Feed additives: Adding value or just costs?

Sales people in the feed additive business currently are having a very hard time. The typical argumentation pattern of adding value to feeds and achieving more animal performance does not impress anyone as the costs of commodities have in some cases doubled and grain traders are speaking of upcoming shortages. A differentiating discussion is difficult. Nutritionists working on feed formulation are told to strike out anything that is not essential to feed the animal. It is perceived that feed additives, no matter how powerful they are, first of all add costs. They increase the price per tonne. Any ongoing discussion is too long for our hectic business. Any sentence starting with “Yes, but…” is overheard. Feeling almost like green rookies feed additive sales people have to start all over again. As if there was no established additive industry and as if the idea of adding micronutrients, probiotics and so on was all totally new.

Yes, feed is the largest chunk of costs in animal production followed by the cost of labor. In relation the individual costs of animal replacement, veterinary services, energy or finance are rather small, difficult to compare and very difficult to change. The costs of reduced performance often don’t even appear in the statistics. Or at least, they are not recognized. The pound of milk that was not produced does not send an invoice to the farmer, but the feed mill does. Therefore farm consultants like to attack the cost of feed and sales people find it hard to get appointments.

So if we ask what we really need to put in or feeds and how much farmers are prepared to spend for an additive, let’s take the example of good old yeast culture as an established technology in dairy production. If we assume that adding live yeast to the diet increases the average daily milk yield by one kilogram (2lb) per cow per day we will find that the dairy farmer get’s around 26 cent (average farm gate price US-EU Feb/March 08) in return. How much is the yeast now worth? If it is adding value by 26 ct per cow per day how much should I be prepared to I pay for it? 2ct, 4ct, or 12ct? The answer is up to 26 ct per cow per day. Basic economics. One extra litre of milk makes my cow, my labour, my farm more efficient. So, even if I had to pay the full 26 ct per day to achieve this extra litre of milk it would stil be profitable. Yeast does not cost that much.

He same calculations can also be done with other species and other pre- and probiotics, enzymes or micronutrients and their effects on growth performance, fertility, health and product quality. As energy prices rise we insulate our houses and make our cars more efficient. When commodity prices go up we should make feed more efficient. The animal will not die without it but a product fulfills its promises production will be more profitable. That’s adding value.