SOARING grain prices have added another layer of complexity to the lot feeding industry as operators try to best manage one of their key input costs.
However, an animal nutritionist said at the heart of the matter the equation was simple.
"Grain's value is in the starch, which provides the most efficient form of fermentable energy," said Robert Lawrence, Integrated Animal Production consulting nutritionist.
"All other nutrients have limitations to inclusion and extending inclusion of other nutrients only increases cost and/or provides no additional production response," Dr Lawrence said.
Dr Lawrence sat down with ACM's national grains industry reporter Gregor Heard to discuss the issue of grain management and how lot-feeders can successfully manage costs in a volatile environment.
GH: Has the cost of grain changed much in the past five years at a delivered feedlot level? We had drought for two years, then two years of high international prices, are $300 a tonne plus values for feed cereals now considered the norm?
RL: Grain cost always reflects supply and demand both internationally and domestically.
However, as primarily an export nation, international effects override domestic status, such as the current experience.
Other factors which influence price include world grain values, world stocks, planting and harvest forecasts and the Australian dollar.
I don't think there is a norm. Variation in value is the norm and all grain users will need to rely on strategies regarding purchase to ensure adequate coverage.
GH: What are businesses doing to extract more value from what they buy? Is 'grain grain' as per the drought or is there more work being done to ensure the grain most effectively conveys the nutritional needs required?
RL: Grain's value is in the starch. Starch provides the most efficient form of fermentable energy. All other nutrients such as minerals, fibre, protein and fat have limitations to inclusion.
Extending inclusion of other nutrients only increases cost and / or provides no additional production response and / or depresses production.
Although grain protein is used to determine value and/or quality of grain, it is not a significant concern for feedlots.
For a feedlot, grain is valued on an energy basis.
All grains contain starch, but grain energy level differs due to content of starch and availability of starch.
For example, sorghum has more starch than wheat, but when processed by dry rolling, sorghum has 25 per cent less energy than wheat due to a proportion of the starch being unavailable to cattle.
During periods when grain value is high, there is greater incentive within the feedlot industry to maximise starch availability.
This is achieved by investing in grain processing techniques. Examples include tempering, which uses the addition of 10 to 12pc water to whole grain to achieve final moisture of 20-22pc, storing the grain overnight and rolling it the next day, this method works well for wheat and barley.
Steam flaking is another grain processing method, it combines tempering with addition of steam to grain, improving starch availability of all grains or fermentating grain, similar to silage production where we add water to rolled sorghum to increase moisture to 35pc and store pits or above ground buns for 30 days prior to feeding.
GH: Have feed rations changed? Barley without access to China has been at a bigger discount to wheat than usual - has that been the catalyst for any change or are grain users happy to stick with what has worked in the past?
RL: Ration composition is a function of many factors relating to ingredients including cost, nutrient content and consistency, availability, reliability and consistency of supply, shelf life, storage requirements and availability, loading ease, processing requirements and shrinkage or loss.
These factors are considered when formulating a ration that has the ultimate objective of promoting production in the animals, such as daily weight gains, feed conversion or carcase weight and minimising operation costs such as feed delivery and manure removal.
To answer your question, yes, rations have definitely changed. For example, during the drought, all the operations in eastern Australia were using wheat or barley supplied by WA and reducing inclusion of whole cottonseed as cost exceeded $800/t.
The situation now is that sorghum is appearing in rations due to a sufficient price discount to wheat and whole cottonseed is been maximised as it is cheaper than grain.
GH: Are there any practical changes people are making in terms of feeding to cut out wastage?
RL: Yes, definitely. Feedlots are always seeking ways to promote efficiency and reduce wastage or loss. Recent examples include:
- Modifying feeding periods and/or induction weights of cattle depending on cost of gain
- Maximising inclusion of whole cottonseed
- Investment in grain processing systems
- Investment in stationary mixers to promote feed manufacture rate and control ingredient inventory
- Investment in covered housing to reduce effect of environment on cattle maintenance energy requirement
- Investment in larger capacity equipment such as roller mills, mixing or delivery wagons
- Seeking greater automation to promote consistency of operations
GH: Can costs be passed onto consumers, and at what level do you start seeing substitution to other sources of protein?
RL: An important consideration to remember is that Australian beef production is primarily export focused with approximately 75pc of beef exported, 25pc consumed domestically.
Also, there has been a shift in product exported, from a commodity type supply, with a limited emphasis on eating quality, to development of specific branded products where points such as breed, time on feed, production system and marbling score are all important.
Brand development is occurring in both export and domestic markets.
Branding is a double edged sword. On one hand, brand development creates value and provides a buffer potential for cost, but on the other, the brand must be maintained at expected quality and this can also increase production cost.
An interesting phenomenon occurring during COVID lockdown in relation to consumer purchasing decisions.
Consumers returned to the food they grew up with, the food that gave them comfort.
Purchasing decisions moved away from processed food and the "fake meat" products and returned to whole foods. In terms of beef, this was reflected in mince and sausages.
GH: Can abundant grass / fodder become a larger part of the ration?
RL: In a nutshell, no. Grass and fodder are low in fermentable energy compared to grain.
Grass and fodder are expensive to freight and feed, meaning higher operating costs.
Cattle eat to a dry matter and energy level. Feeding diets high in energy reduces daily feed intake requirement for higher production.
Also, as cattle increase in live weight, so too does their maintenance energy requirement. This energy requirement must be met before cattle can gain weight.
As an example, a 500kg animal has a 30pc higher maintenance energy requirement than a 300kg animal. That means the 500kg animal must consume 30pc more energy before it can achieve weight gain.
The limitation of fodder is variation in energy and digestibility. Fodder based diets cannot always meet both maintenance energy requirement and weight gain potential, particularly of markets requiring heavy carcasses in excess of 300kg.
GH: Are lot feeders that have a long term relationship with their supplier at an advantage, eg deals that smooth the edges so prices are not so high in periods of high prices, suiting buyers but not so low when low, suiting sellers?
RL: The advantage of long term relationships is knowing carcass value. Feedlots can use this value to determine profit margin even before cattle start on feed.
This is achieved by collecting and assessing historical close-out for specific markets.
Understanding cost of gain and occupancy cost, or the cost of having one head in a feedlot for one day, enables feedlots to accurately predict break-evens for purchase of cattle.
The other advantage of a long-term relationship is communication. Processing and feedloting are very different production systems. Communication regarding changes in cost allows time for the feedlot to adjust and remain sustainable.