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Economic Analyses of Feeding Systems Combining Pasture and Total Mixed Ration

Department of Dairy and Animal Science, Pennsylvania State University, University Park 16802

Corresponding author:
P. R. Tozer; e-mail:
ptozer{at}psu.edu.

	ABSTRACT

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
Partial budgeting was used to compare net incomes of high-yielding Holstein cows fed either a total mixed ration (TMR), a pasture-based diet, or a combination of both. Variables included in the analysis were milk income, feed, feeding, manure handling, fencing, and water system expenses (revenues and costs based on 2000 values). Base data were from 45 Holstein cows (109 days in milk), assigned to one of three dietary treatments: TMR (nongrazing with TMR ad libitum), pasture plus TMR (pTMR, with pasture in the day and TMR at night), or pasture plus concentrate (PC, pasture twice daily plus 1 kg of concentrate/4 kg milk). Data from those groups were projected to a case-study herd of 70 cows and subjected to sensitivity analysis at varying milk prices and feed and pasture costs. Although costs per kilogram of milk produced were lowest for PC cows, cows on TMR had the highest net income per cow per day ($5.61) because of higher yields of milk (38.1 kg/d) and milk components (1.24 kg/d of fat, 1.13 kg/d of true protein), although expenses were highest among all systems ($4.12). Cows on the PC had lower daily net income ($5.31) due to lower yields of milk (28.5 kg/d) and milk components (0.89 kg/d of fat, 0.79 kg/d of true protein) even though expenses were also lowest ($2.57). Cows fed the pTMR were intermediate in production (32.0 kg/d of milk, 1.06 kg/d of fat, 0.93 kg/d of true protein) but had similar daily net income per cow ($5.28) to the PC cows but were lower than the TMR cows. Sensitivity analysis showed that the TMR system was more profitable than the pTMR and PC systems, with expenses considered, except at combinations of lower milk prices and higher feed costs. Differences between the pTMR and PC systems were less, with PC being more profitable in half of the scenarios, particularly at lower milk prices and higher feed costs.

Key Words: economics • feeding system • grazing

Abbreviation key: PC = pasture plus concentrate, pTMR = partial TMR

	INTRODUCTION

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
Numerous studies have compared the economics of grazing-based dairy feeding systems to that of confined dairy operations, which fall into four basic categories: surveys of dairy operations utilizing grazing as a forage source (Hanson et al., 1998; Dartt et al., 1999); case study analyses of cows fed on pasture or in confinement (Tucker et al., 2001), simulation models (Parker et al., 1992), or accounting analysis (Moore, 1998). Each of these types of studies contributed meaningful information, but many were not based on scientific experiment analyzing the production response of the cows within each study.

Ford (1998) discussed the strengths and shortcomings of each of these approaches in evaluating the profitability of grazing systems. Results from surveys must be interpreted carefully as the number of respondents, the definitions used, and the questions asked may limit the applicability of the results to the general population. Case studies and cost studies also need to be interpreted carefully because of the data collection methods and the links to actual practices in the dairy industry (Ford, 1998).

Another problem that arises is the application of the results generated in grazing research to the general farm population outside the geographic boundaries used in the studies. For example, Dartt et al. (1999) surveyed dairy farms outside the Michigan "farm belt" and concluded that the "extrapolation of these results to an average Michigan or Midwest dairy should be made with care" (Dartt et al., 1999). Further problems arise when applying management systems that are viable in other regions such as the southeastern United States to different regions, such as the northeast of the United States where climatic factors, including growing days and temperature, topography, and economic factors differ markedly.

Several of the studies mentioned assumed that the milk production of cows utilizing pasture as one of several forage sources was identical to that of cows managed in a confined feeding operation (Parker et al., 1992; Elbehri and Ford, 1995; Ford, 1996; Moore, 1998). Most grazing and confinement comparison studies demonstrate that milk production/cow on pasture is lower than with a confinement system (Kolver and Muller, 1998; Bargo et al., 2002; White et al., 2002). Kolver and Muller (1998) reported a 15 kg/d, or approximately 33%, lower milk yield for cows fed only pasture compared with cows fed TMR in confinement. Tucker et al. (2001) reported that TMR-fed cows consistently produced between 22.5 and 27.2 kg/d of milk over the length of the experiment, but milk production of grazing cows decreased from 26.6 to 15.9 kg/d during the same period.

A criticism of grazing research has been that some trials have been conducted over a short period of time (White et al., 2002). However, year-around grazing is not possible in the northeastern United States, so experiments that are conducted over the grazing season in the southeast United States (White et al., 2002) more closely represent actual or potential production practices for that region. Typically, the economics of dairy systems that involve grazing compare the profitability of the grazing treatment to that of a confined feeding dairy operation (Tucker et al., 2001; White et al., 2002). There have been no published studies combining grazing and confinement feeding.

Soriano et al. (2001) conducted a 6-wk trial in which cows were fed one of three rations: full TMR, TMR fed in the morning and grazed pasture in the afternoon, or vice versa. However, the economic analysis of that trial assumed that 100% of pasture was utilized and that the pasture was fully established, therefore, underestimating the true costs of pasture production. The pasture cost in the research of Soriano et al. (2001) was approximately $0.01/kg DM. This cost is substantially lower than determined by Elhebri and Ford (1995) ($0.04/kg DM), Moore (1998) ($0.06/kg DM), and Parker et al. (1992) ($0.03/kg DM). The costs from Elhebri and Ford (1995), Moore (1998), and Parker et al. (1992) allowed for less than 100% pasture utilization and included costs for pasture establishment and maintenance. This underestimation of the total cost of pasture production would overestimate the net returns from pasture-based milking systems.

The principal objective of this research was to compare the returns and costs of high-yielding Holstein cows managed under three different feeding systems: a TMR in confinement, pasture-based diets, or a combination of both. The animal performance results from this trial were published (Bargo et al., 2002). The approach used is a partial budget method, where returns are based on milk and component prices under the current federal order system and hay sales. Costs were calculated for the variables that change under the three systems and include feed, labor, feeding, fencing, watering, and hay production expenses.

	MATERIALS AND METHODS

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
Experimental Protocol
A brief explanation of the experiment is provided here. A full description of the experiment, experimental procedures, and results were published by Bargo et al. (2002). Forty-five Holstein cows (15 primiparous and 30 multiparous) [BW, 624 ± 56 kg; milk yield, 44.9 ± 7.5 kg/d; parity, 2.19 ± 1.24; DIM, 109 ± 39 (mean ± SD)] were used in a 21-wk trial starting on May 8, 2000, to compare three feeding systems on animal performance. Cows were selected from the dairy herd of The Pennsylvania State University Dairy Cattle Research and Education Center (University Park, PA), which averaged 11,436 kg of milk and 363 kg of protein per cow per lactation in 1999. Cows were stratified in groups of three by lactation number and DIM and randomly assigned to three dietary treatments: 1) pasture plus concentrate (PC), 2) pasture plus TMR or partial TMR (pTMR), and 3) TMR (nonpasture).

Cows on the PC treatment grazed a pasture with an average botanical composition of 50% smooth bromegrass (Bromus inermis L.), 33% orchardgrass (Dactylis glomerata L.), 7% Kentucky bluegrass (Poa pratensis L.), and 10% weeds and dead material. Pasture was fertilized five times with 50 kg N per hectare before the start of the trial on April 20 and during the trial on wk 5 (June 7), 7 (June 19), 13 (July 31), and 18 (September 5). The targeted amount of pasture offered per cow (pasture allowance) was 30 kg DM per day. Pregrazing pasture mass (kg DM per hectare) was measured cutting 15 quadrats (0.124 m²/quadrat) of pasture to ground level and drying at 55°C in a forced air oven every week to adjust the size of the paddock to maintain the targeted pasture allowance. A new paddock was constructed daily using a temporary polywire and divided by a polywire to offer a new portion after each milking. A second polywire fence was used to prevent back grazing. New paddocks were provided each morning at approximately 0700 h. After the a.m. milking, two-thirds of the daily paddock was offered to 30 cows (15 on the PC treatment and 15 on the pTMR treatment) to provide a pasture allowance of 15 kg DM per cow per half day. After the p.m. milking, the other one-third portion of the paddock was offered to the fifteen cows on the PC treatment to provide a pasture allowance of 15 kg DM per cow per half day to complete the daily allowance of 30 kg DM per cow.

Cows on the PC treatment were fed a corn-based concentrate (Table 1) offered at 1 kg/4 kg of milk based on the pretrial milk production. The level of concentrate feeding was based on two criteria. The first was to have a constant forage-to-concentrate ratio of 60:40 (DM basis) in this treatment. The second criterion was the concentrate-to-milk ratio as fed in this experiment has been shown to be economically beneficial (Hoffman et al., 1993). An upper limit of 10 kg DM per cow per day was established to minimize the risk of metabolic problems in the rumen. The amount of concentrate offered was readjusted in the middle of the trial (wk 10) using the milk production from wk 8 and 9.

Cows in the TMR treatments remained in a free-stall barn and were group fed the TMR (formulated according to NRC, 1989; Table 1) once daily at 0730 h at approximately 28 kg DM per cow per day. Feed was pushed up three times per day. Cows were milked twice daily at 0530 and 1730 h. All cows received bST injections at 2-wk intervals. Walking distance from pasture to the milking parlor averaged 0.9 km (range: 0.75 to 1.2 km).

Data were analyzed as repeated measures using the PROC MIXED procedure of SAS (1999). When significant (P < 0.05) effects due to treatments were detected, mean separation was conducted by the PDIFF option in SAS (1999). For a more detailed description of the statistical analysis, see Bargo et al. (2002).

Economic Information
Ration ingredients and prices for all feeds (Table 1) are from the Feed Price List of June 2000 and are representative costs for the feeds delivered on-farm in the northeast United States (Ishler, 2000). These values are used because they are consistent with the experimental period of this study. Milk and milk component prices are derived from the Federal Order One Milk Marketing Administrator’s Office and are for June 2000 (Table 2, Rasmussen, 2000). Pasture costs were averaged from Elbehri and Ford (1995) and Moore (1998) and were estimated to be $0.0528/kg DM. It is assumed in the costs for the individual ration ingredients, even if grown on-farm, that the costs cover all expenses incurred in growing, harvesting, and processing the commodity of interest. By making this assumption, any differences in machinery requirements and costs for different cropping rotations of the three systems are included.

For the pTMR feeding system, 16.8 ha of the farm area was fenced and provided water to allow for grazing. The remaining area was left unfenced for the growing of forage crops. The fencing system on the farm consisted of 1707 m of fixed fencing and 457 m of electric fencing at a cost of $3.28/m and $0.98/m, respectively (Benson, 1997). The water supply for this area required approximately 305 m of 2.5 cm diameter water lines and two waterers; the total cost for the watering system was $3100. The fencing and watering system costs are based on the assumption that the farm is currently not set up for grazing and that the farmer must incur the costs of investing in new water and fencing facilities. If the farm already had some water and fencing, the costs for each of these would be lower and would reduce the costs for both the PC and pTMR systems.

With the PC feeding system, a larger area (28.3 ha) was set aside for grazing. The area was larger; thus, higher fencing and watering expenses were incurred. The fixed fencing cost was $11,000 for 3353 m of fence and $640 for 2100 m of electric fence. The water system was similar with two waterers, but an extra 152 m of water line was required at a total cost of $3850. It is assumed in both systems that the life of the fences is 20 yr and that of the watering system 10 yr.

Given the land area and stocking rate, at peak growing times total pasture production would exceed requirements by the animal units on the farm. Therefore, one cutting of hay was made on half the land area set aside for grazing, 8.1 and 14.16 ha for the pTMR and PC systems, respectively. Hay mowing, conditioning, raking, and baling costs were estimated from custom rates for Pennsylvania (Stout, 2002). Hay yield was assumed to be 5 t DM per hectare for one harvest.

Because this is a partial budget analysis, only labor costs that vary across the different feeding systems are included. For the PC feeding system the principal labor requirements are for moving the cows between pastures and the milking parlor and for moving the electric fences to provide daily access to fresh pasture. Under the pTMR system, labor requirements were the same as for the PC system, except that moving time for cows is reduced to once daily. Other costs incurred in the pTMR system are similar to the traditional confinement system and include mixing, feeding, and pushing up the TMR; cleaning and bedding stalls; scraping free-stall alleys; and estrus detection. It is assumed that estrus detection in the PC system is done while fences are being moved and when cows are walking to and from the pasture. Because some tasks are performed only once in the pTMR system compared with the total confinement TMR system, there are some labor cost savings for the pTMR system. The daily labor cost per cow is $0.15, $0.20, and $0.29 for PC, pTMR, and TMR systems, respectively. These labor costs are based on a cash wage of $8 per hour, which is a typical wage level for the skills required for the tasks designated (Maloney, 1999). Note that milking time is not included as this is approximately the same for all systems.

Manure handling costs were derived and updated from Holmes and Klemme (1989). Only costs for handling, cleaning, scraping, and spreading are included as storage costs will be the same across all three systems. Storage costs are the same across systems as it is necessary to construct sufficient manure storage for winter. As cows on pasture over the grazing season do not have any requirements for manure handling, except at milking time, and the costs for this do not vary across the three treatments, these cows incur no manure handling costs over the grazing season. The handling and spreading costs for the pTMR and TMR systems were $0.12 and $0.24 per cow per day, respectively.

The final cost category is the differences in machinery costs across systems. It was assumed there were only three pieces of machinery that differed across the systems, as all other costs were captured in the costs of feeds included in the ration. The three pieces of machinery were a 65-kW tractor used for feeding and manure scraping, a feed mixer wagon, and a four-wheel vehicle used to take cows to and from pasture and move fences. Operational and depreciation costs for these pieces of machinery were estimated from Rotz et al. (1999).

	RESULTS AND DISCUSSION

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
With the relatively short grazing season, the results are limited to a partial analysis across the grazing season and are not a full-year analysis. Thus, care should be taken in extrapolating the results beyond the grazing season length. In the discussion, only statistical results that affect the economic outcome are presented. A complete explanation of other results is reported in Bargo et al. (2002).

Weather Data
Precipitation totals were 82, 105, 87, 87, and 51 mm for May, June, July, August, and September, respectively. Average precipitation amounts in the previous 10-yr period (1989 to 1999) for May, June, July, August, and September were 82, 89, 90, 100, and 105 mm, respectively. There was a shortage of precipitation compared to the averages during September. Mean monthly temperatures during May, June, July, August, and September were 16.8, 20.6, 20.2, 20.3, and 16.2°C, respectively. Average low temperatures during May, June, July, August, and September were 10.9, 15.7, 15.0, 15.5, and 10.7°C, respectively. For the previous 10-yr period (1989 to 1999), average low temperatures for those months were 8.9, 14.2, 16.5, 15.2, and 11.0°C, respectively. Average high temperatures during May, June, July, August, and September were 22.6, 25.5, 25.3, 25.0, and 21.7°C, respectively. For the previous 10-yr period (1989 to 1999), average high temperatures for those months were 20.6, 25.4, 27.4, 26.3, and 21.9°C, respectively. The first day of the experiment (May 8), sunrise occurred at 0502 h and sunset at 1915 h, while on the last day of the experiment (October 1) sunrise occurred at 0608 h and sunset at 1754 h. In average, day length during May, June, July, August, and September was 14 h 25 min, 14 h 59 min, 14 h 42 min, 13 h 44 min, and 12 h 27 min, respectively.

Pasture Management and Quality
Pasture pregrazing mass averaged 2470 kg DM per hectare (SE 215 kg DM/ha) for the 21-wk study. Pasture quality was 26.3 ± 0.9% CP, 13.9 ± 0.6% NSC, 49.9 ± 1.0% NDF, and 58.0 ± 1.2% in vitro DM digestibility (mean ± SEM) (Bargo et al., 2002). Pasture quality measures were within the ranges summarized by Muller and Fales (1998) for cool-season grasses in Pennsylvania. The in vitro DM digestibility of pasture was similar to that reported by Kolver et al. (1998) for an orchardgrass pasture in Pennsylvania (60%).

BW and BCS
The initial BW did not differ among treatments and averaged 624 kg (P > 0.05). The three treatments all gained BW (P < 0.05). However, the cows on the TMR treatment had a greater increase in BW in comparison with both the PC and the pTMR treatments (76 vs. 34 kg; P < 0.05) (Bargo et al., 2002).

The initial BCS did not differ among treatments and averaged 2.85 (P > 0.05). Body condition score changed through wk 21. The final BCS was higher for the TMR treatment than for the PC treatment (P < 0.05), while final BCS in the pTMR was intermediate and did not differ from the PC and TMR treatments (P > 0.05). Comparing the initial and the final BCS within each treatment, cows on the PC treatment lost BCS (-0.20), cows on the pTMR treatment maintained BCS (0.01), and cows on the TMR treatment gained BCS (0.19) (Bargo et al., 2002).

DMI and Milk Production and Composition
The total diet of the PC treatment was 60% pasture and 40% concentrate; the pTMR treatment was 30% pasture, 61% TMR, and 9% concentrate; and the TMR treatment was 100% TMR (DM basis). The forage:concentrate ratio (DM basis) was approximately 60:40 for both the PC and the pTMR treatments and 50:50 for the TMR treatment. Compared with the PC treatment, total DMI was 5.1 and 3.5 kg/d higher for the TMR and the pTMR treatments, respectively (P < 0.05; Table 1). The 21.6 kg of DMI for cows fed PC is similar to values found in other studies (Muller and Fales, 1998). While the total DMI of the TMR treatment remained relatively constant, both the PC and the pTMR treatments had larger variations. The PC and the pTMR treatments had a reduction in total DMI during June and August when compared with May and September that was associated with a reduction in pasture DMI during those two periods. The reduction in total and pasture DMI in both the PC and pTMR treatments may be attributed to higher temperatures during June (25.5°C) and August (25.0°C). The average high temperatures during the 11 d of intake measurements averaged 19.2, 25.3, 24.8, and 22.2°C for the intake periods in May, June, August, and September, respectively. The reduction in pasture DMI could also be due to changes in sward structure as the season changed; however, sward density changes were not estimated in this study.

Milk production was significantly higher for cows fed the TMR than for cows on the other two treatments (P < 0.05; Table 2). Cows fed the TMR produced 19% more milk (6.1 kg/d) than cows fed the pTMR and 33% more milk (9.6 kg/d) than cows fed the PC (Bargo et al., 2002). The combination of pasture with TMR (pTMR) resulted in a 13% higher milk production (3.5 kg/d) than found with the PC treatment (P < 0.05; Bargo et al., 2002). The use of TMR in both the pTMR and the TMR treatments increased milk fat percentage compared to the PC treatment (3.33 vs. 3.13%; P < 0.05; Table 2; Bargo et al., 2002). True protein percentage in milk was significantly higher in the TMR treatment than in the PC treatment (2.99 vs. 2.82%; P < 0.05; Table 2; Bargo et al., 2002), while the true protein percentage in the pTMR treatment was numerically between those two treatments. Fat and true protein yield followed the results found for milk production production (Table 2). Both fat and protein yield were significantly higher for the TMR treatment, with the lowest values for the PC treatment (P < 0.05; Bargo et al., 2002). The pTMR treatment was intermediate between these treatments. Cows on the TMR treatment produced 18% more fat and 21% more true protein than the pTMR treatment and 38% more fat and 41% more true protein than the PC treatment. Somatic cell score did not differ among treatments (P > 0.05; Table 2; Bargo et al., 2002).

Economic Analysis
Initial Conditions.
The reductions in DMI directly affect the costs of feeding. Table 3 summarizes all income and expenses for the partial budget. The daily costs of feed under the alternative systems are shown. Daily feed costs, pasture and concentrate, are $1.94/cow for the PC system, $2.70/cow for the pTMR system, and $3.42/cow for the TMR system.

Ration and pasture costs, and milk income constitute the major proportion of the partial budget; however, the other components still affect the net milk income comparison across systems. Hay sales contributed $0.68/cow and $0.39/cow to the daily income of the PC and pTMR systems, respectively. While on a daily basis, the hay-making costs were $0.18/cow and $0.10/cow, for the PC and pTMR systems, respectively. The other daily expenses incurred by the PC and pTMR systems are fencing and watering costs of $0.08/cow and $0.06/cow, respectively. Labor, machinery, and manure handling costs increase as the level of intensity increases from the PC system through the pTMR system to the TMR system. The daily labor costs are $0.15/cow, $0.20/cow, and $0.29/cow, and daily machinery costs are $0.03/cow, $0.13/cow, and $0.21/cow, for the PC, pTMR, and TMR systems, respectively. The daily manure handling costs are zero, $0.12/cow, and $0.24/cow for the PC, pTMR, and TMR systems, respectively.

With the above data, the PC system yielded a daily net income of $5.31/cow. Because this is a partial analysis, this income may appear high, but other costs, such as milking labor and parlor costs are not included in the calculations; hence, sufficient income is needed to cover these types of expenses. The daily income over costs for the pTMR feeding system is slightly lower ($5.28/cow) than the PC system reflecting the higher milk and component yields and also the increased costs associated with that type of feeding system. The daily net income from the traditional confinement system was highest at $5.61/cow, but this system also incurred the highest level of costs of $4.16/cow.

When comparing the returns on an equivalent unit basis such as 100 kg of milk, the rankings change. From Table 4, net income per 100 kg of milk ranks the PC as highest, the pTMR system second, and the TMR system yielded the lowest income. However, caution must be used in interpreting these rankings because of the yield-per-cow differences across systems as shown in Table 2. In most cases, net income is a better measure of profitability than the per unit returns.

The results presented earlier in this paper tend to be counter to those of other recent research, Soriano et al. (2001), Tucker et al. (2001), and White et al. (2002), which showed that grazing systems yielded higher economic returns than traditional confinement TMR treatments. However, several things need to be considered when comparing the results of the current research to others. The first is that the cows in this study were high-yielding Holstein cows grazing high-quality pastures in the northeast United States for a limited grazing season. In the experiment of White et al. (2002), cows were grazed year-round on different pasture and forage species suited to a climate and geography different to that of the current study. The average total production of cows under the confinement treatment in the trial of White et al. (2002) was 8560 kg/cow, which is 2903 kg less than the herd average of the cows used in the current study. The milk yield in the White et al. (2002) study was adjusted to account for losses in yield due to mastitis treatments. In the current study there was no difference in mastitis rates across treatments (linear SCC was 3.13 P > 0.05; Bargo et al., 2002); therefore, milk yields were not adjusted to account for losses caused by mastitis treatments. Tucker et al. (2001) used cows late in lactation (231 ± 121 d postpartum) to graze a ryegrass-only pasture and compared the milk response with cows at a similar stage of lactation fed a TMR. The cows utilized in the experiment of Soriano et al. (2001) were also later in lactation (averaging 185 DIM) than those of the current research and had lower milk yields before the initiation of the experiment than cows in the current study.

The results reported here are consistent with the conclusion of Elbehri and Ford (1995) that grazing would remain more economically viable than the TMR systems if milk yield from the grazing treatment was not more than 6% lower than that of the confinement herd. In this case the milk yield was 25 and 16% lower than the TMR milk yield for the PC and pTMR feeding systems, respectively. Another point to consider is that of relative prices of milk. The milk and milk component prices for June 2000 were relatively low, under the current Federal Milk Marketing Order. Given that the TMR system yielded the highest level of milk and milk components, when prices rise, the profitability of this system rises faster than for the two other systems. For example, in June 2001 the prices for butterfat, true protein, lactose, and the producer price differential were $4.8697/kg, $4.7774/kg, $0.3106/kg, and $1.51/45.4 kg (Rasmussen, 2001a), respectively. At those price levels the TMR system yields 14.0 and 9.3% higher income over feed and feeding costs than the PC and pTMR systems, respectively. However, the converse is true as milk and milk component prices fall, the profitability of the TMR system decreases more than the PC and pTMR systems. Another price series demonstrates this using the component prices for November 2001 (Rasmussen, 2001b). The prices for butterfat, true protein, lactose, and the producer price differential were $2.0170/kg, $3.4711/kg, $0.1246/kg, and $4.34/45.4 kg, respectively; thus, the TMR system returns only 10.5 and 8.0% higher income over costs. The impact of the price reduction is somewhat ameliorated by the relatively high producer price differential, which offsets the reduction in component prices.

Sensitivity tests.
To test the competitiveness of the three systems, a series of sensitivity tests were conducted. The sensitivity of the results to changes in major components of the net income calculation, feed price, and milk revenues are presented in Table 5. Beginning with the comparison of the TMR and PC systems, the TMR system is more profitable over most changes in feed costs or milk revenues, except when the combination of high feed prices and low milk prices makes the PC system more profitable for 17 of 49 of the scenarios as shown in the lower left corner of Table 5a. When feed price increased by 30% and milk revenue decreased by 30% the PC system was 71% more profitable than the TMR system. While this is an extreme situation, the statistical uniform price of milk in the Federal Order One region has ranged from $12.21 to $17.76; thus, there is a degree of variability in price. This variability in price coupled with production variability may make the PC system more viable in some circumstances.

Examining the difference between the PC and pTMR treatments is also important, as a producer may have already chosen to graze. The decision then becomes what feeding system works most profitably under grazing? The difference in income between the pTMR and PC systems is marginal. This occurs because the cows in the pTMR system yielded higher milk and milk components, but also incurred the highest level of costs. One reason for the higher milk yield is the increase in DMI of the cows in the pTMR treatment; these cows consumed 3.6 kg DM per day more than the cows in the PC treatment. When milk prices rise or feed costs fall, the pTMR system is relatively more profitable than the PC system, as shown in Table 5c.

The ration formulated for the pTMR and TMR systems was identical and did not account for variability in the nutrient content of the pasture. In this study the protein content of the pasture was relatively high. Therefore, the protein content of the entire ration fed to cows in the pTMR treatment was higher than would be fed in a commercial operation. Reformulating the ration for the pTMR cows to reduce the protein content to a more realistic level reduced the costs for this treatment to $3.06 per cow per day. This reduction in costs increased the net income for the pTMR system to $5.53/cow per day making it competitive with the TMR system.

The final change considered is that of pasture costs (Table 6). Pasture costs can vary directly with changes in input prices, such as fertilizer, seed, or pasture maintenance. However, pasture costs can also vary indirectly through differences in pasture utilization rates. A producer who is very efficient in pasture utilization would have a lower pasture cost per unit of intake because pasture is consumed. Conversely, a producer who is relatively inefficient in pasture utilization would have a higher pasture cost as less pasture is used even though costs are constant. In the sensitivity analysis the cost of pasture was changed by ±$0.02/kg DM, which on a percentage basis is relatively high but tends to cover the range of pasture costs reported in the literature. The effects of changes in pasture costs are reported in Table 6 and tend to be consistent across feeding systems. For example, comparing the pTMR and PC systems a change in the pasture costs of ±$0.02/kg DM has a similar impact on the relative profitability as a ± 10% change in the price of feed. Similarly, when comparing the TMR system to the other two systems, the impact of a ±$0.02/kg DM change in pasture costs has the same impact as a ±10% change in feed costs. However, even with large changes in pasture costs the PC system is generally the least profitable of the three systems, even compared to the pTMR system.

One factor that can markedly affect the profitability and indeed the sustainability of any forage or pasture-based system is that of the impact of drought on any one of the three systems discussed here. Drought can affect the growth of any of the forages used in the feeding systems, and determining the economic impact is very difficult as each system is affected in different ways. Under the traditional TMR system drought will reduce the amount of corn and alfalfa available for ensiling or hay, and in this case the dairy producer would have to enter the market for forages, and it would be reasonable to assume that forage prices would rise in an area where demand was high. In the pTMR system both pasture and forage crop yields would be reduced, and again the producer would have to enter the market for forages. For a producer using a pasture-only system, the reduction in pasture yield would require that producer to purchase hay or silage in the open market at relatively high prices compared to the costs of producing pasture. The aspect that will determine the impact on the relative profitability of each system under the drought scenario is the pasture or forage crop yield losses and how much additional forage the dairy producer would have to purchase to sustain the dairy system.

	CONCLUSIONS

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
The objective of any dairy producer is to produce enough milk to generate an income that can sustain the desired lifestyle, and the principal cost of milk production is feed. This research has analyzed three different feeding systems [the traditional TMR, a combined TMR, and grazing system (pTMR), and a more typical grazing and concentrate feeding system] and the effects these different feeding systems have on income over feed and feeding costs. The results have demonstrated that a traditional TMR feeding system generates the highest level of income over costs in most cases, when compared to the other two systems. However, in certain feed cost and milk price circumstances one of the alternative systems was more profitable.

In this analysis, comparisons were made within the grazing season and differences or similarities in costs or revenues outside the grazing season were not included. Therefore, the application of these results is only valid during the grazing season. Also, economic analyses are always based on numerous assumptions, and the impact of these assumptions on the results needs to be considered when extrapolating these results beyond the boundaries of the case study farm. Other factors that differ across systems, such as survival rates, reproductive efficiency, or level of pasture management skills and knowledge that have not been studied here also need to be considered when evaluating the profitability of alternative systems. Each of these factors will influence the economic returns in different ways. Survival rates and reproductive efficiency determines the number of replacements needed and will affect the costs of the replacement program. The level of pasture management, such as rotation period and grazing time, affects the fixed and variable costs associated with feeding pasture and will therefore influence the economic returns in a feeding system utilizing pasture.

Although the TMR system achieved the highest level of income over costs, the feeding system utilized in any dairy business should be the one that best achieves the goals of the business and ensures the long-term sustainability of the business.

	ACKNOWLEDGEMENTS

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 
The authors are indebted to the section editor and two anonymous referees who provided numerous suggestions and ideas, and as a result of these comments, the manuscript is a much better product.

	FOOTNOTES

 
¹ Current address: Dairy Nutrition Services, Inc., Chandler, AZ 85244; e-mail: fbargo{at}dns-ans.com.

Received for publication May 17, 2002. Accepted for publication October 10, 2002.

	REFERENCES

TOP ABSTRACT INTRODUCTION MATERIALS AND METHODS RESULTS AND DISCUSSION CONCLUSIONS ACKNOWLEDGEMENTS REFERENCES

 


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