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Coping with increasing raw material prices

The increasing prices of raw materials have received a lot of media attention. High prices of cereal grains particularly affect the feed industry. Leen Wigboldus (left, director for feed formulation) and Jaap van Wingerden (manager for purchasing) at Provimi provide information on the price developments and give suggestions on how to cope with the current market situation. They also offer advice on how to reduce feed cost increases and protect profits.

European weather conditions in the past few months have not been ideal for grain harvest. Dry weather has prevented adequate ripening of wheat which has resulted in lower yields and starch content. In Russia and Kazakhstan part of the harvest was lost due to drought and fires. The excessive rainfall following the drought caused overgrowth of the crop and may lead to the formation of mycotoxins.
 
“Depending on the region and its weather, the composition of the cereal grains may fluctuate strongly,” explains Wigboldus. “This may affect the fermentation rate in the rumen of the cow so producers must keep an eye on the wheat quality to prevent acidosis.”
 
Consequences for trade
Jaap van Wingerden and Leen Wigboldus explain the problems affecting the feed trade: “The disappointing crop yield will further increase prices of raw materials. Because of the shortage, Russia has already announced an export ban for wheat. The Middle East and Africa depend on cereal imports from Russia; these regions will have to search for other suppliers in Europe and this will put further pressure on the markets.
 
Milling wheat containing high protein may become available as feed wheat if its quality does not meet the specified standards for the human food industry.
 
How to manage these developments?
To keep feed costs at an acceptable level, feed manufacturers and producers need to work together. Nutritionists need to take account of cereal quality and the higher prices when formulating rations. Raw materials, such as corn, tapioca and sorghum offer good alternatives to replace expensive components like wheat. “With sorghum, the quality, nutrient content and the fineness of grind should be closely monitored. We have seen some disappointing results in livestock performance when sorghum was fed,” warns Wigboldus.
 
The challenge for now is to save costs in a responsible way by balancing rations more precisely and taking advantage of the latest nutritional knowledge.
 
To optimise ruminant feeds, the PFOS optimalisation program may be used. Balancing fast and slow carbohydrate fractions with protein fractions will improve rumen function.
 
How to optimise feed profit
Producers need to be aware of feed profit. Many farms focus on feed prices and feed costs per kg of growth. An analysis of piglet nutrition shows that on units with the lowest feed price or feed costs per kg of growth feed profit is only average. This is because feed with a lower price is often associated with poorer feed conversion rates and liveweight gains.
 
Farms with the highest growth rates are investing more in feed and show improved results and the feed cost per kg gain are on or above average and feed profit is higher (see Table 1).
 
In practice, higher quality feed for young piglets is justified through better growth and feed conversion and improved feed profit. These better quality feeds have a higher proportion of special ingredients so are less dependent on cereal prices than the cheaper piglet feeds and will, therefore, suffer less from increasing cereal grain prices.
 
 
Management measures
Other management factors can also be taken into account to improve the feed profit. Of course these measures are not only relevant in periods of higher commodity prices. These factors include separating boars and gilts, avoiding feed spills and monitoring animal health.
 
The genetic potential for milk production in sows and growth rates in piglets is much higher than the actual results obtained in practice. But the most efficient growth rates are achieved in young animals and maximising the potential at this stage - in both piglets and broiler chicks - offers a good return on investment and the benefits will extend to savings in the quantity of feed needed as the animal of bird gets older.
 
Adjusting the feeding strategy, and separating gilts and boars in the growing phase can also help to maintain feed profits, since the dietary requirements differ between different sexes and lines/breeds.
 
To improve performance, feed spills should be avoided in growing pigs and laying hens. The feed needs to be fresh and of good quality to warrant proper digestion and utilization. In wet feeding systems care should be taken to ensure good fermentation and prevent decay.
 
Adjusting the diet and the feed intake to match the animal's requirements will save feed costs without loss of performance. Research by Provimi has revealed that laying hens show overconsumption (+5% to +10%) of nutrients when fed ad lib.
 
Animal health is also crucial and needs to be monitored. Intestinal disorders may impair digestion. Also, excessive feed intake and feed passage rate negatively affects feed utilization.
 
Analyzing raw materials
The coming months it is of utmost importance in feed formulation and it is vital that the quality of raw materials is analysed. Provimi has developed its NIR system to help livestock farmers.
 
NIR is an important technology for testing feedstuffs. It is a quick and cost effective method for determining the composition of products and it can be applied to raw materials, silages and complete compound feeds.
 
Feed prices medium term
Van Wingerden expects prices to stabilize in a few months, but a lot will depend on the harvest in the southern hemisphere. “The crop yields in Australia have not been good in the past few years. If this year also turns out to be disappointing, the market will tighten even further.”
 
Advice for nutritionists and farmers:
1.  The nutrient levels of cereals, especially wheat, may be inconsistent in the near future. Check the composition and quality.
2.  Levels of fungi and mycotoxins may be high. Be prepared for this.
3.  Use the PFOS program in ruminant feed formulations.
4.  Be creative: consider alternative raw materials in feed formulation.
5.  Make optimal use of additives.
6.  Focus on feed profit, not feed prices.
7.  Consider separating boars and gilts to increase feed profit.
8.  Prevent feed waste/spill with growing pigs and laying hens.
9.  Invest in a good starter diet for piglets and broiler chicks (utilize growth potential at this stage). This will pay off.
10.   Ensure freshness of feed. Prevent decay of wet feeds.

Editor PigProgress

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