Accurate feed inventories pay off

By Cody McCary, Vita Plus forage specialist, and Rod Wautlet, Agri-Business Consultants LLC senior financial consultant

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 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 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.

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. Furthermore, 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 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

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 inventory at feedout is what matters most to accurately projecting budgets and developing feedout strategies.

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.

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%. 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.

Lean on your management team and consultants to assist in investing in better or more feed storage, harvest efficiencies, management resources to improve your bottom line, and assessing the economics of your operation.

This article was originally published in the November 2024 issue of Hoard’s Dairyman. Click here to read the original article.