Does it pay to make hay?

Like anyone who grew up in agriculture, Jim Gerrish, who coined the term “management-intensive grazing,” grew up in a culture of hay. Gerrish, owner and operator of American GrazingLands LLC in Idaho, got his first baler as a high school graduation present in 1973 and spent the next five years as a custom hay producer. “If you grew up on a farm in the last 50 years, you’re probably deeper in

Does it pay to make hay?

Like anyone who grew up in agriculture, Jim Gerrish, who coined the term “management-intensive grazing,” grew up in a culture of hay. Gerrish, owner and operator of American GrazingLands LLC in Idaho, got his first baler as a high school graduation present in 1973 and spent the next five years as a custom hay producer. “If you grew up on a farm in the last 50 years, you’re probably deeper in the hay culture than you ever thought you were,” he says.

Back then, it made sense to make hay, but Gerrish says now, over 40 years later, the price of the product isn’t worth the cost of inputs. From 1973 to 2013, the cost of that new baler rose 950%, from $4,200 to $40,000; diesel fuel rose 2,000%, from 17 cents a gallon to $3.46; and nitrogen fertilizer rose 700%, from 9 cents to 63 cents.

Meanwhile, the custom baling rate barely doubled, going from $6 a bale to $12.60. Fed cattle prices increased 275%, from a high of $54 per cwt. to a record $148. “These costs are why it doesn’t make sense to make hay anymore,” he says. “It’s just about impossible to pencil it out.”

So why do so many farmers and ranchers still make hay? Gerrish says almost half of the beef producers in the country simply don’t monitor input costs, and winter feed costs are the most expensive part of the budget.

Counting costs to make hay

What does it take to make a ton of hay? First, it takes land. Whether owned or leased, used solely for hay or for other enterprises as well, land comes with a cost. The land has to have something to harvest, so cost of seeding for the expected life of the stand has to be accounted for, even for perennials like alfalfa. There’s also a cost to harvest hay and haul it away.

Then there’s the fertilizer cost. Each ton of hay contains about 50 pounds of nitrogen, 13 pounds of phosphate and 50 pounds of potash. At today’s prices that’s roughly $65 a ton.

Add calcium, magnesium, sulfur, copper, zinc and other minerals, and it goes up to $80 to $85. “If you make hay and sell it, that’s what has left your property,” Gerrish says. “If you want to maintain soil nutrient levels where they are, you have to put that much back as fertilizer. Most people don’t do that.”

One of the biggest costs on small- to medium-size farms is equipment depreciation. It takes 60 cows to justify a $5,000 investment in hay equipment, or 450 for basic used equipment, including a mower-conditioner, twin rake, big round baler and two tractors. “I’ll bet a lot of your neighbors have all those things and don’t have 100 cows,” he says. “Most farms and ranches are overcapitalized on equipment way beyond what the cow herd can bear.”

With a full line of equipment, depreciation costs can vary from $3 to $4 per ton on large ranches putting up 5,000 tons of hay a year, to $30 per ton for smaller farms putting up 150 tons a year. “Buying a 1,500-pound bale for $45 starts to look more interesting, especially when you consider you’re bringing $80 worth of nitrogen and minerals on your land when you buy a ton of hay for $60,” Gerrish adds.

Making up for missed opportunity

Making hay also comes with an opportunity cost of resources. Rather than spending money making hay, Gerrish notes those same acres can be used to make money by grazing cattle.

“When we generate a salable livestock product from standing forage the animal has harvested themselves, we have done so at a much lower cost than when we harvest the forage with labor, iron and dead dinosaurs,” he says.

Management-intensive grazing, stockpiling and aligning animal demand with forage supply, or variable stocking rate, all help fill the gap previously filled by hay. By setting a stocking rate based on winter capacity, extra spring growth is available, providing an opportunity for custom grazing. In southern Iowa’s fescue country, fall calving is another option, which avoids calving and breeding when toxicity levels are at their worst, while providing an opportunity to retain weaned calves in spring and graze extra growth for additional gains from May to early August.

The biggest opportunity cost, Gerrish says, is time spent making hay — time that could be spent observing the cow herd, subdividing pasture, or installing watering systems for paddocks. “Think of all those things people say they don’t have time to do because they’re out making hay,” he says. “The classic excuse is ‘I don’t have time to go to grazing school because it’s in the middle of haying season.’ That’s a true illustration of missing the point.”

Exploring additional options

With the recent rise in beef prices, a drop in feed costs and a readily available feed supply in the state, Iowa State University Extension beef program specialist Joe Sellers says Iowa’s beef producers have a range of options. “We’ve got a little bit of everything. We have people who want to graze year-round and people who are grazing less and feeding more,” Sellers says. “Right now, either option is probably advantageous.”

Sellers says the economic effectiveness of rations like baled corn stover and ethanol coproducts depends on the situation. If a producer already has a feedlot and a readily available feed supply, and grazing acres are unavailable, feeding cows year-round can be cost-effective if feed wastage is minimized. “It’s getting to the point that some of those rations might be the most cost-effective option,” he says. “Some farmers already have a feedlot and a vertical mixer. For them it makes sense to use those rations.”

In places with fewer available acres and higher pasture costs, grazing crop residue is the most viable option. If you compare crop residues to pasture in some places in the Midwest now, crop residues are actually cheaper than grazing pasture, says Jim Gerrish. “If we compare grazing crop residues to feeding harvested crop residues in a feedlot, grazing once again becomes the lower-cost approach because we don’t have to account for equipment costs.”

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HAY CULTURE: Jim Gerrish spoke to beef producers at a management-intensive grazing workshop in eastern Iowa last August. Despite the high cost of inputs required relative to the price of the product, many beef producers have roots deep in the hay culture.

This article published in the January, 2015 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2015.

Hay/Forage Management

Grazing Management

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