Producer: “Enough in case of a drought next year” or “Enough that I can maximize forage inclusion.”
Nutritionist: “Enough to not have to feed unfermented or under-fermented silage and to have some flexibility in the rations.”
Banker: “Not any more carryover than you need” or “Enough quality and quantity of forage to support your budget and projections.”
Accountant: “Enough reconciled forage inventories to support your needs — no more, no less.”
Each of these responses, though presented differently, leads to the goal of maximizing profits and improving the bottom line.
Under the surface, the producer is looking for reliability. The nutritionist is trying to maximize income over feed costs to keep all parties in good standing. The banker is looking at how feed inventory affects the farm’s collateral, future projections, and other key financial metrics that are impacted by feed inventories. The accountant simply wants to have accurate numbers.
Assets and risk
Feed inventories can make up as much as 50% of a producer’s current assets, depending on the time of year that inventories are measured. Bankers often look at metrics that take current assets into account, such as current ratios (current assets divided by current debt) and working capital per cow (current assets minus current debt, divided by total cows). The typical industry goals for these metrics are greater than 2 and greater than $500 per cow, respectively.
Bankers will also have to assess risk to their clients based on the accuracy of information, historical trends, insurance coverage (crops and milk), and various other metrics, such as equity. This risk score will impact a lender’s internal credit score assessed to a farmer, which, in turn, will reflect the going interest rates on any loans secured with the producer’s collateral. Bankers may be concerned about too much carryover and its effect on feed stability, current ratios, and underperforming assets.
Keep quality current
There is no doubt that Mother Nature will play an important role in the quality and quantity of feed inventories, but management will dictate the quality and cost-efficient capture of your inventories. Measuring inventories — from both quality and quantity standpoints — relies on intensity and methods of measurement.
From a quality standpoint, reputable forage testing labs are abundant throughout our industry and can be a valuable resource when paired with a thorough forage sampling schedule. Ingredient moisture is one simple quality factor to be monitored, and it can support accurate inventory measurements to maximize your return and thus the bottom line.
For example, a ration calls for 20 pounds of corn silage on a dry matter (DM) basis that is assumed to be 35% DM. However, the actual DM of the corn silage is 36%. If the 1-percentage-unit difference in dry matter is not corrected, the farm would feed an excess 580 pounds of corn silage per cow per year. On a 500-cow dairy, that is 145 tons of corn silage that could have been preserved. At $50 per ton, that equates to $7,250 that could have been saved.
Know what you have
Measuring quantity is another step in the quest for accuracy. Much like knowing the quality of feed, accurately measuring forage inventory will go a long way to maximize your return on investment. Reconciling inventories via cross-checks with acres harvested and yield monitoring is valuable. However, what is sitting in the piles, bunkers, bags, and/or silos at feedout is what matters most to accurately projecting budgets and developing feedout strategies. This is no different than measuring milk per cow via Dairy Herd Improvement (DHI) rolling herd average per cow versus milk sold per cow to the milk plant. One is an estimate and one is actual.
For example, a farmer purchases a pile of corn silage that was stored at another facility and asks, “How much feed is in that pile?” Farm employees and consultants all try to estimate the amount of feed in the silage pile with a measuring wheel. When the estimations are collected, there is a wide range of tonnages listed, and an answer cannot be settled upon. This is because definitive measurements of the pile were not possible, but ballpark estimations of dimensions and density were made for calculation purposes.
Improvements in technology and equipment have allowed producers to better manage feed inventories, though. The implementation of drone technology to measure the amount of fermented feed in storage is one of the latest developments aimed at improving inventory accuracy and removing the guesswork that previously existed in this task.
Greater accuracy is accomplished first using ground control points to georeference locations and determine elevation changes of the feed storage area. Next, hundreds of photos are collected using drone imagery of the feed storage area and “stitched” together with the GPS location points, providing an accurate measurement of the silage mass in question (top photo). Subsequent drone flights paired with tracked feed usage will allow for measurement of packing density on entire sections of a given pile, and inventory end date forecasts can be generated (Figure 1).
It is well-established that in poorly managed silages, spoilage can approach or exceed 15%. Therefore, management techniques that reduce the risk of spoilage are paramount. Drone technology can now be used to assist in fine-tuning pile shape, size, and alignment through the creation of farm-specific three-dimensional pile and bunker models (bottom image). These models allow for fine-tuning of storage plans, ensuring that proper silage management techniques are promoted and reducing the risk of financial losses due to unnecessary spoilage and shrink during harvest, storage, and feedout.
In the end, you may decide that you need to prioritize an investment in better or more feed storage, harvest efficiencies, or other management resources to improve your bottom line. Lean on your management team to assist you in that critical decision-making process, including financial analysis methods such as partial budgeting, to assess the economics of your options.
