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What is a Fair Price for My Crop?

Authors as Published

Peter Callan (peter.callan@vt.edu), Extension Agent, Farm Business Management, Northern District

During the harvest season, extension agents frequently receive the following phone call:  “My neighbor called and wants to purchase corn silage or round bales of hay.  What is the going rate for these crops?”  The extension agent’s favorite response is “It all depends on …”

Pricing corn silage

There are a number of factors which influence the price of corn silage.  The price of corn silage is directly related to the price of corn at the local elevator.  Local grain prices are based on prices that that have been determined on the Chicago Board of Trade (CBOT) and local supply.  Virginia does not greatly influence national corn prices due to the relatively low corn acreage in Virginia compared to the Midwestern states.  Total acres of corn planted in the USA, the average corn yield per acre in the USA, world supply and demand are the primary factors in setting corn prices on the CBOT.

In some areas of Virginia, a corn producer has the option of harvesting, drying and selling corn at the local elevator or selling the corn as corn silage.  See Table 1-2 Estimated Yields in Bushels (Bu) or Tons (T) per Acre (Ac) of Various Non-Irrigated Crops for Identified Soil Productivity Groups in the Virginia Nutrient Management Standards and Criteria (Revised October 2005) for conversion factors.

The following example can be used to demonstrate calculating the value of corn silage per ton from 100 bushels corn per acre.

  • Conversion rate 100 bushels corn/ acre =17.5 tons corn silage/acre
  • Current market price of corn at the local elevator - $3.30/ bushel
  • Custom harvest rate per hour for self propelled harvester - $300/hour
  • Assume 50 tons per hour acre harvested
  • Harvest cost $300 per hour/50 tons per hour harvested = $6/ton harvest cost
  • Value of the corn crop - 100 bushels/acre X $3.30/bushel = $330/ acre
  • Value of corn silage in the field - $330 per acre / 17.5 tons per ace = $18.86/ton
  • Value of harvested corn silage - $18.86/ton corn silage + $6.00 harvest cost/ ton = $24.86/ton

Please note that the price of the silage does not include transporting the silage from the field to the neighboring farmer’s silo.  Transportation costs, which are based on the distance from the field to the purchaser’s silo, may add several dollars per ton to the silage price.

Depending on fertilizer prices, a producer may have approximately $400.00 per acre invested in growing an acre of corn.  Remember, the price of corn silage is determined by the corn grain price.  Thus, as the price of dry corn increases or decreases, silage prices will change accordingly.

Pricing Hay

Quality and size of the local hay crop and are the primary factors impacting hay prices.  Generally, equine owners are willing to pay top prices ($200-$280+/ton) for orchard grass hay that is early cut (low in fiber, high in protein and energy), free of weeds, dust and mold.  Equine owners will not purchase hay that has been rained on because it is dusty which will cause colic (upset stomach) in horses.  In years of abundant rainfall, hay supplies may be more plentiful compared to years of limited rainfall.  Rainy weather during harvest will limit the amount of hay that has not been rained on.

It costs approximately $180 to produce a ton of hay including fertilizer, labor, and equipment costs.  “Patriotic” hay, which is cut in late June and early July, is high in fiber and low in protein and costs the same to produce as early cut hay.  Beef producers are the primary buyers for “patriotic” hay.  This year due to the significant amount of rainfall in spring and rain during harvest season, there is an abundant supply of “patriotic” and rained on hay in NOVA.  Current market prices are ~$20-$40 per ton for low quality hay.  If storage facilities are available, producers may want to consider storing and selling the hay in 2010 instead of selling of selling the crop for a large loss.

Virginia Tech has online crop budgets which can help producers calculate their production costs. Although producers have large investments in growing the hay and corn crops, crop prices are not linked to production costs.  The prices Virginia farmers receive for their corn crops are determined by prices set on the CBOT.  The amount of rainfall received during the growing season and at harvest time are the primary factors that set local hay prices.

Rights


Virginia Cooperative Extension materials are available for public use, re-print, or citation without further permission, provided the use includes credit to the author and to Virginia Cooperative Extension, Virginia Tech, and Virginia State University.

Publisher

Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Alan L. Grant, Dean, College of Agriculture and Life Sciences; Edwin J. Jones, Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; Jewel E. Hairston, Administrator, 1890 Extension Program, Virginia State, Petersburg.

Date

October 7, 2009