Robert Tigner,Ag Systems Economist

PRICING FORAGE

INTRODUCTION

• Forages regularly purchased• Normal business practice• Forage deficit due to drought

ECONOMIC RISKS FOR FORAGE PURCHASE• If an inventory is built, cost is locked in• Overpaying for forages• Forage costs too high to cash flow

• Added costs to beef production• Forage purchase includes land charge to grow forage • Many beef producers already own land for forage

LIVESTOCK AND DAIRY RISKS

• Forage quality not as good as needed• Assess forage fields before purchase• Will supplement be needed if very low protein• Poor milk production

HAY PRICING APP

• U of Wisconsin-Extension

REFERENCE PRICE

• Example is non-alfalfa hay• Can enter own price

ANNUAL YIELD ESTIMATE

• Is the estimate accurate?

HARVEST COSTS

HARVEST COSTS

• U of IL survey showed machinery costs were 30% higher than custom rates

LOSS RISK

Calculates per Acre value bycutting

OTHER HAY TYPES

• Adjust price to forage type• Adjust number of cuttings• Oats or meadow hay may only be 1

CORN SILAGE

• Two perspectives• Crop producer• Livestock producer

FEED VALUE TO BUYER

• Grain content• Stover

TOTAL FEED VALUE TO BUYER

• Example calculation 225 bu/acre grain yield, 30 ton corn silage at 65% moisture:• Grain: $3.25 X 225 = $650• Costs for livestock producer: Harvest,

transportation: $650 - $80 = $570• Stover: 4.47 tons grass hay equivalent X $80/ton=

$357.60• Costs for livestock producer: harvest and

transportation $357.60 - $116 = $241.60• Total: $570 + $241.60 = $811.60 or $27.05 per ton

• The max bid for the livestock producer is $27.05

OPPORTUNITY COST FOR GROWER

• Example calculation 225 bu/acre grain yield, 30 ton corn silage at 65% moisture:• Grain: $3.25 X 225 = $650• Avoided costs: Harvest, transportation: $650

- $80 = $570• Extra costs: fertilizer $120

• Total: $570 + $120 = $690 or $23 per ton• The minimum bid for the crop grower to take would

be $23 per ton

EASIER CALCULATIONS

EASIER CALCULATIONS

PRICING THUMB RULES

• Using thumb rules can miss price silage• Unharvested: 6-8 X price of corn• Variance is $6 per ton• As high as $150 per A if 25 ton yield per A

• Harvested: 10-12 X price of corn

THUMB RULES CAN BE WAY OFF

FEED VALUE DROUGHT CORN

DROUGHT STRESSED CORN

• More value than often expected• Price according to feed value

FINAL DETAILS

• Pricing• Average pricing or point in time• Local elevator or state NASS reports

• Quantity• Preference is to weigh

SOURCES & RESOURCES

https://cropwatch.unl.edu/feeding-value-and-pricing-drought-stressed-corn-silage-unl-cropwatch-july-20-2012

https://www.extension.iastate.edu/agdm/crops/html/a1-65.html

https://fyi.extension.wisc.edu/forage/files/2018/06/Copy-of-UWEXCornSilagePricingDecisionAid-6-7-2018.xls

https://fyi.extension.wisc.edu/forage/files/2014/01/PricingStandingCereals.xls

QUESTIONS

Extension is a Division of the Institute of Agriculture and Natural Resources at the University of Nebraska–Lincoln cooperating with the

Counties and the United States Department of Agriculture.

University of Nebraska–Lincoln Extension educational programs abide with the nondiscrimination policies of the University of Nebraska–

Lincoln and the United States Department of Agriculture.