Evaluating Feed Efficiency with Profit in Mind

Introduction

As the dairy industry looks to improve both profitability and environmental impact, feed efficiency continues to move to the forefront of management discussions. For dairy farms, feed is the largest operating expense, therefore how efficiently cows convert feed into milk generates a lot of attention. 

Most commonly on farms, feed efficiency (FE) is evaluated using the ratio of energy-corrected milk (ECM) to dry matter intake (DMI) – expressed as ECM/DMI. While this metric provides base-level insight into cow efficiency, it doesn’t capture the full energetic or economic picture (1).  To make more informed decisions, producers should consider feed efficiency alongside other metrics, including Income Over Feed Costs (IOFC). 

IOFC measures how much milk income remains after paying for feed and provides a lens into profitability. Using FE and IOFC together balances feed conversion with economic return.  Below are five real-world scenarios showing how this combined approach provides deeper insight into cow, group, or herd performance.  Although the examples use individual cows, the same logic applies when evaluating pens or the entire herd. 

Note: Milk pricing in this article reflects Federal Milk Marketing Order 30 pricing at the time of writing.

Scenario 1: Improving Feed Efficiency and IOFC 

The ideal situation is when feed efficiency improves, and profitability increases at the same time. In Table 1, both Cow A and Cow B produce the same amount of ECM. However, Cow B does so with lower feed intake. As a result, her feed efficiency is higher and her IOFC is $0.60 greater. This scenario demonstrates that generating more milk with the same amount of feed can directly boost profits.

Table 1

Scenario 2: Feed Price Makes a Difference

It may seem obvious, but it’s an important foundation for the next scenarios: if two cows produce the same amount of milk and eat the same feed, the one with cheaper feed will be more profitable. 

In Table 2, both cows produce 101.6 lb of ECM and consume the same amount of feed. However, Cow B’s feed costs $0.01 more per pound of dry matter which reduces her IOFC by $0.62 compared to Cow A. This illustrates the reminder that it is not only important to consider how much she eats, but also what the feed costs. 

Table 2

Scenario 3: Same or Better Feed Efficiency, Lower Profitability

Feed efficiency is a ratio and ratios can be deceiving. For example, two cows can have the same FE but very different levels of production and profitability. In Table 3, Cow A and Cow B both have a FE near 1.8, yet Cow A generates $2.84 more in IOFC. That’s because she produces more milk and, in this example, each pound of milk generates $0.21 of revenue while each pound of dry matter costs $0.15. This makes the added production economically worthwhile.  

Even improving the feed efficiency of the lower-producing cow wouldn’t necessarily close the profitability gap. Cow C, for example, has the highest FE of the group, but her total income is still lower than Cow A’s. This scenario illustrates that milk volume still matters, especially when milk production outweighs the additional feed cost needed to produce it (1).

Table 3

Scenario 4: Higher ECM Isn’t Always Profitable

What happens if you boost production, but the additional feed cost to support the extra milk outweighs the benefit? 

Table 4 shows three cows with the same feed efficiency. Cow B produces more ECM than Cow A but the cost of her feed per pound is greater, which reduces her IOFC compared to Cow A. However, Cow C produces even more ECM, and in her case, the increased revenue outweighs the greater daily feed cost and results in a higher IOFC than Cow A and B.  

The lesson here is that more milk can be profitable but only if the feed cost per additional pound of ECM remains favorable.

Table 4

Scenario 5: Milk Composition Impacts IOFC

Not all milk is priced equally. Component based pricing means that butterfat and protein content play a key role in milk income. 

In Table 5, both cows produce the same ECM with the same feed efficiency. But Cow B produces more milk with lower fat and protein percentages. This leads to lower overall yields of these components resulting in lower milk income and IOFC despite the seemingly similar production. 

At the time of writing this article, milk pricing favors high component yielding cows, so shifts in composition can significantly affect profitability even when total ECM is unchanged. 

Table 5

Additional Limitations

While evaluating Feed Efficiency (ECM/DMI) and Income Over Feed Costs (IOFC) together provides a more complete picture than either metric alone, it’s important to recognize there are still limitations. Stage of lactation plays a major role in feed efficiency; early lactation cows often appear more efficient simply because they are mobilizing body reserves (fat or muscle) to support milk production. In these cases, both FE and IOFC can be artificially inflated, not because the cow is more efficient, but because she is “borrowing energy” from her own body (1). Over an extended time, this can compromise health, reproduction, and long-term productivity. Additionally, IOFC only accounts for income from milk and the cost of feed – it doesn’t capture other important expenses like health events or reproductive performance. For these reasons, FE and IOFC should always be interpreted within the context of factors such as lactation stage, body condition, and cow health.

Taking a Broader View of Efficiency

Feed efficiency is a useful tool, but it doesn’t tell the whole story. As the scenarios above show, cows with identical or different feed efficiency values can have very different income outcomes depending on production volume, feed prices, and milk components.

That is why pairing ECM/DMI with IOFC is a stronger combination. Together these metrics can help you take a broader view of feed and economic efficiency. To make these comparisons meaningful, ensure you’re working with accurate data: actual feed intake, milk yield and composition, and current or standardized milk and feed prices. Together these metrics can help you take a broader view of feed and economic efficiency.

For readers interested in how energy stored in or mobilized from body reserves affects feed efficiency, something not captured by ECM/DMI, see our companion article Evaluating Feed Efficiency with Body Reserves in Mind.

Author

 

Katelyn Goldsmith

Dairy Outreach Specialist– In her role as a statewide Dairy Outreach Specialist, Katelyn connects research with practical farm management practices to create educational programming addressing the needs of Wisconsin dairy producers.

Articles by Katelyn Goldsmith

Contact Katelyn Goldsmith