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April 28, 2005 Crop, Livestock Producers Can Reach Hay Sharing Arrangement Oats and other small grains routinely are utilized as a part of the forage supply for beef cattle in North Dakota. These crops are more important in years with reduced pastures and perennial hay supplies. This year, many livestock producers in southwestern North Dakota again will be relying on annual forages to provide a substantial part of their winter-feed needs. For livestock producers who do not have enough cropland to raise needed hay, arranging to rent or buy from an area crop producer at the start of the season may be an alternative. Oats and other small grains harvested as hay may be a competitive rotational crop for many producers, but they typically do not have hay harvesting equipment, says a North Dakota State University agricultural economist. “This is where a share rental arrangement with a livestock producer would fit in,” explains Dwight Aakre of the NDSU Extension Service. “The crop producer would have the equipment needed to plant and spray the crop, while the livestock producer would have the equipment to harvest and haul the hay.” Based on the latest budgets, projected costs for seed, fertilizer and herbicide for oats in southwestern North Dakota are $19.82 per acre. Using custom rates is the easiest way to account for machine work costs. By using custom rates, all costs are covered. Those costs include the use of the machine, fuel, repairs and operator labor. Custom rate charges for no-till seeding and spraying are $14. In addition to these costs, the crop producer is contributing the land resource. The value of this contribution is the cash rental value, which will vary considerably by quality of land and other factors. The average reported cash rental rate for the southwest region of the state is $24.70 per acre. This brings the total value of the crop producers’ contribution to $58.52 per acre. The livestock producer would be contributing the machinery and labor to harvest and haul the hay. “Assuming a 2-ton per acre yield and round bales weighing 1,500 pounds, there would be 1.3 bales per acre,” Aakre says. “Custom rates for mowing/conditioning, baling and hauling total $20 per acre. This would be the contribution of the livestock producer.” The total cost per acre in this example is $78.52. Of this total, the crop producer is contributing 75 percent and the livestock producer is contributing 25 percent. An equitable share arrangement would have each party share the hay in the same proportion. Another arrangement possibility has the livestock producer paying for the seed, fertilizer and herbicide, in addition to the harvesting and hauling. The crop producer would provide the land and the seeding and spraying operations. This sharing arrangement would work out to an approximately 50/50 cost sharing. Under this arrangement, the crop would be split equally. “With either of these arrangements, the crop producer will end up owning a percentage of the hay,” Aakre says. “It is likely that the livestock producer would be the best market for his share. Both parties must agree to a fair price for this portion of the crop. Since the crop producer has fully paid for his share of the crop, the market price for his hay should reflect full market value.” If the crop is covered by federal crop insurance, it is necessary to report these acres as oats for hay so they will not be included as insured acres. A failure to do so may be considered unauthorized disposition of an insured crop. These acres also must be reported as oats for hay when the acreage is certified with the Farm Service Agency. This will ensure consistent information reported to both USDA agencies. ### Source:
Dwight Aakre, (701) 231-7378, daakre@ndsuext.nodak.edu
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North Dakota State University |
