To determine a fair price, start by multiplying the expected grain yield times the current price, then subtract the harvesting, drying and storage costs the seller won’t incur if the crop is sold for silage. Then add a few dollars per ton to cover the value of the nutrients that will be removed in the stover
Mike Rankin thought he’d never see prices for standing silage corn hit $50/ton.
“I can remember the $16 days,” says this University of Wisconsin Extension crop and soils specialist.
But with corn grain prices hovering around $7/bu, it’s going to take record-high silage prices to pry the crop from growers this year, he says.
“The seller’s got to have an equal price to what he or she could get selling it for grain,” says Rankin. “It has to be at least equal and could be a little more.”
To determine a fair price, start by multiplying the expected grain yield times the current price, then subtract the harvesting, drying and storage costs the seller won’t incur if the crop is sold for silage. Then add a few dollars per ton to cover the value of the nutrients that will be removed in the stover.
“Those, in my mind, are the major components,” he says. “Then you take an equivalent corn silage yield in terms of wet tons and divide that into that net to give you a cost per ton on a wet basis.”
Rankin calculates a $50-53/ton price based on $7/bu corn and a 150-bu/acre grain yield, which converts to about 20 tons/acre of silage.
“The other important thing to consider, that a lot of people don’t, is the moisture content,” he says. “Any price that you set has to come with a given moisture content and then be adjusted up or down just like you would sell high-moisture corn. That can make a bigger difference than what people think.”
The preset moisture content usually depends on the type of silo; 65% or 68% is often used.
“The percent is immaterial as long as everybody understands it and knows that the price is based on that moisture.”
The buyer and seller also should agree on when and how the corn grain price is set.
“I’ve seen deals where, when they harvested the silage, corn was a dollar and a half more than when they decided to settle,” says Rankin. “Then the question is, ‘which price are we going to use?’ ”
The fairest method may be to use the local price on the day of the agreement or the day of harvest. The average local price over a few months or the Chicago Board of Trade price on a predetermined day also are possibilities. The important thing is that both parties agree in advance.
“We have farms that actually do use the Chicago price or an average of the Chicago price over time, and everybody understands that,” says Rankin.