November 2018
The Business of Farming

Hay Economics

Just to cover myself, I will say from the beginning to the end of this article that grazing animals make more money than animals eating from a hay ring or feed trough. There is no doubt as to the truth of that statement. The same animals in a knee-deep pasture of healthy forages will look better, breed back better, and cost you less to maintain than the same animals in a pen with range pellets (or a molasses lick or whatever your preference may be) and umpteen bales of hay. I know the arguments about not wanting to plant winter annuals. It’s too expensive. It’s too weather dependent. There are always weeds (particularly turnips) in the seed. There are several reasons for not planting good forages. Unfortunately, none of them (except for the weather issue periodically) will "float" when you look at the research and economics associated with the comparison. But that being said – most folks will need to feed for a couple of months each year, and hay will be their choice of roughage. So, what can we do to reduce the cost of feeding hay?

To start with, really analyze whether you need to grow or buy hay. Most folks have fewer than 50 cows, and with that size operation, if you aren’t providing your own hay AND selling quite a few bales of hay, the fixed cost of owning hay equipment and maintaining a hayfield is very costly. Economy of scale refers to the fact that with all things equal, as you produce more, in this case hay, your fixed costs are lower per unit. There is just a certain amount of production that is needed to spread the cost of equipment over each unit to the point it makes financial sense. If you own $150,000 worth of hay equipment, the fixed costs per ton to bale 100 tons would be somewhere around $108/ton and the fixed cost per ton to bale 600 tons would be somewhere around $18 per ton. That is $54 per bale in fixed costs for the small guy and $9 per bale in fixed cost for the big guy. Those costs DO NOT include fertilizer and other variable costs. So, you can see there is a very real economy of scale that should be considered in the decision to bale or buy. Have I mentioned that grazing animals make more money than animals around a hay ring or feed trough?

The next thing to consider is storing your hay. The ideal situation for most folks would be to buy their hay, and have the supplier hold it in a barn for them until they are ready to feed it. Unfortunately, most suppliers have limited storage space, too, and tend to charge a premium for hay they store for you and deliver when you want it (as they should). So, most folks who buy hay and all folks who bale their own hay end up needing a place to store it. The best-case scenario would be to have a barn or some other type of shelter to protect your hay. The losses will be minimal in that situation … somewhere in that 0-5 percent category. However, what about if you don’t have a barn? Then you must explore your options and look for the best scenario for your situation. Hay doesn’t need to stand in water and it needs to be where it can get air circulation and some sun to dry out after getting wet. Unfortunately, most folks tend to store hay close to their hayfield (around the edges usually) in the places where they aren’t going to cut and bale the next time it’s ready. A lot of times those places are damp or even downright wet and have limited air circulation (pecan tree anyone?). Hay storage waste becomes significant in those situations. Losses of 20-40 percent are not unusual. So, what does that mean? That means that if you are storing your hay in the bottom alongside the hayfield under the pecan trees you will need anywhere from 15-35 percent more hay because you will lose that much. If you need 200 bales of barn-stored hay to feed your momma cows for the winter, you will need around 270 bales of hay when you factor in the waste of storing it outside on the ground. Have I mentioned that grazing animals make more money than animals around a hay ring or feed trough?

The last part of the process is feeding the hay itself. There can be significant loss associated with this part of the process, too. The variation in loss for feeding methods is just as significant as the variation in loss for storage methods as far as waste is concerned. Feeding hay in an enclosed cone feeder usually results in hay losses of 2-5 percent, whereas feeding on the ground with unlimited access over multiple days can result in up to 40 percent waste of hay. So, if you figure somewhere in the middle of that you can assume that by NOT feeding in a hay cone or ring you are costing yourself somewhere close to 22 percent of your hay. Which means, just like in the above example of loss in storage, you will need 22 percent more hay to accomplish the feeding of the herd. Have I mentioned that grazing animals make more money than animals around a hay ring or feed trough?

If you carefully evaluate your hay feeding operation, you might find that some small investments pay large dividends. It has been said that you pay for a hay barn whether you build it or not. I tend to think there is a lot of truth in that statement, because if you stay in the cow business for very long, the losses you accumulate from storing your hay outside on the ground would have more than paid for a nice hay barn. However, I think that if I could take the liberty to tweak that saying just a little, I would say that you are going to pay for a hay barn AND some cone/ring feeders whether you buy them or not. Sometimes doing your homework ahead of time, making smart purchases, and preparing for cattle feeding before you run out of grass will make you money. And finally, have I mentioned that grazing animals make more money than animals around a hay ring or feed trough?

 

Ken Kelley is a regional farm and agribusiness management agent for Alabama Cooperative Extension System.