Projected Economic Benefits to the Producers (sugar refineries) and Users (dairy & beef feeders) from Feeding Liquid Feeds in Ukraine.
Mr. Dmitrash, the director of the Zbarazh Sugar Refinery, is considering the economic benefits to his association and to the cattlemen in the Zbarash area of converting beet molasses and other ingredients to a liquid feed and feeding it to dairy and beef animals. Previously I wrote a 15 page report on the formulation, mixing, delivery and feeding of liquid feeds. This report is available in Ukrainian and English. I have also supplied Mr. Dmitrash with a formula for producing a liquid feed (32% protein, 1% phosphorus) using beet molasses from his plant plus urea, phosphoric acid, vitamins and trace minerals.
The obvious economic question that needs to be answered in a profit oriented market economy before committing to such a project is, "What are the costs and benefits from producing and feeding a liquid feed?" This paper will try to answer those questions. Please study it along with the two previous papers mentioned to make a determination.
Usually the rations (what an animal consumes in a 24 hour period) fed in the beef and dairy industry of Ukraine are not nutritionally balanced. As a result, animal performance is below accepted norms leaving much opportunity for improvement. A liquid feed is not a magical feedstuff but it does supply protein, energy, vitamins and minerals in a convenient and economical package while making use of molasses, a major by-product of the sugar industry. Animals fed liquid feed will increase production and look better.
During the spring and early summer when the grass is green, the nutritional needs of the grazing animal are more likely to be met than during the rest of the year when the forage is usually hay or silage that was cut too mature to promote optimum animal performance. These stored forages are usually deficient in all nutrients except for perhaps calcium, which may also be marginal. These forages therefore need to be supplemented. A liquid feed can be an economical and efficient choice to supply the needed nutrients.
The liquid feed that I formulated is to be fed at 10% of the ration (90% dry matter basis) or 0.033% of animal body weight with a maximum intake of 1.5 kilograms per head per day. (Please note that a liter of liquid feed is about 30% heavier than milk or water and will weight about 1.3 kilograms, so feed the liquid by weight and not by volume.) Feeding any more than 1.5 kilograms/day may be laxative to the animal and may actually reduce rumen function because of the high level of sugars (34%) in the liquid feed. This level of intake will supply adequate levels of all the vitamins and trace minerals except for iodine, which should be supplied in iodized salt. For modest production, roughages (particularly legumes) usually supply adequate calcium unless a high level of grain is fed and milk production is high. One and a half kilograms of liquid feed plus the phosphorus found in the usual feedstuffs will satisfy most of the phosphorus requirement. The liquid feed will supply the ration with some energy and a substantial amount of protein.
It should be remembered that the microorganisms fermenting and digesting feed in the rumen of cattle need a minimum of 11% crude protein on a dry matter basis in order to function optimally. Most preserved forages in Western Ukraine are below this level of protein. When ruminants are deficient in protein, feed intake is reduced as the rumen microorganisms are compromised in their ability to process feed. Raising the protein of the ration in dairy cows from 12 to 13% (dry matter basis) increases feed intake by 0.75 kg and increases milk production by 1.75 liters. Raising ration protein from 13 to 14% increases dry matter intake 0.5 kg and milk one liter. Increasing the protein from 14 to 15% increases dry matter intake 0.25 kg while increasing milk yield about 0.90 liters.
Dry forages that resemble low-protein straws are fed during the winter to cattle in Ukraine. They appear to be substantially below the critical protein threshold of 11% crude protein needed for rumen microorganisms to function properly. I predict that feeding 1.5 kg of a 32% liquid feed will increase daily milk production by five liters/cow. Half of this will come from the actual protein supplied by the liquid feed and half will come from the increase in intake and digestibility of the rest of the ration.
Looking at the energy supplied by 1.5 kilograms of a liquid feed fed to animals deficient in protein and energy, you can predict again that five liters of additional milk will be produced. Half of the increase will come from the energy in the 1.5 kg of liquid feed and half will come from the increase in energy intake and utilization of the rest of the ration.
The supplementation of vitamins and minerals will support increased milk production and promote animal health, which could be a substantial benefit (improved breeding performance, fewer veterinary bills, etc.) in addition to the value of the five liters of increased milk production predicted above. Healthier animals look much better also.
Five liters of milk sold at wholesale is worth 0.30 (to 0.40 grivnia)/liter or 1.5 grivnia total while if the milk is sold retail on the street, a liter will bring 0.60 grivnia or 3.0 grivnia. The extra income is due to marketing, so my calculations are based on the 0.30 grivnia price. Because of the health benefit, I'll use 1.6 grivnia return to the feeder from feeding 1.5 kg of liquid feed/hd/day. This equates to a value of $0.40 or $0.267/kilogram of liquid feed ($267 per ton) to the feeder. Fortunately, it will cost much less than this to supply it to his animals. How do we divide up this benefit between supplier and user?
I'm not sure of prices for Ukraine but pricing molasses at $25 per ton, phosphoric acid at $160 per ton and dry urea at $200 per ton, shows a ton of liquid feed would contain approximately $16 of molasses, $6 of phosphoric acid and $20 of urea. Based on their cost in the USA, I'm estimating the vitamins and trace minerals will cost $18 to $25 in Western Ukraine, making the ingredient cost of a metric ton of liquid feed $60 to $67.
Subtracting a $67 ingredient cost from $267 (value to the cattle feeder from feeding this liquid feed) shows that there is $200 per ton of added value to be shared by the producer of the liquid feed and the feeder of the liquid feed. I'm suggesting that the producer add $40 for sale of feed at the production plant and $50 if delivered. This would price the liquid feed at $100 to $110/MT so that the feeder of the liquid feed would realize a return ($267) of $150 to $160 above his costs, which is a great return. This allocation of the added value would be a generous return for both the producer and feeder of liquid feeds.
Liquid feeds would probably not be fed on fresh pasture, although feeding a half to one kilogram/head/day would be advisable. Feeding liquid feed should increase milk yield per lactation by 1000 to 1500 liters. When added to the usual production of 2500 liters per lactation, we can see that this would be a 40% to 60% improvement to 3500 to 4000 liters. It is estimated that the native 450 kilogram black and white dairy cow could produce 6000 liters per lactation if the nutrition, including forage and concentrates, were top-notch. This is in comparison to over 10,000 liters of milk expected per lactation from a well-bred and adequately fed Holstein cow. Fresh cows should be fed particularly well.
Feeders of beef animals would also benefit from supplementing their animals with liquid feed but I won't try to estimate the economic return for them, although the feeding of beef animals represents a substantial market for liquid feeds.
Mr. Dmitrash reports that each sugar factory has 2500 to 4000 tons of beet molasses per year to return to the growers. Assuming the lower figure, there is a potential to manufacture 4000 tons of liquid feed/year. If 4000 tons could be sold at margins of $40 to $50/ton to the manufacturer, there would be a return of $160,000 to $200,000 per year to each sugar factory. The feeders around each refinery would realize another $150 per ton or $600,000 per year of added value. These are huge figures! If realized it would cause a significant economic effect in the area surrounding each of the 35 sugar refineries in Western Ukraine. There are 192 sugar refineries in all of Ukraine.
Each milk cow could consume 400 kg of liquid feed per year [1.5 kilograms times 180 days of the non-grazing period (270 kg) plus another 130 kg during the 180 days when there is as a variable amount of grazing.] Therefore, 4000 metric tons of liquid feed per year would feed 10,000 head of cattle. Ukraine has 5.8 million cows or an average of 26,000 cows per each of the 192 refineries, so the market for liquid feeds is there.
Realistically, the idea of feeding liquid feeds would have to be sold to the dairy and cattle feeders. Even though there are enough cattle to consume all the potential liquid feed production, it will take a lot of marketing to convince cattle feeders to include liquid feed in the rations of their animals. Still, the potential exists. If a few feeders realize the estimated production and economic returns, I'm sure others will follow. Even the private backyard feeder with one to a few cows could participate by buying barrels or buckets of liquid feed. Finding money to buy feed is always a problem. The growers of the sugar beets already own the beet molasses and have molasses coming so they could choose to receive the value of what is owed them as a liquid feed. The rest of the liquid feed could be sold to private feeders who would sell their milk and receive payment shortly after feeding the liquid feed. They wouldn't need very much working capital to buy enough liquid feed to last until they got paid for their increased production.
The cost for a sugar plant to get into the liquid feed business is low compared to the potential return. Most of the equipment needed is probably already on site. For $10,000 to $20,000 per sugar factory they can get equipped to produce liquid feeds if they use some existing equipment, such as tanks, pumps and meters. While formidable, it is peanuts in return for what they can earn. There is also a very substantial financial benefit that would accrue to the sugar beet growers who most likely are also cattle feeders.
Manufacturing and feeding liquid feeds in Western Ukraine will be very profitable.