Estimating unit costs of nutrients from market prices of feedstuffs

The determinations of nutrient costs and breakeven prices of feedstuffs are important activities in the field of nutritional economics. Current methods are either extensions of the Petersen method, which dates back to 1932, or mathematical programming methods generally set as linear programming problems. Both sets of methods have severe limitations that make them unsuitable or biased for deriving unit costs of nutrients and aggregate breakeven costs of feedstuffs in a given market. We propose a least-squares method that, under verifiable conditions, yields maximum likelihood estimates of unit costs of nutrients and breakeven prices of feedstuffs. Assumptions to the maximum likelihood estimates are verified with studentized residuals, leverage values, and variance inflation factors. The method has been programmed into a Windows application and can be used by those with little formal training in statistics.