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Animal Nutrition Views

Ioannis Mavromichalis, Ph.D., gives his views on poultry, pig and dairy nutrition based on his experience as a nutrition consultant with clients around the world.
Livestock Feed Manufacturing / Animal Feed Additives / Business & Markets

Feed formulation cost: How far can you stretch a dollar?

holding money one dollar
John Hughes |

A dollar looks negligible in a diet that has a high ingredient cost — but the potential for profit is still there.

February 14, 2017

Nutritionists, and everyone who formulates diets for animals, often discount the significance of small increments in formulation cost. A U.S. dollar (USD), or the equivalent in any currency, looks negligible in a diet that has an ingredient cost of USD$200 or USD$300 per imperial ton (or metric ton, if you prefer the metric system).

This often leads to unnecessary increases in feed cost that, at first look, appear as low-risk investments (a cheap additive, perhaps) or generous safety margins (just a bit extra amino acids to be sure). Quite often, overworked formulation specialists might stop trying to optimize a formulation, looking at alternative options or using more advanced techniques. For example, lowering a lysine requirement from 1.2 percent in a feed to 1.19 percent might cause one ingredient to drop out of the formula and allow a less expensive one to enter the scene, reducing overall cost by USD$1.

Is this 0.01 percent drop in lysine significant? Perhaps it is if it is real and it is based on actual feed ingredient analyses, which in 90 percent of the cases I have encountered, is not the case. Most formulate using book values. But what about that USD$1? Is this real? Let us examine a real example where feed cost was kept USD$1 higher than it could have been (I have only changed the numbers to make them round for demonstration purposes).

Read more: Innovative feed formulation methods reduce feed cost

Let us consider a broiler farm with 1,000,000 birds per year. This is a nice average figure that can be easily adjusted to fit any real farm capacity. These birds will grow to 2.81 kg body weight requiring 1.87 kg feed per kg gain (I used the most recent figures from the National Chicken Council's 2016 estimates). So, in a year, there will be 5,254 metric tons of feed coming through such a farm. A single U.S. dollar in extra feed cost would then require the outlay of USD$5,254 that could have been written as profit instead. This is perhaps not a significant amount for many broiler enterprises, especially seen as a figure of USD$0.005254 per bird — less than a red cent per broiler. But do also consider that in the U.S. there were 8.8 billion broilers raised last year. Now, the math becomes really interesting as the potential profit is slightly above USD$46 million. I will let you find out the global effect of this single dollar.

In the next blog, I will discuss how to transfer this dollar from expenses to profit!

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