January 30, 2003

Pricing Forages on the Farm a Key to Determining Profitability, Specialist Says

Regardless of price and availability, forages remain the most important component when balancing diets for the dairy cow. Because the majority of North Dakota dairy farms raise their own forages, assessing profitability of their farm operation requires not only knowing the cost of production, but the market value as well, says a North Dakota State University dairy specialist.

"There are several ways to determine market value. Which method you choose depends on how accurate you want to be, the detail of records kept, and how much time you wish to put into your calculations," says J.W. Schroeder of the NDSU Extension Service. Following are some methods to consider pricing for legume-grass forages and corn silage.

Hay Auctions. While not currently available in North Dakota, hay auctions are common in many other states. To establish the going rate, use the selling price of auction hay that matches the quality of your hay. To price haylage, adjust the hay price for the dry matter content of the haylage. The quick adjustment is hay price times dry matter (DM) equals haylage price as fed (AF).

Relative Feed Value Rule of Thumb. For this method, use the relative feed value (RFV) and percent dry matter (% DM) as follows:

$/ton as fed = ($/ton of DM) x (%DM/100), where $/ton of DM = RFV-26

For example, haylage at 152 relative feed value and 50 percent dry matter would be valued at $63 per ton.

Energy-Protein-Fiber. This method uses prices of corn, soybean meal, and grade 2 (103-124 RFV) hay to calculate the value of hay of grades other than grade 2 at 89 percent DM. Use a different formula for each grade of hay as follows:

Price (above 150 RFV): $/ton = (0.191 x S) + (0.057 x C) + (0.742 x H)

Grade 1 (RFV 125-150): $/ton = (0.045 x S) + (0.067 x C) + (0.879 x H)

Grade 3 (RFV 87-102): $/ton = (-0.071 x S) - (0.08 x C) + (1.146 x H)

Where S = price of soybean meal (44%), C = price of corn, and H = price of grade 2 hay (103-124 RFV), all in $/ton.

Relative Feed Quality (RFQ) is also being determined by some commercial labs. Do not substitute RFQ for RFV when estimating Method 3.

Rule of Thumb. To calculate the price of corn silage using the rule of thumb method:

$/ton (35% DM) = 10 x $/bushel

If corn silage has to be hauled a significant distance, you will need to make adjustments for cost of transportation or adjust the factor of 10 to a lesser amount.

Energy-Protein-Fiber. To calculate the price of corn silage based on energy, protein, and fiber:

$/ton (35% DM) = (0.19 x C) - (0.059 x S) + (0.263 x H)

Where S = price of soybean meal (44%), C = price of corn, and H = price of hay, all in $/ton.

Energy-Protein. To calculate the price of corn silage based on energy and protein:

$/ton (35% DM) = (0.265 x C) - (0.11 x S)

Where S = price of soybean meal (44%) and C = price of corn in $/ton

"Everyone’s costs are different," Schroeder notes. "The problem with thumb rules is that they don’t fit most operations. There is no replacement for actual farm records. In the situation where this is the best information you have, however, using a rule of thumb can help you establish a reasonable range to estimate your profitability."

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Source: J.W. Schroeder, (701) 231-7663, jschroed@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu