Dan Undersander offers pointers on how to price standing hay during an early June webinar hosted by the Professional Dairy Producers of Wisconsin. Undersander is the University of Wisconsin Extension forage specialist.
Buyers and sellers of standing hay should consider the amount of risk involved and set prices acknowledging that buyers will carry most of that risk, said Dan Undersander, University of Wisconsin Extension forage specialist.
Undersander suggested how to price hayfields last week before delving into the scheduled part of a webinar called “Jump Start Alfalfa Stands.” The webinar was hosted by the Professional Dairy Producers of Wisconsin.
“The greater risk is assumed by the buyer; there is potential for growing conditions that you may not have been able to imagine when you bought the hay. There is yield variation that is potentially going to show up. Then you’re also not quite sure of the quality of the harvested forage you’re going to get,” although some do lessen the risk by buying hay on a quality basis, he added.
Wisconsin hay buyers are buying standing hay anywhere from $50/ton up to $200/ton, Undersander said, although he believes most fields averaged $120-150/ton for this year’s first cutting.
Buyers should pay less for hayfields as the amount of time increases between when the transactions are made and when the crops are harvested. “If you purchase hay from a field for a season, you really don’t know what’s going to happen between first cutting … and second cutting.”
He suggested negotiations be made by the ton rather than by the acre. “Yield can vary all over the place. There are fields out there that have close to 3 tons/acre on first cutting, and there are fields that have close to 1 ton. By far, it is best for both parties to buy and sell by the ton.”
Anyone set on making a per-acre deal should remember that not all cuttings yield an equal amount of forage.
For most of Wisconsin and into Minnesota, he added, “on a three-cutting basis, we expect about 40% of our yield on first cutting and about 30% each on second and third.” With a four-cutting system, yield percentages can range around 35-25-20-20 (see Yield Distribution table). Those figures are from 25- to 30-year averages.
In 2012, he warned, 60-70% of the yield was produced at first cutting; drought pretty much dried up later cuttings.
Before setting prices, buyers and sellers need to decide who will harvest, the forage specialist said. “If the seller is harvesting, then that’s a cost of about $50-60/acre (not including transporting). If the buyer is harvesting, that charge goes to the buyer and needs to be subtracted from the cost.”
Fertilizer and insecticide costs should also be included. “As we’re thinking of buying standing second or third cuttings, across most of the Midwest, we need insecticide to keep the potato leafhopper down. Who’s going to pay for that? If that isn’t going to happen, then we have to figure that the yield is going to be 20-30% less.”
It will cost about $57/ton to replace nutrients removed with the hay, he figured (see Values of Minerals table). The University of Wisconsin offers a spreadsheet that growers can use to figure their own estimated fertilizer and nutrient values.
“What we’re seeing is that a lot of the standing forage is selling for around $120-150/ton (for first cutting). It will be around that $100-150/ton price for second cutting where the yields are less. What the seller is getting and the buyer is paying depends on the local market and can vary widely.”
For additional information that offers a formula considering buyers' harvesting costs and landowners' growing costs, visit Michigan State University's June 13 posting called: "Buying standing hay crops in 2014." It was written by Jerry Lundquist, MSU Extension.