Feed costs – current situation and future scenario analysis

As part of the recent Teagasc Grassland Climate Adaption Conference, Peter Doyle, Michael O’Donovan, Paul Crosson and Tomás Tubritt outlined the current cost of producing home-grown feeds on livestock farms and assessed how this may change into the future.

In recent years, input prices in the agricultural sector have been very volatile, which makes it difficult for producers to assess the true cost of producing livestock feed on a multi-year basis. Future changes in market prices, policy, weather events and plant breeding will further shift the cost of home-grown livestock feed. Therefore, it is important to identify ‘resilient feedstuffs’ that are less prone to volatility in a fast-changing world.

Grange Feed Costing Model

An agro-economic simulation model, “Grange Feed Costing Model” (GFCM) was developed to quantify the impact of management, market and biological factors on the production costs of ruminant livestock feed (Finneran et al., 2010). This model was used to re-evaluate the cost of feed in 2024, and assess how this may change under different future scenarios.

Table 1 lists the range of home-produced feed crops evaluated and the assumed dry matter (DM) yields, DM concentration, energy content (UFL), and inorganic nitrogen (N) fertiliser (kg/ha) applied for each feedstuff, which were derived from Finneran et al. (2012). Additional feedstuffs (zero-grazed grass and grazed multi-species swards containing herbs, legumes and grass) were added to the model and a dairy concentrate was included to allow a cost comparison with a concentrate supplement.

Total feed cost includes accounting costs plus the opportunity cost of the resources employed (i.e. annual land rental market price of €617/ha or €250/acre). The accounting costs includes all variable and fixed production costs, including processing, storage and feed-out costs, in addition to depreciation and interest on capital funding of fixed assets (e.g. reseeding, roadways, silage pits). Utilisation, harvesting losses etc. are also accounted for.

Fertiliser prices were based on market prices prevailing in the first six months of 2024 for the purpose of this analysis. Likewise, machinery-contracting costs were based on the Farm and Forestry Contractors of Ireland (FCI) estimated 2024 costs and included VAT (FCI, 2024). Zero-grazing was estimated to cost €198/ha per cut, with seven cuts each year for a 13 t DM/ha crop. For the grazed white-clover and multi-species swards it was assumed that 20% and 33%, respectively, of the farm was over-sown each year costing €112/ha for the seed and over-sowing.

A sensitivity analysis was completed to evaluate the impact of future changes in market price and yields on the cost of home produced-feed. Key parameters investigated included a 20% change in fertiliser price, machinery contractor price, land price and total DM yield.

Cost of producing feeds in 2024

The result of the estimated feed costs for 2024 is presented in Table 1. Unless stated otherwise, prices described in the following text outline the cost of feed per tonne (t) DM grown and include land charge (€617/ha); prices excluding land charges are also presented in Table 1. Costs are presented in € per hectare, € per t DM grown, € per t DM utilised and relative to grazed perennial ryegrass swards on a unit of energy basis (UFL; Table 1).

It is well-established that grazed pasture is the cheapest feed resource in Ireland and primarily for this reason, it underpins Ireland’s ruminant production systems. Based on the assumptions in this present analysis, a grazed grass sward costs €94/t DM (9.4 c/kg DM), or at 80% utilisation this equates to 11.7 c/kg DM utilised. Thus, it costs €1.99/day to feed one dairy cow 17 kg DM of grass. Fertiliser (predominantly N) accounts for 35% of the cost of producing grazed grass. Thus N fixing legume swards such as grass-white clover (€84/t DM) and multi-species (€86/t DM) are cheaper than grazed grass, with grazed grass-white clover having a small cost benefit over multi-species swards, due to a lower over-sowing rate and longer reseeding interval (10 vs. 12 years, respectively).

Zero-grazing is a feeding option being utilised by some Irish farmers allowing increased land area to be brought into the farming system. The cost of zero-grazing was assumed as the cost of producing the grass sward similarly to the grazed grass crop whilst also incurring the additional cost of mechanical harvesting and delivery to the cows. The mechanical intervention required in zero-grazing makes it more expensive than grazed grass (€198/t DM vs. €94/t DM) but slightly cheaper than grass silage.

On average across both cuts harvested in late-May and mid-July, grass silage (pit) costs €222/t DM grown (circa €48/t fresh weight). On average baled silage costs €252/t DM grown (€50 and €42/bale incl. and excl. land charge, respectively), with machinery contractor charges being the main cost element (€27/bale), followed by fertiliser (€10/bale).

Red clover silage offers an alternative to reduce fertiliser N application on silage ground. However, red clover persistency in the sward is considerably lower at 5-6 years (Clavin et al., 2017) and therefore would require more frequent reseeding than perennial ryegrass silage swards, raising fixed costs. Furthermore, red clover silage swards are typically operated on a 3-cut silage system instead of a 2-cut system as it is not suitable for grazing, which increases harvesting charges, and subsequently 3-cut red clover silage whilst growing an additional 3.5 t DM/ha has a similar cost to 2-cut grass silage at €217/t DM grown.

Feeds such as maize silage (€238/t DM grown) and fodder beet (€248/t DM grown) cost relatively similar to grass silage (average of bale and pit) per t DM grown, however fodder beet remains more cost competitive when expressed on a unit of energy basis. An important point to consider is that maize and fodder beet often require additional supplementary protein and mineral supplementation, which is excluded in this analysis.

Based on current prices, grass silage (including land charge) and dairy concentrate at €355/t are 3.1 and 3.5 times more expensive than grazed grass per unit of energy (UFL) utilised, or if land charge is excluded, this rises to 5.0 and 7.1 times more expensive than grazed grass, respectively. This emphasises the importance of (1) producing sufficient quantities of home-produced feeds, especially forages and (2) using effective management techniques to maximise the proportion of grazed grass in the diet.

Table 1: Feed assumptions and estimated costs (€) to produce feed in 2024

¹Zero-grazing does not include the cost of handling extra slurry vs. grazing; ²First- and second-cut silage were cut on 29 May and 17 July, respectively. ³Slurry + the cost of 0-7-30 for the remainder of K requirements, no grazing is assumed, 6 year persistence; ⁴The extra cost of feed protein supplementation required for maize and fodder beet is not included; ⁵The remainder of N requirement was fulfilled via slurry (organic N) application. Land charge = €617/ha (€250/acre), protected urea = €520/tonne (t), 18-6-12 = €477/t, and dairy concentrate nuts = €355/t fresh weight. Pit silage complete job = €445/ha (€180/acre), mowing = €72/ha (€29/acre), tedding €42/ha (€17/acre), bale, wrap, stack  and move (including plastic) = €23/bale, beet harvesting = €432/ha (€175/acre), and maize silage harvest (complete job) = €511/ha (€207/acre).

Sensitivity analysis

A sensitivity analysis was also conducted to evaluate the impact of a 20% change in DM yield and fertiliser, machinery contractor and land rental prices on feed costs (€/t DM grown). Within the sensitivity parameters investigated, a 20% change in DM yield and machinery contractor price resulted in the largest feed costs change, followed by land price, and lastly fertiliser price.

For example, assuming the same inputs are applied, for a grazed grass crop producing only 10.4 t DM/ha annually (20% yield decrease), the cost increases to €111/t DM (18% rise). Similarly if DM yield dropped by 20% for silage production, the cost of first and second cut pit silage would increase by €35 per t DM/ha (+ 14%).

Grazed forages will remain the best value feedstuffs for Irish livestock into the future, as even in a scenario where grazed forages yield 20% lower, and silages, maize and fodder beet yield 20% greater, grazed forages remain cheaper to produce, costing approximately €110/t DM grown compared to approximately €200/t DM for the other feed options.

Increases/ decreases in fertiliser price had the least effect on the cost of producing on farm feedstuffs, with a 20% price increase, raising the cost of all feedstuffs by €2-4. The results suggest that fertilisation of swards with sufficient levels of nutrients is a key management strategy in order to maintain low cost ruminant production systems.

‘Winter feeds’ (grass silage, red clover silage, maize silage and fodder beet), all have a high machinery dependence and higher overall costs, and therefore tend to experience the largest cost change in response to increasing input price changes, compared to grazed grass and grass white clover, with zero-grazing being intermediate (Table 1). Thus, any increases in future input costs will further increase the cost competiveness of grazed pasture, and management practices that maximise the proportion of grazed pasture in the diet of ruminants will help to reduce feed costs on Irish farms.

Conclusions

Home-produced feeds and grazed grass in particular, remain the cheapest feed resource for Irish farms, with grass-clover pastures being particularly cost-effective. Grazed grass will remain the biggest cost competitive advantage into the future, while ‘winter feeds’ will likely experience greater price volatility. Weather events that reduce the proportion of grazed grass in ruminant diets will significantly increase costs.

References

• Farms Contractors Ireland (FCI) 2024 FCI Contracting Charges Guide 2024 https://www. farmcontractors.ie/_files/ugd/162a95_efaea3d89a274e9793c2b80baad4cb16.pdf. Accessed 01/08/2024.
• Finneran, E., P. Crosson, P. O’Kiely, L. Shalloo, P. D. Forristal, M. Wallace. (2010). Simulation Modelling of the Cost of Producing and Utilising Feeds for Ruminants on Irish Farms. Journal of Farm Management, 14:95-116.
• Finneran, E., P. Crosson, P. O’Kiely, L. Shalloo, P. D. Forristal, M. Wallace. (2012). Stochastic simulation of the cost of home-produced feeds for ruminant livestock systems. The Journal of Agricultural Science, 150:123-139.

The above paper was first published in the proceedings from the Teagasc Grassland Climate Adaption Conference. Access the full publication here.