We have been asked to make a number of presentations on the costs of making hay over the last year.  We’ve gleaned a few items that might be helpful as livestock producers plan for the future. The process of getting prepared for these talks has been an eye opener for us.  Some of the commonly held assumptions now need to be reconsidered.  What do we mean?  First, consider that more than half of the total costs of producing a ton of hay are spent on fertilizer (Table 1).  In the past our focus has been on total machinery costs as the most important factor in producing hay, but that is no longer the case.  Second, alfalfa hay costs less per ton to produce than nitrogen fertilized grass hay.  This is a major change, when previously alfalfa was considered a premier crop with a premier cost, and was reserved for lactating dairy cows.  Third, our traditional ways of feeding hay to beef cattle (typically 6 months of the year) are not financially sustainable under current conditions.

The high costs of hay production are driven by the increased costs of energy and its effect on fertilizer manufacturing and transportation.  Of course, we all wish that these high costs would go away and prices would settle down to the good old days of $0.25 per lb. for nitrogen.  We do not think this will happen, so we are left to ask, “What should I do”?  Listed below are seven items to consider or mull over while making hay this summer.

Table 1.  Example Costs of Hay

1.  All informed decisions start with information or data.  The starting point has to be farm-level production and financial records to support estimating your per-ton costs of hay production. Combining the financial records with production/field records (yield, soil tests, cropping and management data) will provide information to make field or farm-level decisions to lower costs and increase profit levels.  For example, efficient allocation of purchased fertilizers on the most productive fields will lower total costs of producing hay and in turn lower total feed costs for the beef herd.  These economic determinations can only be made on the basis of field level yield and cost data.
2. Table 1 points directly to one important factor that has been known for decades.  That is, using clovers and/or legumes in your grass hay stands can replace nitrogen fertilizer applications.  In this example, a small investment in clover seed saves $33 per ton in on-farm hay costs and subsequently lowers feed costs. 
3. Alfalfa should be produced on highly productive land instead of on nitrogen-fertilized grass hay.  The cost savings are not quite as high as with clover-grass hay, yet the savings and the higher quality hay may make alfalfa a more cost-effective hay crop, thus lowering winter feeding costs.  An added benefit of alfalfa is that it is more productive in dry conditions and provides forages during the cool-season forage “summer slump.”   
4. Some considerations from the beef cow side of the feed bunk first:  animals harvesting their own forages are (under current prices) more cost-effective than mechanical harvesting, hauling, storing, and then hauling the hay back out for feeding.  In most cases, it is very dubious to assume that beef cattle producers can get by with no hay feeding.  However, stockpiling and efficient use of rotational grazing can reduce the number of days that stored forages are fed to cattle and can greatly reduce total feed costs. 
5. As you look at the cost of making hay for livestock, also consider total feeding costs.  That is, what does it cost to feed a cow including hay, supplemental feeds (corn gluten, soy hulls, etc.), and minerals?  Make sure that you look at the feed costs to meet the animal’s total nutrient needs; for example, compare alfalfa and minerals versus feeding grass hay, corn grain, and minerals.  Choose the feeding system that meets the animals’ needs at the lowest costs.  Work with your local extension agents to develop an annual feed budget or look at one of the VCE cow-calf budgets to assist in developing a feed budget (http://pubs.ext.vt.edu/446/446-048/446-048.html#BeefCowCalfBudgets).
6. Consider the following:  feed a spring calving beef cow for 6 months requiring about 2.8 tons of hay (including a 10% feeding loss) for the cow and her proportion of the bull and replacement heifer.  Using costs in Table 1 yields a range of annual on-farm hay costs to carry a cow-calf unit from $333 per head ($119/ton) to $426 per head ($152 per ton).  Using the VCE spring calving beef budget (http://pubs.ext.vt.edu/446/446-048/XLS_BeefCowsSpringCalving_HayRation.xls) demonstrates that nitrogen-fertilized hay makes up more than 60% of the total costs per cow-calf unit.
7. Hay quality does not impact production costs.  It costs the same to make lower quality (patriotic hay – harvested around the 4^th of July) as it does to make top quality hay.
8. Finally, if you make hay, consider storage.  Table 1 provides information to make an informed decision about storage.  Using the costs of the grass nitrogen-fertilized hay at $152 per ton, how much savings can be expected from protecting the hay?  Consider if storing hay in a barn or under a trap saves 20% more than bales left outside, then a cost-conscious farmer will save $30 per ton.  Savings on grass-clover hay would be $24 per ton.  Thus, annually storing 300 tons (about 100 acres of grass hay) would save a farmer more than $7,000 per year.  This savings would quickly pay for costs of storage (such as barns, tarps, and wrapping).

This simple discussion is intended to spark the process of asking questions about how you consider the true cost of hay used to feed the cow head.  Consider pushing the pencil or working the keyboard to calculate your own costs of making and harvesting hay and to begin considering alternatives that save money and reduce feeding costs.

This Issue:

• Farm Business Management Update June-July 2009

Other resources by:

• Gordon Groover

Other resources from:

• Agricultural and Applied Economics