly-used feedlot ration commodities caused by drought feeding pressure has forced some feedlot managers to redesign rations using cheaper options.

Rising feed costs are forcing some feedlot managers to redesign rations using cheaper options. The trend was well-captured in a conversation Beef Central had recently with the manager of a large Darling Downs feedlot.

The operator of a +15,000 head feedlot, mostly company-bred cattle, said he was in the process of adjusting his ration composition because of rising input costs, and suggested the revised ration was likely to stay in use for the rest of the year, or at least until commodities like cottonseed started to moderate in price.

The substitutions meant he was about to feed a finisher ration “unlike anything he had ever fed before.”

Whereas the business previously fed 10-12pc cottonseed in its finisher ration, that was being cut back to 4pc, replaced with oils, meals and hay, to deliver a balanced ration. The move had effectively trimmed 5 percent off the lot’s finished ration price – a considerable advantage in a large-scale feedlot, when rations are currently worth $385-400/tonne (see Beef Central’s latest grainfed trading budget, published on Monday.)

Recent climbs in commodity prices had seen his conventional ration lift by at least $75/t compared with where it sat two years ago.

Beef Central put the thread of the conversation and a few questions to leading feedlot nutritionist, Dr Rob Lawrence, for comment.

“To begin with, drought conditions always require feedlots to think outside the square and evaluate their standard feeding practices,” Dr Lawrence said.

“However the circumstances can vary, depending on whether the cattle are company-owned, or custom-fed. For owned cattle, the cheapest ration is the one that provides the lowest cost of gain.

This does not necessarily equate to the cheapest ration.”

Energy is another consideration. When old-season whole cottonseed was punching above $650/t, many feedlots reduced the inclusion rates to 3-7pc. However, while ration price was high, it did not impact adversely on profit due to the low cost of purchase cattle due to drought (profit made on the cattle trade, rather than feeding).

Now that it has rained, new season whole cottonseed price has dropped to $420-$450/t landed, depending on location.

Relative to grain (wheat), this price was still pretty good, a lotfeeding contact said.

Depending on circumstances, whole cottonseed could be valued at more than twice the price of wheat.

“It’s valued so highly because it is the only feedstuff that provides both energy, via fat, and fibre,” the lotfeeder said.

Other advantages include its consistency, the fact it requires no processing, its mixability with other feedstuffs and its highly tradable nature. No other single feedstuff used in feedlot rations achieves these two nutrient requirements.

Integrated Animal Production’s Rob Lawrence said there was certainly clear evidence of alternative feedstuffs being short this year, particularly roughages like grape marc and almond hulls, which was always scarce in drought times.

“Feedlots that have fat (oil) storage certainly made use of it as whole cottonseed price increased,” he said.

Vegetable oil could be valued at three times the value of wheat, Dr Lawrence said.

“Values of less than $900/t are certainly attractive and total fat contents in diets can reach up to 7.2pc (dry matter basis) before adversely effecting feed intake.”

Alternative feedstuffs were more about the nutrient provided (energy, fibre, protein) than the feedstuff itself, he said.

As indicated by Beef Central’s example, substitutes for whole cottonseed (24pc protein, 23pc fat, 51.6pc NDF) include vegetable oil (99.9pc fat), hay (68pc NDF) or stubble (78pc NDF) and protein meal (35-45pc protein).

However replacement of one nutrient with another did not account for operational costs such as additional inventory control, shrink & storage considerations, processing requirements, ration density and mixer capacity.

“Options are basically dependent on location,” Dr Lawrence said.

“Access to by-products from food manufacturing is certainly a big advantage as they are prime sources of energy (starch, fat). However, consistency of supply can be variable, meaning lot operators may need to develop greater expertise in substitutions.”

“Certainly, feedlots closer to ports have definite freight advantages in such products, particularly with vegetable oil,” Dr Lawrence said.

Impact on feeding performance

As indicated in Beef Central’s example, a cheaper ration may not produce a lower cost of gain if energy has been decreased, however.

“Cattle eat to a dry matter and energy basis. If energy density is decreased, cattle will eat more for the same or lower gain (lower energy rations are less efficient, increase operation cost and manure production).”

The key question was the net impact, in feeding a cheaper ration which delivers a lesser feeding performance.

“Again it relates to who owns the cattle and what the feedlot’s objectives are. A feedlot which owns the cattle should be feeding the highest energy density possible, irrespective (to a point) of the ration cost,” Dr Lawrence said.

“High energy rations drive cost of gain down and provide direct operational savings, including reduced fuel use, lower machinery operating hours, and reduced manure/pen maintenance. Feed delivery and manure management are the two largest daily operating costs of a feedlot. A high energy ration decreases both.”

In contrast, a feedlot that is custom feeding generates profit by selling feed.

“Yes, performance is still important (promoting the feedlot’s reputation as an attractive custom-feeder), but making the ration cost appear attractive is an excellent way of filling pen space,” Dr Lawrence said.

Dr Lawrence said in some respects, whole cottonseed had been a saviour for the Queensland lotfeeding industry. The only way feedlots could get away with feeding dry-rolled sorghum was because of whole cottonseed, he suggested.

“However, $650/t appeared to restrict enthusiastic purchases,” he said.

With gins spread across the cotton irrigation areas in Queensland and NSW, there was a nice footprint ‘overlap’ of where Eastern Australia’s major lotfeeding operations took place.

As a by-product of the cotton industry, cottonseed was generally readily available. Typically, large parcels are available at ginning time and the trading network for whole cottonseed is extensive. Buyers often purchase for a year and request delivery on a spread over the 12 months.

Viable transport distance is an issue, but lotfeeders suggest it generally remains attractive if cottonseed can be landed for within twice the cost of wheat. Having a high dry matter around 92pc is an advantage in transport, and during the drought it was finding its way into far western areas of Queensland as a paddock drought supplement.

“The Australian feedlot industry’s widespread and rapid adoption of cottonseed highlights the flexibility and adaptability of the local feedlot industry,” Dr Lawrence said.

“Our US counterparts would die of shock if they knew how often our rations are changed, due to seasonal circumstances, crop and food manufacturing by-product access and other factors.”


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