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What is your cost of hay production this season?

Glenn Shewmaker for Progressive Forage Published on 01 December 2016
money bale

Is the market price for hay lower than your cost of production? Do you know your cost of production? I suspect many of us have not calculated it for a while. I recently went through the process of updating a budget for irrigated alfalfa hay in southern Idaho.

Alfalfa production enterprise budgets are complex because establishment factors are different than subsequent production years – we may have different harvest methods within a year and a variable stand life. Alfalfa forage production has high fixed costs with modern equipment and storage facilities.

In this case, I will use 2015 costs and assume establishment costs are amortized over four production years.

Table 1 shows the following calculation breakdowns.

cost of hay production table 1

Click here or on the image above to view the full table.

A maintenance fertilizer program will cost about $96, and metribuzin herbicide and weevil pesticide will cost $23 per acre. Custom application of fertilizer and herbicide cost $8.75, and custom air spray costs $8 per acre.

Harvest costs are estimated for four harvests at $17.25 per acre with custom swathing, custom raking and baling (4-by-4-by-8-foot bales) 7 tons at $22 per ton, and custom stacking 7 tons at $6.25 per ton. Total custom costs are $283 per acre.

Irrigation allows for more consistent production but has a significant cost of $132 per acre. Machinery costs are $9 per acre, and labor totals $45 per acre. I have not included any costs for storage, but we should, because whether hay is tarped, stored in a shed or left to the weather, there is a significant cost. Operating interest is $17 per acre. Total operating costs are $607 per acre or $87 per ton.

Assuming the hay has a value of $140 per ton, the 7-ton yield generates $980 in cash value. So net return above operating expense is $373 per acre. However, ownership costs are $423 per acre or $60 per ton. Total costs are $1,031 per acre or $147 per ton. Returns to risk are minus $50 per acre.

Breakeven analysis shows that a yield of 10 percent less would require a breakeven price of $164 per ton.

Most extension services have sample budgets for hay production. Producers should use their own numbers and management to calculate their own budgets. You should know what your cost of production is so you can negotiate a price that allows the hay producer to stay in business and offers a quality of forage that also allows the forage consumer to stay in business.

Crop enterprise budgets from the University of Idaho can be downloaded from the University of Idaho website.  end mark

Disclaimer: The practices and chemicals specified in the publication are not recommendations. Always read and follow the pesticide label.

References omitted but are available upon request. Click here to email an editor.

Glenn Shewmaker is an extension forage specialist with University of Idaho. Email Glenn Shewmaker.

ILLUSTRATION: Just because you knew your cost of making hay two years ago, doesn't mean you know the cost of today's hay. Illustration by Mike Dixon.

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