There is some optimism for Ontario livestock sectors rocked in the past two years by rising feed costs. Continued projections of a strong 2023-24 corn supply are putting downward pressure on prices.
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The United States Department of Agriculture’s July 12 supply and demand report also had a downward effect on prices, with a record corn crop expected despite dryness in the U.S. corn belt.
Why it matters: Feed is a significant cost to livestock producers and until recently has been at historic highs.
Even if feed costs come down by the fall, they could be more than offset on the cost-of-production ledger by continued increases in what farmers pay for fuel, fertilizer and borrowed funds.
“Certainly, the focus over the past year was on what to do about rising feed costs,” said Simon Jetté-Nantel, agro economist for dairy production services provider Lactanet.
“But now I think a lot of that focus has shifted to interest rates. Liquidity management has become more of a concern.”
Grand Valley Fortifiers monogastric nutritionist Adam Totafurno provided a graph tracking the blended feed cost for grower-finisher swine feed over the past 12 months. It started at about $450 per tonne in July 2022, rose to a peak of almost $480 per tonne in October, but then fell gradually to a low of $410 per tonne in June 2023.
He says the three main feed commodities hit price peaks in the past 12 months – in October for both corn and wheat but as recently as February for soybeans – followed by a gradual decline to a low point for the year in June.
“Although feed costs have risen to a certain degree over the year, they appear to be trending down over the last few months, even to a point lower than we saw this time last year,” Totafurno said.
Jetté-Nantel agrees and says dairy farmers in Ontario and Quebec paid between $325-$350 per tonne for corn through much of 2022, with peaks close to $400. But it’s now below $300 per tonne, with the futures market indicating “we’re getting closer to somewhere between $250-$300 per metric tonne, depending on what area of the country you’re in,” by the fall.
For soybeans, it was between $750-$800 per tonne “not that long ago, but now we’re getting into the $650 range if you’re close to the production areas.”
The futures market indicates the possibility of that falling below $600 per tonne by the fall.
“Barring any catastrophic event with the weather or some other factors, it should be good news for dairy producers,” Jetté-Nantel said.
Globally, quarterly reports from Rabobank offered similarly optimistic takes. They’re tempered by June 30 revelations from the United States Department of Agriculture that the projected U.S. soybean acreage has been “cut sharply” from a previous prediction of an all-time high.
The Rabobank Dairy Quarterly from June says “lower input costs (will) provide some relief to farm-level margins,” citing “continued optimism about Brazil’s second corn crop, combined with large Russian grain exports, renewal of the grain corridor agreement between Russia and Ukraine, a good upcoming European Union harvest, and accelerated U.S. corn planting.”
The Poultry Quarterly, published in early July, says “feed prices are expected to drop further in the second half of 2023, to 10-15 per cent below 2022’s historic high levels.”
The Poultry and Dairy reports were both written by European-based analysts for Rabobank. The Q2 2023 Pork Quarterly was written in April by Cleveland-based analyst Christine McCracken and was significantly less optimistic on the short-term prognosis for feed costs.
“Although a modest improvement in production costs is expected in 2023, local conditions will vary and risk management will remain critical to success,” McCracken wrote.
“Global feedstocks are at historically low levels, and availability remains tight. A disappointing Argentine harvest will partially offset Brazil’s record 2023 soybean crop, and the small global cushion in grain and oilseed stocks is expected to drive additional feed cost volatility in 2023.”
The Agriculture and Agri-Food Canada 2023-24 crop year outlook released June 20 said the acreage seeded to corn across Canada (98 per cent of it in Quebec, Ontario and Manitoba) is three per cent above 2022-23 and an all-time high.
With decreased industrial use and decreased exports projected, “the 2023-24 (price) is projected to fall by $50 per metric tonne from the current crop year to $255 per metric tonne.”
Soybean prices in the AAFC report, however, “are forecast to rise … as a weaker Canadian dollar offsets the large U.S. and Brazilian crops.”
Back in an Ontario scale, Kenpal nutritionist Laura Martin agreed that feed commodity prices have levelled off. Perhaps commodity feed costs have come down but it’s still a challenge to keep them from being a financial drain on the operation.
“I’m focusing on commodities like dried distillers grains (DDGS), soybean meal and corn, as this is where the bulk of the feed costs come from,” Martin told Farmtario.
Despite prices coming down in recent months from historic highs, it remains true that “protein costs in 2023 (from) DDGS and soybean meal have increased by about 25 per cent over 2021.”
Totafurno said no one would be surprised to learn that the months and years following the 2020 onset of the COVID-19 pandemic, with its lockdowns clogging up transport routes and worker shortages due to outbreaks, were prime conditions for rising feed costs.
But they may not be as aware of the pandemic’s continued aftershocks in many segments of the economy.
“As restrictions were lifted, the workforce required to get back to ‘normal’ was just not there – whether it be port workers, truck drivers, warehouse workers, etc.”
Lessons from a period of high costs
There have been lessons learned over recent years of high feed costs. A Lactanet resource aimed “to minimize feed costs as much as possible while maximizing cow production for the same level of concentrate.”
- Frequent calibration of feed mixers and dispensers
- Regular sharpening of mixer knives
- Reviewing cow groupings to minimize feed and concentrate waste
- Reviewing heifer feeding
- Evaluating the relevance of additives
- Sampling forages regularly
- Reviewing management of on-farm supplies.
On the hog side, Totafurno advised producers – if they’re not already doing so – to look into alternative feed ingredients and the use of enzymes to more effectively use the ingredients already being fed.
Many other industries offer potential cost-effective co-products such as the dairy (whey), milling (shorts), baking (bakery meal), ethanol (DDGS) and alcohol industries (brewer’s yeast) to help reduce feed costs, he said.
“Typically, commercial feed mills will have access to many different co-products; for on-farm manufacturers where bin space may be limited, however, this brings up that it may be worthwhile to (analyze) what it would cost to put up another bin versus potential feed cost savings.”
Most importantly, though, Totafurno suggested swine producers do some serious research into optimizing their feed conversion ratio (FCR) through better feeder management, particle size and other factors.
“Ultimately, you’re paying for that feed so why waste it,” he said. “Looking at even small changes in FCR and using a 2.6 feed conversion as a reference, we can see some major cost implications in feed costs per pig.
“Even going from a 2.60 to a 2.65 and (producing) 15,000 market hogs per year, you’re looking at upwards of $30,000 in extra feed costs.”
OMAFRA tips for managing feed costs include:
- If growing your feed, walk fields to monitor crop condition and yield
- If you may be short on feed, look for options to reduce current use of stored feed
- Test crops for protein versus relying on book values
- Calibrate mills and test rations regularly
- Reduce sow numbers
- Cull weak and nonviable piglets early
With indications that feed costs could drop, however, Lactanet’s Jetté-Nantel said the advice – at least for dairy producers – may change somewhat.
He’s hearing that, compared to this time last year, forage quality looks good for 2023. In 2022, much of Quebec and Ontario had good quantity but below average quality. To compensate for lower protein levels in their haylage, many dairy producers added protein in concentrate form.
This year, first-cut haylage yields were generally down due to a dry May but early reports suggest quality was improved compared to last year.
With rains returning in time to spur strong second-cut growth, there could be good quantity spread over the whole season.