Economic Outcomes: Glossary
To the right of the pen info and inputs areas for rows containing pens or herd level summaries are various economic outcome fields. Many / most of these will be familiar to most all practicing nutritionists. In the glossary below are the definitions, interpretations, details, and explanations of fields which might not be completely familiar. Fields in the glossary are ordered by section (Utilities at top, then Lactating and Dry, followed by Growing Animals), and then as they appear from left to right in the rows.
CIII Prices (utility box at top):
Class III Milk: although this term does not appear in the box, it is used as a reference in several calculations of milk value in the Economic Module. Class III milk is defined by the USDA as a hundredweight of milk containing 96.5% skim milk and 3.5% butterfat. The skim milk solids are calculated as 3.1% protein and 5.9% Other Solids. Thus, Class III milk contains 3.5% Butterfat, 2.99% Protein, and 5.69% Other Solids.
CIII Butterfat, Protein, Other Solids these are the Class III values for milk components ($/lb. of Butterfat, Protein, and Other Solids) as released each month by the USDA Federal Milk Marketing Order (FMMO).
CIII Value: This is simply the Class III Milk value per hundredweight as released by the USDA Federal Milk Marketing Order
CIII Short Term Value: This is the three months rolling average of the USDA FMMO Class III price/cwt. This is often more useful for making comparisons of short term performance related economic changes, for instance addition of an additive, than the actual price, because there is significant month to month variation in prices. Even when prices are trending up or down over a mid to longer term, the month to month CIII price may bounce up and down a substantial amount.
CIII Long Term Value: The 36-month rolling average CIII price/cwt. A 36 to 39-month milk price cycle is well recognized, during which there will be both a high zenith price and a low nadir price. Within the cycles, the price varies tremendously. Therefore, for doing longer term monitoring of herd economic performance, the CIII Long Term Value is the more useful reference value, because it avoids distortion caused by examining only recent prices, which, which are not usually representative of long range averages due to the price cyclicity.
Lactation and Dry section
C3val_USDA, $/cwt: The USDA FMMO Class III value, as described above for CIII Value.
C3val_Farm, $/cwt: This is the value of the actual farm or pen milk in terms of the CIII component prices. It is obtained by multiplying the farm or pen specific component yield (pounds) by the USDA CIII component prices and then adjusting that milk value to a hundredweight basis. This is what the farm milk is worth per cwt, based on CIII component prices.
C3val_Cow, $/Cow: This is the value of Actual milk amount per cow, at the component composition reported for the pen (or aggregated for the farm in the summary sections), when the USDA FMMO CIII component prices are applied.
C3eqv, lbs./cow: This value is the farm C3val_Cow, which is expressed in dollar units, but now transformed back into pounds. It is the amount of standard USDA Class III Milk (i.e. 3.5% Butterfat, 2.99% Protein, and 5.69% Other Solids), in pounds, that is equal to the same dollar value of the farm’s C3val_Cow.
Why transform C3val_Cow ($/Cow) to C3eqv (lbs./cow)? Comparing milk value at different times is a problem for three reasons. First, the milk composition on two different evaluation occasions is likely to be different. Second, even if the milk composition was exactly the same, the price of individual components is changing each month. Thirdly, using a timepoint set of component values, even if it is an average or representative typical value, can give a false value comparison because the proportionate contribution of butterfat and protein price to the milk value is also constantly changing. In other words, the correlation of butterfat and protein prices varies tremendously over time, and in some periods actually reversing. The transformation of C3val_Cow to C3eqv removes the distortion caused by the varying correlation of butterfat price and protein price. After this transformation, an average price for CIII Milk / lb., such as the CIII Short Term Value or CIII Long Term Value can be applied for economic evaluation purposes with the distortion caused by time varying correlation of component prices removed.
C3_STval, $/cow: This is the dollar value of the farm’s milk yield/cow when the CIII Short Term Value is applied to it, as described in the explanation for why the conversion to C3eqv is made i.e. the CIII Short Term Value (per lb) is applied to the pounds of C3eqv. Thus, this value accounts for the farm milk composition, adjusts for the contemporary component prices and their correlation, and is useful for comparison of short term changes in milk yield, composition, and value.
C3_LTval, $/cow: This is the dollar value of the farm’s milk yield/cow when the CIII Long Term Value is applied to it, as described in the explanation for why the conversion to C3eqv is made (i.e. the CIII Long Term Value /lb is applied to the pounds of C3eqv). Thus, this value accounts for the farm milk composition, also adjusts for the contemporary component prices and their correlation, and is useful for comparison and monitoring of longer term changes in performance in terms of milk yield, composition, and value.
MBval_Farm, $/cwt: This value is based on the same calculation as the C3val_Farm, $/cwt but also adds in any appropriate farm specific adjustments to milk prices. Farm specific adjustments include many things which affect the “mailbox” price, i.e. mailbox price = the milk check price for the farm milk. This is in contrast to the Class III price elements, which are applied as the same values to all farms paid under the FMMO system and related pricing structures. Farm specific items which change the farm mailbox price vary from farm to farm, and include things such as hauling charges, stop charges, PPD, quality or volume bonuses, quality deductions, coop dues, etc. If no farm specific price factors are included on the “Multiple Component Milk Pricing” sub-tab in “Farm Structures” table then the MBval_Cow, $/cow will be the same as the C3val_Cow, $/Cow
MBval_Cow, $/cow: This field is calculated similarly to the C3val_Cow, $/Cow, but like the MBval_Farm, $/cwt described above, farm specific adjustments to the pay price for milk shipped are included in the calculation of the farm milk value per cow.
When to use MBval_Cow, $/cow versus C3val_Cow, $/Cow.
When the intent is to monitor a farm in comparison with other farms, or to monitor a single farm over time, the C3val_Cow, $/Cow is a better metric, because the basis for Mailbox price for different farms differs between different farms. Two large common differences are the hauling charges, and the PPD, which can result in significant differences in two farms milk value, even if their Class III values are identical. So to monitor herds over time relative to other herds, C3val_Cow, $/Cow is preferred. Furthermore, some elements of the Mailbox price also vary within farm over time, such as the PPD. Therefore, for long term monitoring of herd economic performance the C3_LTval, $/cow, which incorporates the C3val_Cow, $/Cow via the transformation to C3eqv, is the better metric.
MBval_Cow, $/cow is the preferred metric when evaluating the return on investment of an intervention made over a short period of time, especially an expensive intervention. The reason is that in some cases, the farm specific adjustment such as PPD or hauling etc. can either increase or decrease farm specific milk price enough to change a decision about profitability, especially if there is a change in volume and components together. A common situation is assessing the value of rumen protected amino acids. Often the RPAA improve not only milk protein yield, but milk volume as well, thus accounting for the PPD for instance, helps more accurately assess the return on feeding the RPAA.
IOFC (Income over feed cost) is calculated based both on Total feed cost, and on Purchased feed cost. It is also calculated based on the both the C3val_Cow and on MBval_Cow. The calculation is straightforward, with the “Total” or “Purchased” feed cost / head simply subtracted from the respective C3val_Cow or MBval_Cow.
Growth section
The economic outcome fields in the growth section are intended to be useful for assessing economics related to feed costs for either or both dairy replacement heifers and beef.
Weights, Initial & Target, and Growth/head-ADG: These fields were previously described in this document in the Weights section of the inputs explanation for Pens & Rations: Growth above. They are very important in the calculation of days on feed, and period closeout costs; users should review the above sections on how to enter them usefully.
RADGvar is the “Residual Average Daily Gain Variance” It is calculated as the ((ADGact - ADGpred )) and is the difference between the predicted ADG and the actual ADG. Positive numbers are good, negative numbers inform of lower gains than expected. In this implementation RADG does not include a genetic element in its calculation.
Efficiency, Feed:ADG is simply the commonly used ratio of DMI to ADG. Also, termed Feed Conversion Ratio.
Efficiency, ADG:Feed is also a commonly used metric, and is the ratio of ADG:DMI (Also called Gross Gain:Feed)
Costs of Gain: These fields are simply the daily Total and Purchased Feed Costs after adjustment for refusals, divided by the ADG.
Adj. Costs (Mortality) This is the Costs of Gain fields with further adjustments for the mortality. Refer back to the Additional Costs section in input descriptions in the Pens & Rations: Growth section above for further explanation.
Adj. Costs + Yardage: This field is the Adj. Costs (Mortality) described immediately above, with further adjustment for yardage. It is also explained in the “Additional Costs” section above.
A further explanation of yardage charges from Penn State Extension explains: “In general good custom feeders will price the feed that gets in the cattle and add a daily yardage charge for the costs of labor, facility use, utilities, and insurance. The yardage charge can vary greatly because it may or may not contain costs such as marketing charges (checkoff, transportation, price discovery, shrink, etc.), the labor for treating cattle, bedding, or any number of other costs. For pasture costs, the Feeder should be sure to count the depreciable cost of fencing, watering equipment, fertilizer, and a prorated replacement cost for seeding pastures.”
A different Extension publication explains yardage costs as: “Yardage fees are more or less a rental rate on facilities and service while cattle are fed. The main methods to charge for this are: 1) flat yardage fee, or 2) feed markup, or 3) a combination of the two. The flat yardage fee is the easiest and most transparent, as well as most straightforward. Average yardages today range from 0.30 to 0.40 per head per day. This includes facility charge, animal care, feeding, and all services needed (including marketing). With older facilities, yardage may be a bit lower; however, they are not charging for facility-replacement costs in these instances. Of course, feed amounts and costs need to be tracked very closely, as well as little to no markup on feed cost, except for feed preparation (e.g., grinding and shrink on dry hays).”
Aggregate Costs: This field takes the value in the Adj. Costs + Yardage field and further adjusts it for the interest and Misc. Cost inputs. The intent of these multiple adjustments is to allow the user flexibility in determining the daily cost to grow livestock. In some situations, with home raised replacements or a pen of Holstein steers users might not apply either mortality or yardage costs. In commercial heifer raising operations, or for a feedlot, these additional costs would more routinely be part of the daily cost calculation.
Days on Feed: This was previously explained in the Weights: Initial & Target ; Average Daily Gain and in the “Weights” sections of the input information above. It is the calculated number of days for an animal to reach the target weight after entering the pen at the initial weight, based on the ADG “Actual” (the first limiting of either ME or MP allowable gain).
Period Closeout: This field is calculated by multiplying the value in the “Aggregate Costs” field by the Days on Feed. Most ration software does not facilitate this calculation, but NDS includes it because it can provide very powerful information about profitability of feeding and management strategies.
Aggregated Herd Summaries
Herd summary: Dairy enterprise and whole herd and Herd summary: Growing stock enterprise combine data from individual pens by summarizing or calulating a weighted average as appropriate. Specific fields here have the same meaning as for a pen, but are the aggregate values for the animal and pen combined in any particular labeled row.