Price corn silage with grain in mind
|By Mike Rankin|
Corn is frequently sold “on the hoof” to be chopped for silage rather than harvested for grain. This year, there will be a number of drought-stressed acres sold off for chopping.
Pricing standing corn can be as simple or as complicated as two bargaining parties desire. Regardless of the approach taken, corn grain price will be the major driver of the final negotiated silage price.
So, how should a fair corn grain price be determined?
Although national commodity prices from the Chicago Board of Trade (CBOT) are sometimes used, it’s probably a better approach to rely on local new crop or futures prices. Next, you’ll want to determine if a single day’s price is adequate or if an average of several days in consecutive months is more appropriate.
“In most years, there are about eight bushels of corn grain in a ton of corn silage,” notes Joe Lauer, extension corn agronomist with the University of Wisconsin-Madison. “However, significant variation in this number is caused by the production season, forage moisture, and the actual grain-to-stover ratio.”
Lauer says that many producers will simply multiply the price of grain corn times 7.5, 8, or 8.5 to get the equivalent price per ton for as-fed silage.
“It usually is a good estimate because the cost of grain harvest, which is a savings, is nearly offset by the value of additional nutrients and organic matter removed in the silage crop,” he reasons.
The seller or grain producer is going to look at pricing from the standpoint of what might be made if the corn grain was marketed. There is also opportunity to sell the stover.
To determine the fair market price for corn silage, Lauer says to calculate the potential gross income from grain (price x yield); subtract grain harvesting costs, which include combining, trucking, drying, storage, and harvest loss; and then add back the fertilizer value of the stover being removed. The result from these calculations is then divided by the estimated corn silage yield to give an equivalent price per ton that equals the net grain return.
The buyer of the standing corn begins by valuing the corn crop and then adjusting for harvesting costs plus any quality differentials that might make the crop more or less valuable.
“The silage buyer adjusts the value of the crop based on what it would cost to purchase corn and straw to replace the nutritional value of the corn silage,” Lauer explains. “Forage quality adjustments can be derived through opportunities with marketing milk. Some corn, like brown midrib hybrids, have more stover value than non-brown midrib hybrids.”
These calculations are often more involved than many people want to deal with. Because of this, the University of Wisconsin Division of Extension has developed a spreadsheet (click link to download file) to make this process easier. There is also an easy-to-use phone app available (search: corn silage pricing).
Finally, when buying or selling standing corn, set a per ton price at a given moisture level, then adjust the price if the moisture is something different than the target.