As with corn grain prices, the price of corn silage will increase this year, says Joe Lauer, extension corn agronomist with the University of Wisconsin. He roughly estimates corn silage will go for $25-30/ton if corn grain tops $3.50/bu.
“When corn is relatively cheap, the typical price of $18-22/ton for corn silage is probably reasonable,” says Lauer. “But it's going to be a very different scenario come fall if people have to buy corn silage.”
In a ton of corn silage, the grain yield may average 150 bu/acre, or about 7.5 bu/ton of corn silage, he adds. “At $2/bu, that's $15 just for the grain. But if corn grain is $3.50, then what we're talking about is almost $26 just for the grain itself, not including the value of stover.”
His rough estimates, however, won't be enough for growers and dairymen as they negotiate prices, he says. And alternative feeds aren't much of an option.
“Corn silage,” Lauer says, “becomes an excellent feed when corn grain prices are higher because you have to feed some grain as a source of starch for high-producing cows. You can cut back on your grain purchases with a dairy ration that includes corn silage.”
Lauer suggests growers and dairymen follow University of Minnesota extension dairy nutritionist Jim Linn's lead in valuing corn silage. “When you think about a pile of corn silage,” Lauer says, “about half of the dry matter is grain and the other half is stover. The value of the grain side is pretty easy to get a handle on, because most people use the Chicago Board of Trade price for determining that.
“But Jim Linn took it a step further,” says Lauer. He wanted to determine the value of NDFd and starch in corn silage.
Three components to figuring corn silage value, according to Linn, are a base price plus adjustments to it that reflect the value of the starch and NDFd. Last year it cost about $350-400 to produce an acre of corn silage, Lauer says. “Usually we figure base price on a dry-matter basis: $60/ton, or $20/ton as is in the field.”
In Linn's formula, every percent of NDFd is worth 0.6 lb milk (48-hour in vitro research). “So silage with an NDFd of 60%, at 15¢/lb milk price, will add $5.40 to a ton of corn silage dry matter. NDFd adjustment = 60% × 0.6 × 15¢ = $5.40/ton.
To determine corn silage's starch value, Lauer says, start with 29%, which is the average starch content for corn silage in much of the Midwest.
“If you're above 29% you should get paid more, because that's saying there is more grain in that corn silage than average.”
For example, corn silage at 34% starch adds $8.75 for $3.50/bu corn (CBOT price). Starch adjustment = ((34% - 29%) × 0.5) × $3.50 = $8.75/ton.
To put it all together, the equation is: corn silage value = base price + NDFd adjustment + or - starch adjustment, or $60 + $5.40 + $8.75= $74.15 (dry-matter basis) or $24.72 (wet basis).
“All price points are negotiated,” Lauer says. “The corn and milk prices can be derived from futures prices. The base price should at least cover production costs. The incentive for the grower is to produce good-quality forage and the dairyman should be willing to pay for it. Starch and NDFd adjustments are based on science as far as we understand how starch and NDFd affect a dairy cow.”
For the second year, the Wisconsin Crop PEPS Program will offer a corn silage division.
PEPS stands for Profits through Efficient Production Systems, a program where growers can compare the economics of their cropping systems. Growers can also opt to take part in the PEPS contest, which encourages profitability, efficiency and conservation, as well as productivity.
PEPS recognizes top producers for highest-yielding grain corn and soybeans, as well as for producing the most ethanol per acre of corn and the most protein and oil per acre of soybeans.
“This last year we added a corn for silage division,” says Joe Lauer, University of Wisconsin extension corn agronomist. “In that we use the approach promoted by Jim Linn, University of Minnesota extension dairy nutritionist, to really get at the value of corn silage (see main story).
“Many corn grain growers are entering cooperative agreements to produce corn silage for large dairies. Understanding the economics of silage yield and quality — and their influences on milk production — is critical for developing fair contracts,” Lauer says.
“PEPS pushes the discussion on crop production economics and we do the best that we can and try to be as fair as we can,” he adds. “The University of Wisconsin has promoted milk/ton and milk/acre as a way of estimating the value of corn silage, because there is a trade-off between yield and quality. Frankly, farmers don't use these concepts to set silage value because they look at the Chicago Board of Trade to set the price. To accurately and fairly determine the value of corn silage, farmers must value both the grain in that field and the stover.”
For information on the program, visit the Wisconsin Crop PEPS Program site.
For pros and cons of contracting corn silage acres, download a paper by Mike Rankin, UW extension crops and soils agent for Fond du Lac County. The Web url is: cdp.wisc.edu/jenny/crop/contract.pdf.