3.13.2 Calculation model (2024)
- Tessa Jacobs
- Kor Oldenbroek
The economic weighing factors are determined by calculating the difference in farm income, when a marginal increase in production per cow takes place, while all the other conditions remain unchanged. The situation (milk price) likely to apply in eight to ten years is taken as the basic assumption in this calculation. The marginal increase in production per cow is the result of the marginal increase of the genetic capacity of the cow for higher production. So, what does an increase in the breeding value of a cow of one kg lactose, fat or protein represent at a dairy farm? When determining the Inet it is important to consider what is likely to change in the coming years. Important factors are the milk price the farmer receives and the feed cost.
Milk price in the future
The results of decisions made about breeding now, will be realized in performance of the offspring in eight to ten years time, so when considering the significance of the Inet we have to estimate what milk will be worth eight to ten years ahead. The trends to be expected are: 1) the world's population will continue to grow, entailing a corresponding increase in the need for food; 2) the economy will continue to grow in emerging countries which also have booming populations; 3) the average wealth of consumers will rise and thereby also the demands placed on food. The demand for dairy products rises in line with increasing prosperity and therefore the consumption of dairy produce will rise, partly due to a shift in eating patterns from vegetable based protein to animal based protein. The long-term expectation is that the rise will be around 30% in developing countries and around 10% in developed countries. On a global level greater attention for the environment is at stake, whereby reduction in the greenhouse gas emissions will become very important. One way of achieving this reduction in emissions per kg of milk is to produce milk more efficiently. This can be achieved by increasing the production per cow, for example.
Costs for energy and DVE
The calculation model calculates the energy and protein required for milk, fat, and protein. To produce fat, only energy is required, producing protein requires energy and protein. The feed costs kg fat or protein are calculated as (energy requirement)*price of energy)+(protein requirement/DVE)*(price of/DVE). Per kg fat and protein respectively 5.9 and 3.0 kVEM energy is required and for 1 kg of protein 1.56 kDVE is required.
To calculate the feed costs, a price for medium-priced A-pellets of 18 euro/100 kg is assumed and a price ratio of 6 between kDVE and kVEM : 1. This results in a price of 1 kVEM of € 0.107 and a price of 1 kDVE of € 0.639.
Calculation of net returns for fat and protein
The calculation of the Inet factors assumes price ratios for lactose, fat, and protein of 0, 4 and 6. The protein : fat ratio of 6:4 reflects the higher valuation of protein compared to fat at most dairy companies.
In view of the information above, the following points have been assumed in the calculation of the Inet factors:
the milk price is 38,5 eurocent per kg milk, with 4.2% fat and 3.4 % protein.
the ratio for lactose : fat : protein price is 0 : 3 : 4.
this results in a price for 1 kg lactose of € 0,00, 1 kg fat of € 4.14, and € 6.21 for 1 kg protein.
Based on the energy consumption and the protein demand from feed to produce lactose, fat and protein, the feed costs are respectively 0.47, 1.14 and 1.93 euro per kg lactose, kg fat and kg protein.
The yield per kg lactose, kg fat and kg protein are 0,00, 4.14 and 6.21 euro respectively. This results in a net yield per kg lactose, kg fat and kg protein of -0.47, 3.00 and 4.28 euros respectively.
The feed costs for lactose per kg of milk amount to 2.1 eurocents per kg of milk. The marginal yield of 1 kg of milk with standard contents is therefore 0.25 euros.
Given that there are various allowances, such as quantity allowance, grazing allowance, sustainability allowance, VLOG allowance, etc., the feed costs per kg of milk to produce lactose are more or less reimbursed by the various allowances.
When the (feed) costs are deducted from the proceeds, the net proceeds remain for fat and protein:
Inet = 3.0 * FW kg fat + 4.28 * FW kg protein
After the rounding of the weightings, the Inet per August 2024 will be as follows: