Determine the cost of hay based on nutrients removed

Andrew Frankenfield, Extension Educator, Penn State University

I’ve had several conversations regarding the cost of hay. One person, trying to determine what to charge for essentially renting hay ground, reasoned that if the renter was going to sell small square bales for $5 or more per bale, then they ought to have at least $2 per bale as their share.

Another person told me that if there is a lot of grass growing that gets made into a lot of hay then hay will again be cheap as in past years. The cost of producing hay can be determined from the value of nutrients removed plus the equipment costs. Whether hay is actually worth what it costs to produce it is yet another question.

According to the Penn State Agronomy Guide, each ton of grass hay removes 50 pounds of nitrogen, 15 pounds of phosphate (P2O5) and 50 pounds of potash (K2O). Using average bulk fertilizer prices, urea (46-0-0) $750 per ton; DAP (18-46-0) was quoted at $1,150 per ton and potash (0-0-60) $700 per ton. Using these prices to replace the nitrogen, phosphate and potash removed in a ton of hay resulted in a cost of $84 per ton. Since I was using DAP to replace the phosphate removed, this also provided about 6 pounds of nitrogen. The remaining 44 pounds was replaced using urea. Besides the fertilizer cost, there should be something figured in for spreading the fertilizer. Using the 2008 Pennsylvania Farm Custom Rates, the average cost for spreading dry bulk fertilizer is about $10 per acre.

It is true that hay can be produced without fertilizing. I see it happen all the time. So, should fertilizer cost be part of determining the cost of hay? Yes, because each ton of hay removes those nutrients whether they are replaced or not. It is a matter of pay now or pay later. The soil can get mined to the point where it is no longer practical to produce hay. To restore soil to good productivity, one must make a massive investment to restore soil fertility.

Every year I get phone calls where people say they will fertilize in the future, or they are waiting for fertilizer to get cheaper because it is too expensive. If your soil fertility levels are good, and you are pretty sure fertilizer prices are going to decrease, then go ahead and delay fertilizing. However, you should still include some fertilizer charge into your hay cost calculation based on that future fertilization.

The next part of calculating the cost of hay production is machinery or equipment expense. I used average cost figures from the 2008 Pennsylvania Farm Custom Rates. (These rates are based on survey responses of Pennsylvania farmers; I increased the values by 17 percent to account for increased fuel costs). Your own equipment costs may vary, and if you know what they are, plug those in. For those who don’t know, this is a good place to start. Mowing/conditioning is valued at $16.85 per acre, tedding (not listed, a little cheaper than raking) at $8 per acre, raking at $9.83 per acre and large round bale baling and hauling at $9.01 per bale.

Since we talk about hay in terms of price per ton, these per-acre costs will have to get converted into costs per ton. Here is where fertility will pay some dividends. As tonnage yields increase, the machinery costs of mowing, tedding and raking decrease on a per-ton basis.

Let’s consider an example where hay production is at 2 tons per acre and large round bales weigh 1,000 pounds. The machinery costs are $8.43 per ton for mowing, $4 per ton for tedding, $4.92 per ton for raking and $18.02 per ton for baling and hauling the bales. If we need to do one tedding and one raking before baling, our total machinery cost is $35.37 per ton. Adding the machinery cost to our fertilizer quote ($84) results in a total hay production cost of $119.37 per ton. This does not include the cost of spreading fertilizer.

Now, it may be possible to reduce these hay production costs somewhat. You might find a better deal on fertilizer. Maybe you have an even distribution of 30 percent or more legumes in your hay mix, so the legumes provide nitrogen. Possibly you can spread some livestock manure that accumulated on a heavy-use feeding pad. You might be able to take out a pass with the tedder if the weather is right and just rake the hay or pick it up without raking. Maybe your machinery costs are a little lower. The point is, even with some of these conditions, hay is still going to be an expensive commodity. If you are making your own hay, these production costs are there whether that hay is mowed and baled at 15 percent crude protein and 65 percent total digestible nutrients (TDN) or at 7 percent crude protein and 48 percent TDN.

Don’t forget about establishment costs of hay fields, lime and herbicide applications, and with timothy seed costs at $2 per pound and a 10- to 15-pound seeding rate your seed costs are around $25 per acre and $20 per acre to no-till drill or $5.63 per ton over four years. Two tons of lime at $40 per ton at establishment = $80 per acre ($10 per ton) and $20 per acre ($10 per ton) for annual herbicide application. Total of these establishment costs = $25.63 per ton

Establishment ($25.63) + fertilizer ($84 per ton) + machinery cost ($35.37) = $145 per ton.

Oh, I almost forgot, what are you paying for land rent? $30, $50, $100 per acre? Don’t forget to add that on to the cost of the hay. If you pay $30 per acre, you are up to $160 per ton.

Then again, maybe the best situation is to find a neighbor or some other person who likes to make hay and hasn’t pushed a pencil on the costs. You just might run into a good deal. HG

—Excerpts from Penn State Field Crop News, Vol. 8, No. 20