By Dianne Shoemaker
Warmer weather is just around the corner. As forage crops break dormancy, so does the perennial question of how to price standing forage crops. Whether they are vegetative small grain crops, pure grasses, grass and legume mixes, or pure legume stands, the fundamental considerations are the same:
- Determine market price of an equivalent crop
- Calculate and apply deductions:
- Cost of harvest, including mowing, tedding, and raking
- Cost of baling
- Cost of hauling
- Risk – nutrient variation
- Risk – weather, etc.
- Adjustments: These optional adjustments can be made if a forage analysis is done post-harvest:
- Dry matter
- Feed value – If this option is chosen, then there is no deduction made for risk of nutrient variation (d above).
Clearly, this is not a quick process, but when broken down into these steps, it is doable, easy to document, and provides a framework for the buyer and the seller to agree on a process and price that is acceptable to both parties before the crop is harvested.
Tools are available to assist with this process, all available at https://forages.osu.edu/forage-management/forage-economics. These include:
Factsheet: “Assigning Value to a Standing Forage Crop”. This factsheet discusses each step listed above in detail, including links to helpful resources.
Spreadsheet: “Pricing Standing Forage Worksheet”. This spreadsheet follows the steps to calculate the ceiling price a buyer should pay based on the market price of equivalent forages and the costs of harvesting and transporting the crop, as well as considering adjustments for dry matter, quality, shrink, and risks that are transferred from seller to buyer.
Factsheet: “Pricing a Standing Oat/Spring Triticale Haylage”. Some farms grow these crops for cover crops while they are a dual-purpose crop for dairy farmers – winter ground cover and spring forage source. Sometimes dairy farms have the chance to purchase these crops out of the field, extending feed supplies. This factsheet walks through the process of pricing these standing crops harvested as haylage.
Spreadsheet “Pricing a Standing Oat or Triticale Haylage Worksheet Tool”. Save a little time with this spreadsheet as you work through pricing a standing crop, whether you are the buyer or the seller.
Setting the final, fair price for a hay or small grain forage crop rests on an understanding of the needs of both the buyer and the seller. It is critical that both parties agree on price, payment method and timing, crop yield measurement, restrictions, and similar details before the crop is harvested! Ideally, the agreement should be in writing and signed by both parties. These agreements are especially important when large quantities of crops (and money!) are involved. While this type of contracting may be uncomfortable for some producers, mainly because they are not used to conducting business on more than a handshake, it forces the parties to discuss issues up front and minimizes troubling misunderstandings after harvest.
Source : osu.edu