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Economics

Now, we are usually most interested in conversion of nutrients from a dry-matter to as-fed basis or vice versa. Occasionally, we will also do conversions with the cost of a feed. Feed quotes are almost always expressed on an as-fed basis because this is the way feed is traded and this is the way the brokers quote their prices. A couple more rules of thumb for cost conversions. If you convert from dry-matter to as-fed, the cost per unit always decreases. If you’re converting from as-fed to dry-matter, the cost per unit always increases. Converting from as dry-matter to as-fed or as-fed to dry-matter can also be particularly useful when comparing prices.

A very good example is brewer's grain which comes in two forms, either wet or dry. Suppose we have two choices, brewer's grain that is dry which contains about 90% dry-matter and costs $100 per ton or wet brewer's grain which is about 30% dry-matter and costs $25 per ton. So, which would be the best buy? If you just look at cost at this point, wet brewer's grain would be the best buy and it has the lowest cost, 25 versus 100. But remember what we are interested in when we are purchasing a feed and that is the nutrients other than water. Which feed contains more water? Wet brewer's grain. But still we haven’t arrived at a basis where we can compare apples to apples and oranges to oranges. So we need to get both of these feeds on some basis where they can be comparable. And the way we would do this is is, for the dry brewer's grain, we would divide 100 by 90 and that would give us about 1.11. And then multiply that by the cost per ton which is 100. So remember, when we are converting from as-fed, cost per ton of feed is always on an as-fed basis, and we are going to dry-matter, the price must increase. So, on an as-fed basis brewer's grain costs $100 per ton. On a dry-matter basis, it would cost us $111 per ton. For the wet brewer's grain, we would multiply 25 by 100 divided by 30, so that would give us about 3.33, times $25 per ton. That would give us a price of about $83 per ton on a dry-matter basis for wet brewer's grain. So which is the better buy? Which is costing us the least amount per ton of dry-matter? And in this case, it’s wet brewer's grain.

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