The Manager: How do I price forages?

Pricing forages? That perennial question asked by dairy producers can be answered using any of these methods

 

By Larry Chase and Tom Overton

 

In these times of low milk prices and high input costs, dairies may be all the more eager to feed as much forage as possible. To do so may mean looking to neighbors as a source for forages. And with that comes the proverbial question: How do I determine the price of forages? 

There are many approaches you can use to compute how much to pay when buying or selling forages. The methods range from very simple to relatively complex in terms of the information needed to determine a price for forage. 

Here are the common approaches:

1. Use current prices in the area. This quick  method doesn’t account for such factors as differences in nutrient or dry matter (DM) content of silages. 

A variation of this approach is to use prices from auctions where forages are sold. This works better for hay than silage. At a recent Pennsylvania auction, the price for a ton of mixed hay ranged from $65 to $185. What was different about these hays to cause such a large price swing?

2. Use published prices as a reference point. One source is a monthly list of feed and forage prices available from the Department of Dairy and Animal Science at Penn State University. Find the list at: www.das.psu.edu/dairy/pdf/feedprices.pdf.

Virginia Ishler in the department compiles the Penn State list monthly using prices from a number of sources. The June 2009 list had a price of $37.40 per ton for average corn silage at 33% DM. The price for average legume hay was $162 per ton. These price lists don’t account for factors such as variations in nutrient content and DM.

Similar lists may be available from other sources such as regional agricultural publications. 

3. Use information from crop enterprise budgets. There are a number of computer programs or factsheets that can be used to determine the actual costs of producing various crops:

www.aede.osu.edu/programs/FarmManagement/budgets   

http://agguide.agronomy.psu.edu/cm/sec12/sec121.cfm

  www.uwex.edu/ces/crops/uwforage/Pricingstandhay-FOF.pdf

http://cdp.wisc.edu/crop%20enterprise.htm

These sites take into account such factors as the costs for seed, fertilizer, machinery and labor, plus yields. Some programs allow for inclusion of storage costs and losses. 

The crop enterprise budget tools require that you supply a lot of detailed information. But it’s worth the effort since you can do such things as adjust forage price based on factors like yield per acre. 

In 2009, a sample budget from Penn State showed a total cost of $698 per acre to produce conventional-tillage corn silage. The break-even price of the corn silage ranged from $29 per ton with a yield of 24 tons per acre to $38.78 at an 18-ton per acre yield. 

Corn silage yield per acre is a major factor in determing corn silage price when using crop budgets. As you look ahead to future crop years, consider using some of the crop enterprise budget tools. 

4. Use computer spreadsheets. There are a number of these computer-based programs, ranging in ease of use and the quantity of input data required. These programs value forages based on nutrient content rather than from an enterprise cost of production estimate.  

Here’s a short list of computer spreadsheets to check out:

Pricer: www.uwex.edu/ces/dairynutrition/spreadsheets.cfm

Designed specifically for pricing forages, Pricer requires prices for corn, soybean meal and base forage. Also, it requires information on cow body weight, milk production and milk price. 

Forages.xls: www.das.psu.edu/xls/forages.xls  

Inputs for this program are prices for corn grain, soybean meal and average quality legume hay.

FeedVal: www.uwex.edu/ces/dairynutrition/spreadsheets.cfm

There are different FeedVal programs that vary in the inputs required. The original FeedVal program uses neutral detergent fiber (NDF) as one of the nutrient inputs. FeedVal 3 and 4 don’t consider NDF and are less applicable for pricing forages. 

FeedVal requires prices of corn, soybean meal, lime stone and dicalcium phosphate.

SESAME: www.sesamesoft.com

This program calculates the cost of forages using energy, protein and fiber fractions in the feed. 

All of the computer programs allow you to modify basic forage analysis parameters, such as DM, crude protein (CP) and NDF, so you can get an estimated price based on the quality of forages you either grow or want to buy.
    Most of the programs are fast and relatively easy to use. The simpler programs (forages.xls, FeedVal) require less input information but still provide useful feed price estimates that can be used as a starting point for sale or purchase information. 

The Sesame program, for which you must pay a fee, encompasses more nutrient considerations in estimating feed prices and should give a more precise estimate.

 

Table 1. Predicted forage value, $/ton

Program                Alfalfa hay Corn silage 

                                  20% CP,              35% DM

                                  44% NDF

Forages.xls 164                       51%

FeedVal 169                      48

Pricer                             172                      58

Sesame                        160                     63

 

Table 1 contains an examples of forage prices obtained using four of these programs. Corn grain was priced at $152 per ton; soybean meal at $347 per ton. Predicted forage prices differ between the programs due, in part, to differences in trying to get the same base information into the programs. 

These forage pricing methods can help you determine more closely the value of forages, whether you’re buying or selling them. Make using them part of your decision-making process; it’s important in the current dairy economy and the tight margins.

 

FYI

Larry Chase is an animal scientist at Cornell. Reach him at 607.255-2169. Email: lec7@cornell.edu

Tom Overton is an animal scientist at Cornell University and associate director of PRO-DAIRY. Reach him at 607.255.2878. Email: tro2@cornell.edu.


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