# Figuring 2011 Hay Prices.



## rjmoses (Apr 4, 2010)

It's a cool, wet morning here and I don't have anything better to do (yes, I do, but that's another story), so I just started putting pencil to paper and came up with some numbers that impressed/depressed me.

Assuming:

Corn at $7-8/bu, 150-200 bu/ac yield, input costs of $150-200/ac gives a gross profit range of $850 (low price * low yield - high cost) up $1,450/ac (high price * high yield - low cost). Mid-range = $1,150/ac

Beans at $12-14/bu, 40-60 bu/ac yield, input costs $150-200/ac gives a gross profit range of $330 - 640/ac. Mid-range = $480/ac.

Extending this thinking to hay at 3 - 5 tons yield/ac, input costs of 300# potash @ $500/ton, 100# DAP @ $400/ton, 150# urea @ $450/ton and fuel @ $4/gal = total input costs of $150 - $200/ac.

To compete with corn, hay should sell for:
($850/ac profit + $200 input) / Low yield (3 tons) -- $350/ton
($850/ac profit + $200 input) / High yield (5 tons) -- $210/ton
($1450/ac profit + $150 input) / Low yield (3 tons) -- $533/ton
($1450/ac profit + $150 input) / High yield (5 tons) -- $320/ton
Mid-range $1,150 + $175 / 4 tons = $331/ton.

To compete with beans:
($330/ac profit + $200 input) / Low yield (3 tons) -- $176/ton
($330/ac profit + $200 input) / High yield (5 tons) -- $106/ton
($640/ac profit + $150 input) / Low yield (3 tons) -- $263/ton
($640/ac profit + $150 input) / High yield (5 tons) -- $158/ton
Mid-range $485 + $175 / 4 tons = $163/ton

This gives an average range of $165/ton to $331/ton for hay prices.

(My calculations are grain profit + hay input costs vs hay yield. )

I've already started telling some of my customers to expect quality hay in the range of $200/ton this year, assuming a reasonable hay season. Wet or dry weather will change things.

Is my thinking and numbers on track?

Ralph


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## JoshA (Apr 16, 2008)

Around here, crop prices have extremely little to do with hay prices. The exception to this is that if grain is cheap, the feedlots an ranchers will just feed more grain. Honestly this doesn't really change the market here [to my knowledge], just means you might be selling to more horses vs more cows.

If you told someone $200/ton here they'd laugh at you. Its not because your price is out of line, just that your inputs are different. My inputs are about $45/bale and my bale is just under 1,500lbs. Problem is there are too many guys selling hay here for $35-45 a bale, so selling it at 55-65 everyone thinks you're crooked or making a killing off it.


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## rjmoses (Apr 4, 2010)

Josh:

If I figure it right, your input costs are in line with my thinking: You said $45/bale, 1500# bale = about $60/ton or $240/ac at 4 tons/acre.

Selling at $35-45/bale, you're grossing about $48-$60/ton. It seems to me, unless I'm missing something, you're about breaking even.

This is what's got me thinking -- What's my best ROI?

Ralph


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## haybaler101 (Nov 30, 2008)

rj--better double your inputs for corn. Seed will be $80 to $100 and acre depending on traits and population. Fertilizer for 200 bu. corn --400 lbs urea @ $550 = $110.00 lbs potash @ $600 = $60 and 100 lbs DAP @ $650 = $32.50 Total fertilizer = $202.50 You have already spent $200 an acre and still don't have fuel, herbicides, insecticides, fungicides, repairs, machinery cost, labor, drying cost. If you guys are selling hay of any kind for $60 bucks a ton, you won't be for long. You are going to do good to cover your labor, fuel, and machinery cost at this. No fertilizer, seed, chemicals, or land cost at all. Straw is bringing $100/ton here, can't sell hay for less than straw.


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## mulberrygrovefamilyfarm (Feb 11, 2009)

If you're talking about taking alfalfa out and putting in corn for a ROI comparison, at least on my ground around here, there's no need for fertilizer to grow 180 bu corn. My soil tests have shown, and my yields have corroborated, that after alfalfa comes out I can go strait to corn without fertilizer , although it can be short on P if I didn't keep that up on the alfalfa. I also don't need X-cides inputs because corn hasn't been in the rotation to cause pests to be a problem. But that's here and everyplace is different. If you really want more to play with numbers checkout Estimated Costs of Crop Production in Iowa - 2011 from ISU. This one is corn following beans but you can adjust the variable expenses depending on your fertilizer requirements and other variable costs to allow for a good planning tool depending on what's going in and coming out etc. Checkout the hay budgets on the same page.


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## swmnhay (Jun 13, 2008)

I think you still need to fertilize to maintain your soil.Although you don't need as much N after alfalfa for corn.I give about 100# N credit for the alfalfa and put on 60-75# of actual N.And according to soil tests P & K what is called for.I havn't tryed not putting on any N,I just don't feel comfortable without any on with the price of corn.

My fertilizer prices are about the same for alfalfa or corn after alfalfa per acre.

Machinery costs are about the same.

Planting corn will cost me.
100 seed
25 chem
10 ins.

So it will cost me about 135 more to tear out some alfalfa this spring and go to corn.

Can contract corn for $6.

Hay is cheap here now,yes its gonna go up.But I can't contract it at a decent price anyway.

180 x 6.00= $1080 - 135= $945

To get an equal profit per acre I would need.

$945 divided by 5 ton = $189 a ton
5.5 ton = $171
4.5 ton = $210

Typicaly grow 200+ bu corn after alfalfa if fall plowed here.

What to do ????????


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## rjmoses (Apr 4, 2010)

haybaler101 said:


> rj--better double your inputs for corn.


Yepp. My input costs for corn, beans and hay are probably low, depending on where a person is located. I know I didn't included chemicals, insurance, herbicides, etc., because I figure these are pretty much the same from crop to crop. even if I add $150 to corn and beans input costs, the gross profit margins are still radically out of proportions.

I stand by my position that $60/ton hay is a money loser; for that matter, so is $100/ton. The price vs investment (sales price vs input cost, etc.) needs to be in the $200+/ton to be commensurately profitable, at least in the Midwest. In other areas, where the ground and weather are not as well suited to row crop production, the price can be lower.


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## haybaler101 (Nov 30, 2008)

rjmoses said:


> Yepp. My input costs for corn, beans and hay are probably low, depending on where a person is located. I know I didn't included chemicals, insurance, herbicides, etc., because I figure these are pretty much the same from crop to crop. even if I add $150 to corn and beans input costs, the gross profit margins are still radically out of proportions.
> 
> I stand by my position that $60/ton hay is a money loser; for that matter, so is $100/ton. The price vs investment (sales price vs input cost, etc.) needs to be in the $200+/ton to be commensurately profitable, at least in the Midwest. In other areas, where the ground and weather are not as well suited to row crop production, the price can be lower.


Not arguing your point at all, just saying even with my higher inputs for corn, corn still is more profitable than alfafla this year. Already tore out 60 acres and probably hit another 70 after first cutting. I only give about 30 lb N credit to previous crop of alfalfa and 20 to beans. I figure if more is there, I can just push yields higher, ready for some 300 bu. corn.


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## Toyes Hill Angus (Dec 21, 2010)

I don't have any formulas or calculations to back me up on this but with everybody (so it seems) taking hay out to row crop, my hay will be at higher demand, and low supply and high demand creates a high price.








like I said no math, just a thought


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## OhioHay (Jun 4, 2008)

I would agree that the returns look higher for corn. I also think that Toyes Hill is right and there will be a bump in hay price. We are hay farmers geared for hay production and we will stick to that and hopefully gain some more customer base from the fly by night hay producers that are chasing the corn dollar this year.


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## haybaler101 (Nov 30, 2008)

OhioHay said:


> I would agree that the returns look higher for corn. I also think that Toyes Hill is right and there will be a bump in hay price. We are hay farmers geared for hay production and we will stick to that and hopefully gain some more customer base from the fly by night hay producers that are chasing the corn dollar this year.


Hay prices will increase due to supply and demand, however, corn prices are already there. I have over half of my corn production already contracted at high prices, and inputs were all locked last fall. The profit WILL BE THERE this year, either from production or crop insurance. The price for hay is not guaranteed yet and may not be there for another 6 to 12 months, I do think quicker. Yes, I am chasing the corn dollar this year, but I am no fly by night hay producer. I actually have a lot more money invested in hay equipment than row crop equipment, but the reason being the hay equipment is all new (no time for breakdowns) and I maintain the row crop equipment (beating the rain is not as dire). Yeah, won't be able to service all my customers this year, but I couldn't service all of them last year. Going to do what I can to help the good ones secure hay needs for 2012 and beyond.


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## Toyes Hill Angus (Dec 21, 2010)

Welcome to the ebb and flow of farming. This is nothing new or by any means what so ever. Any time crop prices are high, hay acres goes down. When the commodity market is low hay acres come back. There is no need for panic. A beef farmer friend of mine takes this philosophy to the next level, he combined 2010 corn in late February/early March did not put a rut in the feild, paid no drying and made almost $100 a ton in the process. I by no means recomend leaving corn out late, even with the new traits in corn it can go down, which equates to reduced yeild, drying gets more expensive due to the ambient temperature and frozen grain. All I am saying is make a plan, think it over and decide what you want to do. Haste will always make waste."I do think quicker" (hay baler), well I maybe don't think quite as fast, but I "git 'er done"just the same, and I make mistakes and miss opprotunities but I live comfortably and sleep well at night. It will take me some time to prep. and reseed hay ground. And alfalfa seed is quite costly. Steady as she goes.


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## mlappin (Jun 25, 2009)

OhioHay said:


> I would agree that the returns look higher for corn. I also think that Toyes Hill is right and there will be a bump in hay price. We are hay farmers geared for hay production and we will stick to that and hopefully gain some more customer base from the fly by night hay producers that are chasing the corn dollar this year.


I'd hardly call myself a fly by night hay producer having done it for 30 years now. _But_ I'm beyond tired of fighting wet summer after wet summer only to turn around and just break even after all the headaches of getting it made. At this rate looks like we are going to have a 4th wet summer in a row.

Does it make me fly by night when I put all the extra time and fuel in trying to get hay dry in absolute miserable conditions only to turn around and give it away? Does it make me fly by night when the returns on row crops at the moment are considerably better than hay with a considerably less amount of work involved to get row crops in and out? I think not, makes me honest, why fight a barely break even proposition when row crops offer the better return.


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## OhioHay (Jun 4, 2008)

Didn't think I would get such a rise out of people with that comment. Over the past 20 years I have watched guys jump in and out and all around the different commodities. Some are still in business, some are not. I just don't have the philosophy of running with the crowd. What farmers do best is overproduce and that will come true with corn and beans, just like it did with hay after 2008 pricing, and then this site will be buzzing with all the hay acres being planted. Just my 2 cents!


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## haybaler101 (Nov 30, 2008)

OhioHay said:


> Didn't think I would get such a rise out of people with that comment. Over the past 20 years I have watched guys jump in and out and all around the different commodities. Some are still in business, some are not. I just don't have the philosophy of running with the crowd. What farmers do best is overproduce and that will come true with corn and beans, just like it did with hay after 2008 pricing, and then this site will be buzzing with all the hay acres being planted. Just my 2 cents!


Yes, farmers do overproduce. BUT, this is the first time in a very long, long, long time that the grain market is truly working off of supply and demand. The hay market has always been a function of supply and demand. For many, many years the government subsidized grain farmers to overproduce. I dairy farmed during that time, fed all my own grain and raised alfafla. 9 years ago, sold dairy and kept a diversified grain and hay operation. At that time, basically planted row crops as a rotation in and out of alfafla because there was more profit per acre in alfalfa. The government subsidies made grain farming a break-even venture. The dynamics have changed dramatically in the past five years. Some blame ethanol, but the fact is this earth has 9 billion people and looking to double that in another 40 years. A lot of these people are located in India and China are experiencing a higher standard of living due to fact their economies are improving (and ours is regressing). They want to eat a little higher on the food chain and it is going to take a lot of US grain to do this. They want to eat animal protein and they need our feed grains. More importantly, they have the money to buy the goods and thus is driving up prices for commodities. This will have long term positive impact on US Agriculture. We currently can not grow enough corn to support the world market, and soon we will find the demand for pork, milk, and beef far outreaching what we can supply. The good news is that the demand for beef and milk will increase the demand and price of hay. Hopefully, our government will not do anything detrimental to our export business and let ag continue to build and work on a supply and demand basis. To keep this rant from getting any longer and to sum up, what I am trying to say is this, the market looks best for row crop acres now. Marginal stands of hay or stands of low quality hay can not be left in place and pass up the opportunity for larger profits from corn and beans. I am not saying that every hay acre should be converted. Some ground grows great alfalfa, but struggles with row crops. Now more than ever, we must plant and cultivate what is most suited for our land base and what the market desires.


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## rjmoses (Apr 4, 2010)

haybaler101 said:


> Yes, farmers do overproduce. ..... Now more than ever, we must plant and cultivate what is most suited for our land base and what the market desires.


Very well said!

Now, all I have to do is figure the last part out. Easy, right?

Ralph


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## OhioHay (Jun 4, 2008)

haybaler101 said:


> Now more than ever, we must plant and cultivate what is most suited for our land base and what the market desires.


I would agree. I think this should be the goal of every business. Well said.

As for corn being a true supply and demand market. I think that it is functioning better, but any *commodity* that has it's price set or influenced by a system that lets speculators trade paper as a regular practice will never truely function off of supply and demand. The market will almost always move too far in each direction due to the influence of this trade. Thus the terms oversold and overbought.


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## haybaler101 (Nov 30, 2008)

OhioHay said:


> think this should be the goal of every business. Well said.
> 
> As for corn being a true supply and demand market. I think that it is functioning better, but any *commodity* that has it's price set or influenced by a system that lets speculators trade paper as a regular practice will never truely function off of supply and demand. The market will almost always move too far in each direction due to the influence of this trade. Thus the terms oversold and overbought.


Yeah, that's the bad thing about Chicago, to many people dealing corn and the other commodities that do not know what they look like, what it takes to produce, or anything else for that matter. Just a piece of paper with 5000 bushels of corn on it.


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## rjmoses (Apr 4, 2010)

haybaler101 said:


> Yeah, that's the bad thing about Chicago, to many people dealing corn and the other commodities that do not know what they look like, what it takes to produce, or anything else for that matter. Just a piece of paper with 5000 bushels of corn on it.


I developed software for commodities trading for over 20 years before selling my business and getting into farming. The software I developed is still used by firms like ADM, Cargill, Lind-Waldock, and dozens of other companies. I spent a lot of time on the floors at the CBOT, CME, and New York.

Among the many things I learned, the one that sticks the most is "Commodities trading is where people buy something they don't want and sell something they don't have." I saw many people make a lot of money one day and give it all back the next. The only people who really make the money is the brokerage houses, and their best customer is the one who doesn't trade, just leaves their money in their account.

Upon reflection, I think speculation like that is bad for the economy in that it makes things to volatile.

Or maybe there should be a hay contract, like butter, eggs, grain, cattle, T-Bonds, etc.

Ralph


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## wirong hay (Mar 12, 2011)

hi guys it do,nt seem to mater wherein the world you are farming is getting harder,i know ower machinery is getting bigger and not always better.labour still a problem and we have to spend more time to make less money. here in australia alfa prime hay in small bales 8to 10 dollars 40 bales to the ton big squares 350 aton the aussie dollar is 1.10 to the us doillar so export hay to asia will be hard fuel1.55 a litre thats 4 litres to a us gallon oh by the way no farm subside,s here anyway happy farming wirong hay


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