Produce hay to make a profit
Whether a rancher grows hay to feed his livestock or someone else’s, the enterprise isn’t worthwhile unless it makes money.
Surprisingly, many hay producers have no idea how much it costs them to produce a crop.
University of Kentucky Extension hay marketing specialist Tom Keene says essentially, producers have two ways to market: as cash or as hay for their own livestock enterprise. Regardless of which path a producer takes, the hay budget must be unto itself.
“There’s only one way you can know whether you’re making money: You have to go through the numbers,” Keene says.
After a producer runs through the cost of producing hay, he or she needs to figure one more number: storage losses.
• Hay production needs to be run as a separate business.
• Know hay costs, whether selling to the cash market or your own livestock.
• Set price based on production costs and local market.
“The numbers get a lot worse,” Keene says. “And they get worse quick.”
That’s only one of the reasons growing hay for profit is different from any other commodity. Another is that “no bale of hay is quite the same.”
What that means to producers is they must decide which market their hay fits.
The dairy market wants large round bales; demands a test; looks for 20% crude protein, 30% acid detergent fiber and 40% neutral detergent fiber; and measures feed performance by milk production. Dairy producers prefer alfalfa.
The horse market wants small square bales, doesn’t necessarily ask for a test, and buys on sensory perception. Those who buy hay for their horses have no way to measure feed performance in their high-value animals. They like hay that smells fresh and looks green.
“That hay absolutely, positively must be clean. No mold, dust, weeds, foreign matter, blister beetles,” Keene says.
The beef market wants large round bales, measures performance on pounds gained and has varying quality needs. “We throw anything out at them,” Keene says.
Most of the hay grown for the beef market is grown by producers for themselves. “Most of you are probably selling hay to your own operation,” Keene tells a group of cattle producers. “I hope you’re keeping track of the numbers.”
Other markets include — but certainly aren’t limited to — sheep, mulch, goats, llamas, emu, zoos, nurseries, feed stores, rabbits, gerbils, medical research and, most recently, energy.
Regardless of the market, Keene says, growers need to know the cost of producing the hay and the current prices in their market area so they can set a price that moves the hay and brings a profit.
Current prices can be found by looking at USDA hay prices on the Web, asking neighbors and Extension agents, or even checking the sales ads.
“That’s going to give you an idea of what your hay will bring in the market,” Keene says. “Only you know what it’s worth.”
Once that price is set, Keene says, collect the money on delivery.
“If you sell somebody a car or pickup truck and they can’t make the payments, you can go back and get that vehicle. You can’t go back and get your hay,” Keene says. “It’s gone.”
PAY ATTENTION: Alabama cattle producer Eric Smith keeps track of a forage’s cost and income as though it were a row crop.
This article published in the March, 2010 edition of SOUTHERN FARMER.
All rights reserved. Copyright Farm Progress Cos. 2010.