Mecardo Analysis - Hay, this year it’s worth it
- By: "Farm Tender" News
- Water & Irrigation News
- Aug 30, 2018
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By Angus Brown | Source: Meridian Ag, ALFA, MLA
It’s the current farming equivalent of a first world problem, but it is still worth grappling with. Growers in some areas of Victoria, South Australia and Tasmania have had average rainfall for winter, and have the potential make hay or silage. With fodder prices at ten year highs, fodder conservation makes sense.
With feed grain prices sitting around or above $400/t, and hay quotes ranging from $200 to $350/t depending on quality, surely if you can make hay this year you should. The cost of making hay and silage is reasonably easy to work out.
The key assumption, and variable, is that a paddock locked up for hay or silage will produce 5 tonnes of dry matter per hectare. If it doesn’t get rained on, good quality pasture hay is likely to still be worth $250/t ex farm. This gives a value of $1,250/ha.
In terms of the cost of making hay, the key assumptions are around the costs of extra fertiliser, mowing, raking and baling. At typical contracting rates, these costs come to $430/ha. We need to add some labour and fuel for carting which is roughly $75/ha. Also, if we intend to retain it for feeding, hay is costlier to feed out than grain, so if we are comparing the two, we can add $5 per bale, which comes to about $62/ha.
All up the cost of making hay comes to $567/ha. If it produces 5t of hay it makes the conserved feed worth $113/t. Seems there could be good money, or good savings, in making hay or silage.
Something which is not often taken into account with fodder conservation is the opportunity cost of the feed which is conserved. That is, how much is the feed worth grazed in the paddock. In a year when heavier cattle are making more in ¢/kg, it’s worth taking into account.
Unless the grass is pure excess, there will be a cost in lower weight gains in cattle, or lambs, and the loss of dry feed which would have been left over had it not been cut.
The loss of dry feed can be accounted for at $125/ha (0.5t@$250t) or $25/t. Impacts on stock weight gain is harder to account for. An example provided by James Whale of Meridian Ag on a 1000 head cattle trading business put the cost at 0.3kg/day slower growth across the entire herd due to 50ha being locked up. Over a month this adds up to $468/ha if the extra weight is valued at $2.60/kg lwt, which is where the EYCI is at the moment.
Adding the opportunity cost of feed brings the cost of making hay, instead of feeding grain, to $1142/ha, or $228/t.
If we compare it to the cost of buying in hay, that is take out the extra labour for feeding, home grown hay will come in at $216/t.
Key points
* In areas which have had an average season paddocks are being locked up for hay.
* If good quality hay can be made, it will be much cheaper than buying in grain.
* In many years the total cost of making hay is higher than the cost of buying grain.
What does this mean?
This year making hay should provide a pretty good result. Even if the quality is low, it is likely to be cheaper than buying in hay for feeding cattle, and if the quality is good it can be used instead of grain to feed sheep.
Obviously, the comparison is not as simple as this, but figure 1 shows that this year is the best year to make hay out of the last 8. Interestingly, if we assume hay making costs were the same, in the last two years many producers would have been better off using feed in the paddock and buying supplements in.
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